property and buy to let
 

Is the below scenario possible: Ive not done it just wondering, what if,

I buy a second property (a small flat), back home in the north. I pay the usual 5% deposit and solicitor fees. As im thinking of changing jobs and moving back home, up north.

1 month after ive brought the property i decided to stay down south and stay with my original job.

So, now ive got a house down south an flat up north.

Could i then turn round and say to my mortgage company, ive changed my plans. I'm staying in the south but i want to rent my new flat out.

Would i incur any costs or penalties by doing this or is this a loop hole in the system.

If this scenerio happened, we/you/I could save the 15% deposit + all the other fees, and still rent it out.

I dont wanna contact anybody and ask the question. ie mortgage company.

I've often wondered this myself. :wonder:

Can't see why your mortgage company would have a problem with buy to let
Mine didn't

They should be kept informed and mine insisted in a proper rental agreement was in place

Phil

Something thats crossed my mind too, if I buy my house outright but then decide its not what I want or where I want to be can I just decide to rent it out instead and do I have to inform my mortgage company. I know they prefer something along the lines of 25% deposit/equity in the property before they'll let you rent it.

The usual term for this is Let to Buy.

It would normally be done by you letting your existing property and buying a new one to live in. Loan to value limits and rental cover for mortgage payments can often be more relaxed than for a Buy to Let.

This explains it as well as anything else I can find quickly:
YOUR MOVE Lettings - Let to Buy, financial advice, mortgages and insurance

iF YOUR MORTGAGE COMPANY lets you change your mortgage to a B2L you will have to pay some fees. Nothing is free with banks!!.
They might see that you don't have enough equity in the property and say no to it anyway.

If you have bought it out right you won't have a mortgage ;)

Very funny, I meant bought it (got a mortgage on my own) rather than with my current partner.

Ignore this comment as when I changed to a B2L I had a 100% mortgage of which I only paid of about £500 when I decided to change and they never re-valued the house. :wonder: Got me thinking now.

If you want to change to a B2L then the mortgage company will require you to change your type of mortgage, which will also mean the interest rate is not as good, B2L's oftern have worse rate.
However, the way around it could possibly be, buy the other house, say you are renting out the one of them to family, this will enable you to have a second mortgage at the normal rates & only use the usual 5% deposit.

The mortgage company will most probably not want too many details from you all they would want to know is that you say you are renting it out to family, you can afford the repayments and the house is worth the valuation.

We have 2 houses, one which is rented out by my sister the other we live in & our mortgage provider is Halifax, so I know they do offer this service & would assume other mortgage providers would too, they do stipulate if you do not have family livign in the property then you have to tell them, if you do or do not thats your choice & you face the reprisals at a later date if needs be.

Obviously there are some companies out there that appraise things differently and offer 100% B2Ls with different circumstances but they usually want to see 120% rental income on the property.

HTH

paul.

you can just obtain a permission to let form from the mortgage provider :)

Im not sure if i explained myself properly.

What i was trying to point out was:

is this a way of obtaining another property as an investment for our future (me and missis) without paying the usual 15% deposit + solicitor fees/stamp duty as you would normally for a buy to let and get away with paying a 5% deposit + solicitor/stamp duty fees.

Surly the banks would prefer your custom than not. It's not gonna make a difference to the bank if its rented out to someone or you live in it as long as they get money at the end of every month.

On the other side of the coin, could the bank turn around and say well you only put 5% down we want the other 10% or you need to sell it. If i didnt have the other 10% i guess i would have to sell.

I was using 15% as a example. i know companies do range from 10-15% deposit for a buy to let.

O dont wanna ask a mortgage company, they might coton on to it!! haha

If my memory serves me well, I called my mortgage company told them I wanted to change my mortgage to a B2L interest only. A few days later I received the paper work and I sent this back with a cheque for less then a £100 pounds. Thats it! I can't remember any other fees.
Not sure what interest rate i'm on at the moment in fact I probably need to sit down and review my mortgage although the rent is still 150% of the mortgage.

Albert47, if you have a tiny deposit on a BTL on a variable rate, worse still interest only, and the interest rates go up and you have a problem tennant or periods without occupancy, would it give you problems? Might there be an issue selling it if you had to when/if other BTL properties are hitting the market in droves?

But this wont happen John! Im always hearing EA's and mortgage lenders on the TV saying house prices only go UP!!! Albert borrow AS MUCH as you can - and remember if you dont get your BTL now you might never be able to :eek:


:Whatever_

LOL. I'm glad I'm not the only potential property bear Petem95 :)

I can't predict the future, and some people have been talking about a house price crash for 2-3 years now. However, just because it hasn't happened in that time it doesn't mean it still won't. I don't feel the economic fundamentals are in place to keep this bubble going. It has been said that a crash happens soon after the last bear has changed to bull. The interest rates being low just gives it higher to climb before the bubble bursts I think.

Rather than do mortgage equity release as the interest rates went down and the house price grew during our 8 year ownership of our present property, we took advantage of the low repayments to clear our mortgage completely and have now sold and banked the money. We want to take a step up the ladder with a new mortgage, but thankfully our purchase fell through and gave us time to think, and we've decided to rent preferring to lock in our profits and risk getting "left behind" on the ladder. It appears that we're sharing in the perceived capital growth by renting anyway since we're only paying about 3% of the property's present value in rent... from the pre-tax interest on the 3 bed we've sold we can rent a 5 bed!

Low rental yields
Inflation
Rising interest rates
Huge consumer debt/mortgage equity release
Slow wage rises
Rising defaults on mortgage payments
Income multiples on mortgages
Lack of first time buyers to feed the market

= BUBBLE!