Renting my house/changing to buy-to-let? And getting a 2nd Mortgage!

Smegreg

Phew! This thread is in two parts, so bare with me...:eek:


Part 1:think:

I am planning a big move in the next 6 months from Manchester to Newcastle to be with my partner.

I currently own my own home jointly with my father with a mortgage for half its value.

When I move to Newcastle, I do not want to sell this house. I want to rent it out. I know the rent would cover my current mortgage.

Do I need to change the type of mortgage I have to a buy- to- let, or do I leave it as it is?

What is the benefit of a buy-to-let anyway?!

Part 2:think:

My other half is studying for a PhD so in effect is classed a student but is paid a monthly wage.

When I move up, we want to buy a house together which will be his first and my second.

How likely is it that we will get a mortgage if I still have my current one and he is classed as student?

Can you get a second mortgage easily?


I'd really appreciate any help and advice you can give me!

Thank you,

Laura

Thrugelmir

A few pointers.

You need to ascertain from your lender the terms under which they will allow you to rent out your property.

Net rental income after the deduction of interest and costs is taxable. So does this cover your mortgage repayments and allow for void rental periods for example.

How do you intend managing the property when living in Newcastle?

BTL is as the name suggests. A residential mortgage is for the purpose of buying a home for oneself. A BTL mortgage will require a minimum 25%-35% deposit and gross rental will need to be around 125% of mortgage repayments.

Property letting is full of pitfalls and is a business, not a hobby. So think carefully as to why you wish retain the property. If interest rates were to rise signficantly could you support funding of increased mortgage repayments.

grey_lady

I've been looking into this, if you have enough equity in your home and the rent would cover 125% then yes a BTL mortage is fesible, but possibly expensive with arrangement fees / higher rates.

Or you could just phone your current lender and ask them if it was ok to rent out on your current mortgage. Or you could keep quiet and have your mail forwarded on - thats naughty though, probably best to go for the second option, sound out your existing lender and see what they say.

Second mortgage seems to depend on 'affordability' e.g income/debts/deposit and how much you want to borrow. You might have to have the first place rented out before they would give you a second mortgage if your income wouldnt cover both.

Talking to a broker might be useful in any case.

VIGILANT22

[QUOTE=grey_lady;_Or_you_could_keep_quiet_and_have_your_mail_forwarded_on_-_.[/QUOTE]


yes you could break the contract you have with the lender the one who has advanced you the money to purchase the property you're supposed to live in....and then be discovered for mortgage fraud and the loan be called back in etc...

maybe even the house could be damaged and yr insurance would be null and void....rolls eyes

Thrugelmir

grey_lady wrote: »

Or you could keep quiet and have your mail forwarded on - thats naughty though,

Thankfully tenants are catching onto this. In due course there will be a national register of landlords as well, as one suspects there is a fair amount of tax avoidance going on.

grey_lady

Doesnt really affect tenants - as long as they have a roof over their head and the mortgage is still being paid - why would they care. Plenty of people do it, and I doubt that these accidental landlords are barely able to cover their costs after mortgage repayments, agency fees, void periods and repairs etc - in fact these kinds of landlords will probably make a loss and as such aren't really going to worry the taxman. Although id suggest paying an accountant to do a tax return and keep it all above board. I believe that a good accountant will save you more than they cost you.

Its up to the OP to decide what level of risk they are comfortable with, if you read the whole of my earlier post i did suggest that talking to their current lender and sounding them out would be the best thing, because although I've personally never heard of a loan being called in because of this I guess it could happen and that might be a level of risk they're not comfortable with. What's more likely is that their lender would just insist that they go on a btl product or a ctl product.

Buildings ins wouldnt be void by doing this as far as i know (worth reading the small print) and I'm assuming that OP would take out landlord type insurance to cover for any damage the tenants might do which wouldnt be covered by their deposit.

But the worse case scenario is useful to know :-)

VIGILANT22

grey_lady wrote: »

Doesnt really affect tenants - as long as they have a roof over their head and the mortgage is still being paid - why would they care. QUOTE]


Really!!.....tenants would be the first to report you...many have........:)

northerner999

Why would tenants care that their landlord is commiting fraud? I would! It would make me wonder if said landlord would do the same to me or cut corners on maintanance, whether these 'accidental landlords' felt they were morally in the wrong or not.

I reccomend speaking to your lender and asking for permission to let.

MarieAAP

As GreyLady suggests, but add a note, of that your planning on moving back to home, after your OH has finished his phd, so it is only on a fixed term basis. And ofc then reassess the situation again when the period runs out.

seraphina

It's important to let your bank know because if you let without permission, the tenancy agreement is null and void, and the bank can kick your tenants out whenever they so choose. Nice way to screw over someone you're relying on to pay your mortgage...

grey_lady

Hhhmm tenants go to all the trouble of figuring out the lender, report their landlord, find themselves homeless and erm...? then have to find somewhere else to live, pay moving costs, go through the whole expensive rigmarole of agency fees, credit check, employment and previous landlord references... Yup - I can see why tenants report their landlords to their lender all the time. Especially if the landlord pays the mortgage is good with timely repairs etc.

Course if to many people become accidental landlords then that pushes rent down for professional landlords and we wouldnt want that would we :-)

'It's important to let your bank know because if you let without permission, the tenancy agreement is null and void, and the bank can kick your tenants out whenever they so choose.' - I dont think that's true, they would have to go to court and the tenant would get notice. Also I think the bank would rather the mortgage got paid, than go to the expense of repoessing and not getting the mortage paid. Banks tend to care more about making money than losing it, they would probably just make you go onto a higher rate.

Its only if the landlord doesnt pay the mortgage then the tenant will end up being homeless.

Anyway - hope it all works out for the OP.