Mortgage Question - Residential to BTL?

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mastertona09
mastertona09 Posts: 4 Newbie
in Mortgages & endowments
Hi

I will be looking to buy my first house (in the UK) in the next year or two but am not very knowledgeable in this space.

My question is:

What happens if I take out a residential mortgage but after (for example) 3 years, my circumstances change and I need to move abroad, are there methods/processes in existence to then allow me to rent out this property whilst I am living abroad?

Thanks!

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  • Caz3121
    Caz3121 Posts: 15,545 Forumite
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    the lender may give "consent to let" for a limited period (possibly for a fee/higher rate) or they may not, at which point you would be looking for a BTL mortgage from the same or different lender
  • mastertona09
    mastertona09 Posts: 4 Newbie
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    Hi Caz3121

    Thanks for your response!

    If they do not provide consent to let - do you have any idea of the cost expectation for exiting the residential mortgage and picking up a BTL?
  • Cornucopia
    Cornucopia Posts: 16,156 Forumite
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    edited 4 January 2018 at 12:04PM
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    Depends on whether there are redemption penalties on the residential mortgage and whether there are product fees for the BTL mortgage.

    Other than that, if you move from one lender to another you may need to pay for a valuation and legal fees (although some lenders offer these as an incentive on some mortgages). You may need to move lenders if you find that your residential lender doesn't offer BTLs, or the rates/criteria aren't competitive.

    Also, deposits tend to be higher on BTL than Residential.
  • YHM
    YHM Posts: 650 Forumite
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    As above, generally you will need to hold 25% equity to convert to a formal BTL. There are fee free BTL products to keep costs down if you need to transfer, but cannot forecast what they will look like in 3 years time.
    I am a Mortgage Broker.

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice
  • mastertona09
    mastertona09 Posts: 4 Newbie
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    Thanks all - really helpful.

    Given the above, would you be able to provide me some advice for the following scenario:

    Currently feel like I am p*ssing away cash renting when it could be going towards the ownership of an asset (a property).

    I am based in London currently but probably looking to purchase on London outskirts.

    Realistically, it is likely I will only be based in the UK for c. 3 years before moving abroad for an unknown period of time.
  • YHM
    YHM Posts: 650 Forumite
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    Can give you guidance, but not advice (for that you need a broker!).

    Just make sure you are putting a sufficient deposit down to ensure you will be able to convert the mortgage to a BTL in a few years time.
    I am a Mortgage Broker.

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice
  • Cornucopia
    Cornucopia Posts: 16,156 Forumite
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    There's the possibility of making an educated guess of how much deposit to put down now, with a view to getting to 75% LTV within 3 years through house price inflation. In the SE, I would suggest something in the region of 15%.

    I'd also suggest looking at rental yields, which are traditionally quite low in Inner London, but more respectable elsewhere in the SE.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    mastertona09 wrote: »
    T
    Realistically, it is likely I will only be based in the UK for c. 3 years before moving abroad for an unknown period of time.

    Is retaining the property viable? Why not simply sell up.
  • ValiantSon
    ValiantSon Posts: 2,586 Forumite
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    Thrugelmir wrote: »
    Is retaining the property viable? Why not simply sell up.

    Agreed. You may find it better to sell after three years and realise the capital. If you expect to be moving away from the UK after that point, and possibly for a long time, then you may well be better having that money to invest in a place to live in your new country. Furthermore, do you really want the cost and hassle of being a landlord? It isn't simply a matter of collecting the rent and watching your wealth grow, and given recent changes the individual holding one or two rental properties is a much less attractive proposition than it once was.
  • mastertona09
    mastertona09 Posts: 4 Newbie
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    Thrugelmir wrote: »
    Is retaining the property viable? Why not simply sell up.

    I was under the impression that if it is only after 3 years time, the total fees that would be incurred on both acquisition and exit would be significant (when spreading over a short holding period).

    I am ill-informed in this area so I'm not quite sure how the value I would receive on sale is derived? i.e. the component fees, impact of the size of repayments made within those 3 years etc.
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