Getting mortgage for first house and then rent it out?

edfolletthsbc

Hi,

My fiance and I have found a lovely flat we want to buy which is great. We have enough deposit and can cover the cost of a normal residential mortgage.

The thing that makes this interesting (and has promoted the post) is that my fiance and I are in a lucky enough position to be staying with out parents and want to carry on doing so for the next year. During this year we want to rent out the house?

Does this affect the mortgage we can get? Should I be applying for buy to let mortgage even though after the first year we will be living in it ourselves.

Should we declare the fact we are renting it out for the year when applying for motgages? I appreciate I will have to declare any income etc from the renting but is there anything legally binding in the mortgage that stops me renting it out?

Any ideas?

Thanks guys in advance,

Ed

opinions4u

edfolletthsbc wrote: »

During this year we want to rent out the house? Does this affect the mortgage we can get?

Yes.

Should I be applying for buy to let mortgage even though after the first year we will be living in it ourselves.

Almost certainly BTL.

Should we declare the fact we are renting it out for the year when applying for motgages?

Yes. Not to do so would be fraudulent.

I appreciate I will have to declare any income etc from the renting but is there anything legally binding in the mortgage that stops me renting it out?

A normal residential mortgage would require lender's consent to rent it out.

edfolletthsbc

ok.. appreciate the fraudulent stuff. Don't really want to go down that route :-)

if it does mean i need BTL mortgage, i understand I need a much larger deposit. We have been 20 - 25% of the house value saved up. Would i still be able to acquire a BTL mortgage. Do BTL mortgages get worse interest rates?

but from what you have said some lenders do allow for it to be done (with their consent) on a residential mortgage. is this only usually to people who have an existing mortgage?

thanks

ed

herbiesjp

Has to be a BTL

Minimum deposit is 25%

However the rental income would need to be able to support the 75% mortgage - if it does not, you would need a bigger deposit.

You can get good BTL rates comparable to residential rates - however most of these are for lower LTVs

You can only get consent to let, if you already have a residential mortgage/property that you now wish to let out

edfolletthsbc

!!!!!! lol!

The potential rental rate is above the monthly repayments on a residential mortgage repayments I have seen. i think approx 110%. Obviously this may differ with the BTL monthly repayments.

How do banks take into account of renting dry periods. Obviously we don't intend to leave the property empty at any point over the year.

We would be able to pay the mortgage ourselves during this period (in fact we would ideally want to over pay each month for the first year with what we would have had to spend on the mortgage each month) so if the property is empty is this taken in to account?

Ed

herbiesjp

Rental coverage would need to be around 120%-130%, but on differing interest rates, depending on the lender and deal chosen

Rental voids are fine in terms of the criteria, as they can only assess on the going market rental rate

TEDDYRUKSPIN

BTL!!!! BTL!!!! not BLT!!!

You are committing fraud from day one! You will not be allowed a consent to let. You mission is to rent and not buy to live! So BTL!

jamjam3

If you don't inform the bank that the property is going to be let in a years time on your main residence can the bank find out?? :rolleyes:

Wutang_2

All sorted, can we now discuss BLTs?

In my opinion - overated.

herbiesjp

jamjam3 wrote: »

If you don't inform the bank that the property is going to be let in a years time on your main residence can the bank find out?? :rolleyes:

It is not a case of "can the bank find out?"

It is simply what is right and what is wrong

Money saving does not include breaking the law

If you are buying a property and you know you are not going to live in it, then it has to be a BTL

newrecruit

jamjam3 wrote: »

If you don't inform the bank that the property is going to be let in a years time on your main residence can the bank find out?? :rolleyes:

I am assuming that you will be going down the legitimate route of signing the rental agreement and trading as a landlord. If you use a letting agent, there is every likelihood that the bank will find out. Even if you did not use a letting agent, your rental agreement will be invalid because you are in violation of mortgage agreement.
If you rent it out to your friends on non-professional basis and they default on rent, or if you wish to sell the house but the tenants refuses to move out, you will not be able to go to court to get an accelerated possession, ie eviction order, because they are effectively an invited guests and you do not have any basis to evict them, furthemore you will be in trouble for breaching mortgage agreement in the first place.

You can inform the mortgage company that you will have 'friends' coming to stay with you ( this was the case when my mother came to live with me for 1 year) Often mortgage company is fine about it or may request addtional payment each month.
But this will not the way to skirt around the problem, because they will ask your 'friend' ie tenants to sign an agreement.

As soon as your 'friends' find out they are not tenants, they may then decide NOT to pay you the rent but stay, which they are entitle to do.

It is both fraudulant and not worth it in this current economic climate.

Just an after thought
Also if this guy actually rent out the house fraudulantly, can the bank / mortgage company issue CIFAS against him? With CIFAS on the credit record, he will never be able to get loans or even open a BASIC bank account - uts worse than bankrupcy