Moving to from a residential mortgage to buy-to-let

michaelhunt60

I bought a two bed flat in 2003 on a repayment mortgage with the halifax.

In 2008 I wanted to move on to a bigger place so I put my flat on the market (just as things were going belly up in the housing market) and after two sales fell through, I abandoned hope of selling for a while, moved out to a rented place and found a tenant for my old palce.

This was always meant to be a short term move as I always intended to sell so I didn't tell the mortgage provider that I was renting the place out, though I have obviously been continuing to pay the mortgage and have never missed a payment.

After nearly two years I have decided that I don't want to sell and would like to keep my old place on as an investent and thought I'd better do it properly and get a buy to let mortage. Also my current monthly payment is £925 which doesn't cover the rent, but I'm pretty certain I could be paying a lot less than that.

The property was on the market for £220,000 in 2008 and the current mortgage is about £150,000. Rental income is £875 per month.

- Is this feasable?

- Would it go aghainst me that I didn't tell the halifax about renting it out?

- Also, I am still renting my own home but may want to buy something in a year or so. Would I be able to use the equity on my old place as a deposit if I converted to a buy to let.

Any advice would be gratefully recieved!

VIGILANT22

It's not clever you have rented this out an neither declared it to lender, insurer or HMRC...Right now if anything happened to yr property and you have a tenant in there yr insurance would be null and void..Then the issue of receiving rental (earned income) and not declaring this to HMRC..The tenants deposit, not protected...
http://www.direct.gov.uk/en/TenancyDeposit/DG_066374


Anyhow for what you want to do... yr better seeing a whole of market adviser and discuss with them "let to buy" ie this mortgage works by allowing you to borrow money to buy a new home to move into and letting out current one...

michaelhunt60

Whoah! Who said I never informed HMR&C?? That isn't the case at all. I said I didn't inform the mortgage provider.

Thanks anyway.

JA1000

Just apply for a consent to let, give them a ring and ask, they will have a quick look at your payment history and say yes or no. If it's with Abbey they'll charge you £300 for the pleasure and no point going to a broker as this is simple and probably a lot cheaper. Won't matter about rent not meeting. If you say you are thinking about doing it or they will ask for contracts etc, this will show you have been doing it but I know where you are coming from.

VIGILANT22

michaelhunt60 wrote: »

Whoah! Who said I never informed HMR&C?? That isn't the case at all. I said I didn't inform the mortgage provider. Thanks anyway.

With all the respect...you wouldn't be asking and stating some of the things you have if you had informed the revenue...you would be more clued up on the most tax efficent way regarding rental income....

As for the broker...this was regarding the let to buy........

michaelhunt60

Vigilant, it was out of necessity rather than choice. I don't think you read my post properly. I had no intention of doing this as a business at the time. I have informed the revenue and compelted my tax return, tax efficiency is not an issue as I there is a significant loss thanks to mortgage interest, repairs expenditure, agents fees etc. Anyway, you are not being very constructive or helpful here.

As fot "let to buy", the point is that in don't want to buy right now but may want to in the future.

JA100 - Thanks for your reply. The thing is that I want the rent to meet the mortage and want to do something about this before interest rates start going up. Anyway, are you sure that the bank would just agree to this? If they know I've already been renting it out is it possible that this could lead to trouble. I'm with Halifax by the way.

JA1000

Just phone up and ask they will run a quick check over your file, if you 'go ahead' they may want a copy of contracts etc which is easy to produce just get tenant to sign new one with not initial period if he/she is out side of this anyway and on rolling months.

Sometimes you have to tell the banks what they want to hear, it may not be 100% right but you are just trying to resolve the situation.

If they agree and charge a fee just take it. It doesn't mean you are tied to it and is only subject to if you do it. Give them a call and see. You will be no worse off for trying and you will be on exactly the same rate as you are now.

VIGILANT22

michaelhunt60 wrote: »

Vigilant, it was out of necessity rather than choice. I don't think you read my post properly. I had no intention of doing this as a business at the time. I have informed the revenue and compelted my tax return, tax efficiency is not an issue as I there is a significant loss thanks to mortgage interest, repairs expenditure, agents fees etc. Anyway, you are not being very constructive or helpful here.
QUOTE]

(Rental income is £875 per month.)
This is a repayment mortgage....If yr aware of tax laws.... they dictate that the capital repayment elements of your monthly mortgage payments cannot be reclaimed as a legitimate expense ..the capital element is treated as investment and subject to tax...

As for changing to a btl mortgage..lenders look for a rental income of 125% of mortgage payments....therefore maybe tax efficiency will become as issue.........

dimbo61

Please be aware that once you have let out your home for more than 3 years you will have to pay capital gains tax!
Time to see an accountant and a whole of market broker and ask the Halifax for permission to rent ( if they say NO then time to sell or move back in !)

michaelhunt60

Vigilant - I have never suggested that the capital element of the mortgage repayment was a tax deductable expense. I have claimed only the interest. My tax return is of no concern to you. Again, you are not helping. please stop replying. I came on here looking for advice on mortgages not an argument about tax.

VIGILANT22

Its not an argument... I have pointed out several things to u...if you come one a forum you cant be selective in what people post...yr reaction is typical of one doesnt like what is being posted...at least you have something to think about now.......