Using standard mortgage for buy to let?

barney2201

Hi

We have been offered a first time buyer mortgage on a flat in a new development in NW London. The deal is you take out a mortgage for 75% of the value the house builder then lends you the remaining 25% at 0% interest for the first 5 years then 3% for the following 5 years when the 25% has to be repaid. Therefore you own 100% of the property.

We are now thinking of renting out the property instead of moving in, firstly can we do this? And what would the implications be if we did not tell the mortgage company?

neverdespairgirl

barney2201 wrote: »

Hi

We have been offered a first time buyer mortgage on a flat in a new development in NW London. The deal is you take out a mortgage for 75% of the value the house builder then lends you the remaining 25% at 0% interest for the first 5 years then 3% for the following 5 years when the 25% has to be repaid. Therefore you own 100% of the property.

We are now thinking of renting out the property instead of moving in, firstly can we do this? And what would the implications be if we did not tell the mortgage company?

If it's a residential mortgage, then taking it out with the intention of letting it instead (and avoiding a more expensive BTL mortgage) would be fraud.

In addition, it's likely to be a disastrous financial move anyway. New builds aren't usually good value for money, prices are dropping, and in lots of parts of London, rents are lower than the interest-only part of the mortgage.

Tiddler_2

As previously quoted this is a mortgage fraud and obviously you will be breaching your mortgage conditions. As soon as the mortgage company were to discover it they would ask you to either repay the mortgage (which you probably wouldn't be in a position to do) or increase the interest rate you are being charged.

People think that lenders won't find out, but all it takes is something silly like a bit of marketing mail being returned to sender for it to raise alarm bells
Most letting agencies would want proof that the mortgage company would be aware that the property is to be let in order to protect the tenant.

Rabiddog_2

The figures you have for renting it out may make sense on the specialist mortgage you have (75% of value etc) but obviously this is only granted as a way to help first time buyers rather than speculators (Buy to Let investors). You would need to tell them and probably have to get a more expensive BTL mortgage. Even if you lived there for a year or two and then let it out I am sure that the developer would have the right to rescind the mortgage immediately.