Ok I will try and keep this brief. I moved in with my gf a couple of years ago and have been living with her ever since. Prior to my arrival on the scene, one of her mates rented the second bedroom, ergo I was afforded the same deal. This rent covers her mortgage and is way below the market rate for SW London which is nice.
I am now at a stage where I am considering buying (well, considering thinking about saving for a deposit) a property to let out. The problem is, I do not know the first thing about the finance side of things. How do I go about acquiring a property to let out?
I would be looking to buy a flat near to a mainline rail station in the South East - probably around West Kent/East Sussex as I know the area.
Thanks!
I'd suggest going to see your bank and getting a mortgage in principle so you know what they'll lend to you and what can afford. Then start looking for properties in the area you desire within your price range.
There have been some previous threads about buy-to-let that would be worth reading
You won't be able to get a residential mortgage if you're not going to live there, you need a buy to let mortgage.
To get a BTL mortgage, you usually need to have your own home, might be tricky / impossible to get one if you currently own nothing.
If you can get by that, a BTL mortgage would usually require a 25% deposit minimum
If you can do that, a BTL mortgage will require that the rent on the property is 125% or more of the monthly mortgage, assuming a stress rate of 5 or 6%
Don't go to a bank, you need a broker, but i think not already owning could make it a non starter, even if you could stump up 25% deposit and get enough rent.
Edit
Also, are you aware of the new rules regarding mortgage interest tax relief on rental income? Could be significant if you are a high rate tax payer or near to it
Last edited by Brighty; 22nd May 2017 at 17:08.
Sorry for the slight derail, but (Brighty) will a lender usually insist on owning another property before lending to buy a BTL? Do they put a charge on it?
Yes, that's what i was saying they'll want you to own your own home before lending to buy a BTL, the won't put a charge on it thoughOriginally Posted by demonloop
Cheers, didn't realise that.
Or just surely buy it as your primary residence and then a few months down the line change your mind and decide to move in with your GF again and rent it out?
BTL is a busted flush unless you already have a sizeable portfolio and are entirely professional about running it. You can't do too much research. Plenty of books on the subject. Find someone who is successful in the field (at scale), go and talk to them - most such people are indulgent with time and advice.
At best, the property market is not going to do much in the next 1-3 years and may take a dive. The economy is not looking too healthy generally. I think we're in for a bumpy Brexity ride.
Think very long & hard about what you want to do. Anyway maybe wait & see how the election pans out first?
Clearly things like that happen a lot.
That aside you may be able to get a residential mortgage even if you're not living there. Depends on circumstances. See an Independent Mortgage Adviser, one possible option may be 'future intent to live'. For example due to your job/circumstances/location you can't live there now but 'may' do one day. Nat West will consider this but I must stress see an Independent.
Thanks all. It turns out a friend of the family is an indie mortgage advisor so I will pick his brains!
That could be done, but strictly speaking that would be mortgage fraud, taking a residential mortgage when you fully intent to rent it out, no one would ever know, but it's still fraud
If it was done, you can't just rent the place out whenever you like, you would need to apply to your lender for their permission to let you do it, this is called 'consent to let'
You won't get CTL for at least 6 months after taking out your mortgage.
When you do apply, there's no guarantee they'll give it to you, some lenders have strict criteria, similar to getting a BTL mortgage (max 75% loan, rent covers at least 125% of mortgage etc). How do you know who is strict and who isn't before you take out the morgage? A broker won't help, because of the fraud element.
One lender who i know is lenient with CTL is Nationwide, it's who i have mine with. You ask them for the form, fill it in with questions like type of tenancy, that you won't accept DSS etc, send it off and it's sorted, they don't even ask what the rent is.
Not sure if they have a max loan limit though.
They award it for 3 years, then send you a new form and you re-apply. I've done it with them for 9 years now.
After 6 months of CTL with them, they apply a 1% letting fee to your interest rate though, and that would be the problem for you, what happens when the fixed term deal ends? They won't let you take a new deal while on CTL, so you would drop onto their standard rate, SMR currently 3.74%, plus the letting fee, so interest rate of 4.74%. Not a rate you'd want to be on, especially as it would rise in line with any bank of England rises. I'm lucky to have an older Nationwide mortgage that is now on their old BMR rate of 2.25%. So you'd then need to remortgage to a BTL, but would hit the same problems i highlighted.
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