Timelines on getting BTL Mortgage?

QTPie

I am progressing further along the thought of renting out our current house, so that we can "move on".

Our current lender (Intelligent Finance) - with whom we have had a normal residential mortgage for 5 years - wont allow us to let it out on our mortgage. So we would need to change lenders. I am currently looking at Lloyds/C&G because they seem to have good rates, but am open to suggestions...

Background:
- I THINK that the house is worth about £420k ish - although, in this market, it is rather uncertain.
- We currently have a £130k mortgage outstanding with IF (so just under 70% equity).
- would be looking to draw down some more equity (to put aside for another house deposit - if the right property came along), but that would only be about £50k. So would be looking at a £180k BTL mortgage (retaining over 50% equity even by the glumest of assumptions...).
- REALISTIC rental income should be £1350pcm (I believe this is realistic - actual rental income from identical houses was £1550/£1650 a year ago).
- Mortgage payments should be £1100pcm repayment mortgage. I hear people talk about BTL on Interest Only - why would you do that or not do that?
- Married, both with excellent credit ratings and good income. We both work for husband's own company, but 5 years of good accounts (have taken accounts for mortgage quotes before, couple of months ago, and the lenders are very happy with them).

My question is about timelines. We currently live where we want to let out. How long does it normally take (from going into a branch to having the mortgage completely transfered over) to get a BTL in our sort of circumstances?

I am aware that it is "illegal" to live in a house (yourself) with a BTL mortgage and also my mortgage lender will not allow us to let out under our mortgage conditions, so how do people do this? Do they get the application started and then go ahead and try to let the property and providing things are "progressing in the right direction", that is ok? (i.e. if we let before the mortgage chnages over OR we are still in here a couple of weeks after the mortgage changes over, is there a problem?).

Thanks
QT

herbiesjp

Firstly you would look to find a new proeprtyu that you like.

Once you have done that and got the OK from a lender that they will give you the mortgage (with the BTL in the background), you will then need to start the re-mortgage process on the BTL.

You would then also start the process on the purchase at the same time

You would only complete on the re-mortgage to the BTL, once you needed to draw the funds to put down the deposit on the new purchase.

These scenarios can be a little tricky, so you might want to get professional help from a whole of market adviser to get this done for you in the right order.

You can get the BTL re-mortgage process going now, and the offer letter will be avlid for 3 months normally, however if it takes that long for you to find somewhere, you may find yourself having to choose a different rate anyway as the offer may have expired.

QTPie

Thanks for this herbiesjp, you are a star

Unfortunately you picked a big hole in my "lack of background information" (and I thought that I had been so thorough!):
- we are intending to move into rented accomodation ourselves for the next 6/12/18 months)

How does that effect things?

QT

herbiesjp wrote: »

Firstly you would look to find a new proeprtyu that you like.

Once you have done that and got the OK from a lender that they will give you the mortgage (with the BTL in the background), you will then need to start the re-mortgage process on the BTL.

You would then also start the process on the purchase at the same time

You would only complete on the re-mortgage to the BTL, once you needed to draw the funds to put down the deposit on the new purchase.

These scenarios can be a little tricky, so you might want to get professional help from a whole of market adviser to get this done for you in the right order.

You can get the BTL re-mortgage process going now, and the offer letter will be avlid for 3 months normally, however if it takes that long for you to find somewhere, you may find yourself having to choose a different rate anyway as the offer may have expired.

herbiesjp

Well you would need to do either of the follwoing:

1) Delay the re-mortgage process until you are ready to move into a new (not -rented) property

2) DO the re-mortgage now, and put the £50k into an account with safe access to it - although you will be paying a mortgage of £180k

3) Try and find a BTL either flexible or offset that will allow you to borrow the necessary funds, but you can then payback the extra £50k into the mortgage or offset account so you are not paying any interest on that extra £50k until you draw the funds down when needed

Again, I would say to get an adviser to help out especially based on this part of your plan

QTPie

Thanks herbiesjp.

