Buy to Let mortgage advice

travel_freak

Hi there,

I'm hoping to buy a place very soon (re-negotiated offer close to being accepted - I hope!). It will principally be an investment to let out. I'd be really grateful for any guidance/advice re the following:

1. I vaguely recall that for Capital Gains Tax purposes it may be advisable to live in the property for a while before letting - to reduce CGT on eventual sale - does anyone know the ins and outs of this or, indeed, if I am completely wrong about this. I would add this is a long term investment and I have no intention of selling for at least 5-10 years.

2. I have to decide whether to apply for an actual buy to let mortgage or to apply for a normal owner-occupier one, live in the property for a few months and then apply to that mortgage lender for permission to let. However, I'm worried about doing it this way because I just don't know whether a lender is obliged to grant such permission or on what grounds it might be able to refuse - i.e might they take a dim view of the fact that one applies for permission to let after only a short while? I know that the lender may apply a loading to the interest rate (as I let another property, but only after I'd owned and lived in it for many years).

3. Depending on the advice on point 2 above, if a buy to let mortgage is the only way forward, does anyone know of any good deals at the moment? I'm looking for about an 85% loan, ideally fixed for 2-3 years and possibly with an ability to make overpayments.

Many thanks!
Regards,

silvercar

AFAIK

1. If you live in it (as your principal private residence) for any time you get the length of time + the last three years allowance on your CGT. eg own it for 10 years in total, live in it 1 year, CGT reduced by (1+3)/10, so you pay CGT on 60% of the gain. You also get tapering relief if it has been let out, this reduces the CGT the longer you own it.

2. If you are seriously going to live in it for a short time you could get an ordinary mortgage. Some lenders may increase the interest rate by 1% if you then let it. If your mortgage provider was difficult you could get a BTL mortgage at that point.

3. With an 85% loan you are open to most BTL providers. They will also want the rental to cover the interest payment by 125%+. I've been looking at the Coventry and NatWest.

dunstonh

With rental incomes showing such low yields, inflation on the up and interest rates to follow, I suggest you make sure you can afford the mortgage payments plus at least half as much again before you go into this.

In effect, you are going into a buy to let at what appears to be the wrong time. So, make sure you can afford to lose money on it in the short to medium term.

travel_freak

Many thanks for these helpful replies. All points duly noted - I can afford the repayments if the worst comes to the worst and it doesn't let but I'm hoping it won't come to that and lettings SEEMS (!) to be strong in this area albeit that there is competition and I am looking at keeping it for the long term.

Thanks again.