Discounted rate just ended - need to change to buy to let in a few months

Agent_C

The two-year discounted period on my repayment mortgage has just ended, and I want to remortgage to a better rate. I intend to move in with my partner in a few months and let the property out, so I'm looking for a new mortgage that will enable me to switch to buy-to-let in a few months' time. I envisage selling the property within the next couple of years so I don't want something that will tie me in for too long either.

Any advice anyone? There is about £48,000 left on the mortgage and the property is worth about £105,000.

Thank you!

lisyloo

A couple I've seen lately that have good "long term" rates are

Hinchley & Rugby - 4.85% for TERM - daily interest - no penalties
Natiowide - 4.79% for TERM - this has penalties but allows overpayments

These are not as cheap as some of the 2 year discounts but don't forget that you won't need to switch so you need to factor out the switching costs each 2 years. On a smaller mortgage this would be worthwhile.

I have no idea what these are like at allowing renting.

You would either have to call them or alternatively use a broker.
Personally I prefer to be "in control" but a broker will do the legwork for you.

herbiesjp

YOu could look at getting a BTL mortgage set up now.

So you would apply now - some even do free legal fees, valuation etc - but you would not complete on the re-mortgage until you have moved out. MOrtgage offer can be valid for 3-6 months

I would not suggest going for a residential mortgage knowing that you will be letting it out.

lisyloo

I would not suggest going for a residential mortgage knowing that you will be letting it out.

Can I ask why not (always keen to learn).

I understand that some lenders are happy to convert for £50.
Surely that will lead to a better rate.

Or are you worried about potential "fraud" when you fully intend to do something different.

To play devils advocate - How would the lender know that this was your intention all along rather than a change of plan?

AndrewSmith

Some lenders will indeed convert to buy to let for £50 admin fee but they will also, in a large number of cases, possibly load the interest rate to reflect the potential risk of the change of status. Also most lenders would 'smell a rat' if you took a new residential mortgage then asked to switch to buy to let a few months later. They would be of the opinion (correctly) that you knew this was going to happen, on the application form you will be asked if it is your intention to let the property.

You must also consider that it changes your insurance risk situation both buildings and contents. If the place burnt down the insurer is unlikely to pay out if you have not declared to them that it is tenanted and switched to a suitable policy to cover being let.

Dont forget until you repay the mortgage in full the mortgaged portion of the property belongs to the lender thus they have every right to know what you are intending to do with it.

Andy

Agent_C

AndrewSmith wrote:

You must also consider that it changes your insurance risk situation both buildings and contents. If the place burnt down the insurer is unlikely to pay out if you have not declared to them that it is tenanted and switched to a suitable policy to cover being let.

Andy

It's a flat so the service charges cover the buildings insurance, and the tenant would presumably be responsible for their own contents insurance as I'll be letting unfurnished?

I've realised I'll also probably be liable for capital gains tax if I sell the property after not living in it for a time. I'm wondering whether it might not be better to just sell it as soon as I've moved out, after all, a year or so's amount of rent would probably just cover the mortgage payments and any associated charges.

herbiesjp

lisyloo wrote:

Can I ask why not (always keen to learn).

I understand that some lenders are happy to convert for £50.
Surely that will lead to a better rate.

Or are you worried about potential "fraud" when you fully intend to do something different.

To play devils advocate - How would the lender know that this was your intention all along rather than a change of plan?

I think Andy's response covers it quite well

AndrewSmith

Agent C

It may be possible for you to get a rate mid to high 4%'s (4.6-4.99%) fixed for tracker for 2-3 years on a buy to let basis. This would give you stability for the next couple of years and would tie in with, as you state, your plans to possibly sell after a couple of years.

Remember to look at the package as a whole including exit fees from your current lender, and any fees payable to the new lender or product on entry, also added charges that you may not notice up front.

Andy

AndrewSmith

Agent_C wrote:

It's a flat so the service charges cover the buildings insurance, and the tenant would presumably be responsible for their own contents insurance as I'll be letting unfurnished?

I've realised I'll also probably be liable for capital gains tax if I sell the property after not living in it for a time. I'm wondering whether it might not be better to just sell it as soon as I've moved out, after all, a year or so's amount of rent would probably just cover the mortgage payments and any associated charges.

It is still wise to get landlord's contents insurance to cover such things and carpets and internal fixtures and fittings without relying on the tenant to insure it. I have fallen foul of assuming the tenant will take contents insurance and ended up having to replace an entire set of carpets and some internal decor which was far more expensive than the deposit I was holding.

With capital gains tax, I am sure there will be someone on here who can post an educated response, however I have not paid CGT on the disposal of property and have bought and sold approx 2 per year over the last 5-7 years.

Andy