How could we do 1) ? I don't understand that - we have to remortgage to rent out our current property (current mortgage lender will not allow us to let the property).

I think 3) would be ideal - prefgerably an offset mortgage account (which we currently have - except they wont let us let out the house), BUT haven't seen ANY offset BTL mortgages, let alone any with good rates...

So it looks like 2). Which is fine: as you can see from my sums, it already takes the mortgage being £180k into account.

But that wasn't really my question at all:

My question is about timelines. We currently live where we want to let out. How long does it normally take (from going into a branch to having the mortgage completely transfered over) to get a BTL in our sort of circumstances?

I am aware that it is "illegal" to live in a house (yourself) with a BTL mortgage and also my mortgage lender will not allow us to let out under our mortgage conditions, so how do people do this? Do they get the application started and then go ahead and try to let the property and providing things are "progressing in the right direction", that is ok? (i.e. if we let before the mortgage chnages over OR we are still in here a couple of weeks after the mortgage changes over, is there a problem?).

Anyone any ideas/experience on that?

Thanks
QT

herbiesjp

I think we are getting our wires crossed.

You say

we are intending to move into rented accomodation ourselves for the next 6/12/18 months

And then you say:

we have to remortgage to rent out our current property (current mortgage lender will not allow us to let the property).

My point is, you dont move out into rented accomadtion until the last minute i.e re-mortgage and purchase about to both go through

silvercar

Don't think QT is purchasing.

So you get the BTL mortgage application going. When you have the mortgage offer it is valid for at least 3 months. So at that point you start to secure your rental property and look for tenants for your place.

Once you have tenants and found a rental property you agree a date to move to the rental property. On this date you take out the BTL mortgage and redeem your current mortgage.

silvercar

The logic behind BTLs being interest only is to maximise the interest allowable as an expense for tax purchases. The exit strategy to clear the mortgage is to sell the property, so you wouldn't need a repayment vehicle.

herbiesjp

silvercar wrote: »

Don't think QT is purchasing.

.

I think they might be at some point:

would be looking to draw down some more equity (to put aside for another house deposit

QTPie

herbiesjp wrote: »

My point is, you dont move out into rented accomadtion until the last minute i.e re-mortgage and purchase about to both go through

That would be a lot more stressful and difficult to tie up, wouldn't it?

Ok, maybe I am a nut (or maybe no maybe about it... ), but am really looking to get our current house all rented out and secure before starting to even think about buying...

Also we can't comfortably afford to buy our next house yet... we are "gambling" (although not really because we wouldn't be off the property ladder...) that house prices will continue to move down or, at least, that the sellers of the houses that we are interested in will accept a very reasonable offer (the asking prices in that sector of the market are still at "late 2007 and then some prices".

If we sold our current house (we were gazundered 3 weeks ago ), then we could happily afford to buy. BUT there just isn't a lot of movement here at the moment and am VERY dubious about the intention of buyers after our recent experience. So am looking at alternatives - hence letting our house. Before we were gazundered we were moving into rental accomodaton anyway (although hadn't signed anything): so the original intention was to sell, rent, buy.

The idea is to have everything in place (current house rented out, desposit ready and available, mortgage offer for next house etc) and the flexibility to be able to pounce on what we want, when we want. No problems, just go.

It does mean moving once more than is necessary (and the cost/hassle of the move), but otherwise I think it will be better.

QT

QTPie

silvercar wrote: »

Don't think QT is purchasing.

So you get the BTL mortgage application going. When you have the mortgage offer it is valid for at least 3 months. So at that point you start to secure your rental property and look for tenants for your place.

Once you have tenants and found a rental property you agree a date to move to the rental property. On this date you take out the BTL mortgage and redeem your current mortgage.

Sounds good.

What do you commit, financially, to get that mortgage offer? Also are those normally straightforward to get (in a situation like ours - high equity etc.etc)?

Thanks
QT