Question about 'consent to lease' and 'buy to let'

MrsKirche

Hi there - we're planning on applying for a Consent to Lease from our mortgage provider to enable us to rent out our house - does anyone know whether we could still convert the mortgage from repayment to interest-only, as the rent we expect to achieve would cover monthly repayments but not leave anything extra for management costs or contingency?

So it would only work if we could reduce the monthly payments to interest only. I can find plenty of good advice on applying for consent to lease but nothing on what that would mean for the monthly payments?

Natwest told us that we can't get a Buy to Let mortgage as we aren't buying a house (we plan to rent out ours and rent somewhere else ourselves, as we have new jobs we need to be near and don't want to sell the house as it's been valued at less than we bought it for). Can anyone advise on whether that's true? Cos if it, it means our options are severely limited.

Any advice gratefully received. Many thanks.

Ulfar

If you have no equity then you are going to find it incredibly difficult to obtain a buy to let mortgage. In addition to this increasingly banks will want to see rental income exceeding the mortgage by a significant amount. Also the interest rate that you end up on may be higher as well.

If this plan leaves nothing spare how are you going to cope with repair costs, maintenance, letting fees, gas/electricity checks, legal fees.

My advice would be to make sure you know all the ins and outs of being a landlord (there are several good books to be read), check out landlordzone, work out a realistic business plan and then consult a mortgage broker who can look at the whole market for you with a good knowledge of buy to let mortgages.

You didn't say how much negative equity you are in, but selling and paying back the difference may in the end be a cheaper and less stressful option.

MrsKirche

Thanks very much for the response - sorry I wasn't clear, we have an LTV of 75% which we understand is an acceptable rate for buy-to-let deals - the reason Natwest gave us for not being able to get a buy-to-let deal was that they only give them for people using the mortgage to buy a new house, rather than convert the mortgage on our existing house.

The rental income we've been told we could achieve would easily cover the interest-only payments on a buy-to-let deal and leave extra for costs and contingency.

Our problem is that IF we can't get a buy-to-let deal because of our circumstances (i.e. not buying a new house for the purpose of renting out) then can we get a consent-to-lease on our current mortgage that would ALSO allow us to switch to interest-only rather than repayments? Because while our expected rent would easily cover interest-only payments, it would only just cover the repayment costs.

So what we're asking is whether anyone has experience of not being able to get a BTL deal for the same reason, and whether anyone knows if consent to lease deals can be interest only?

many thanks again

silvercar

I know some lenders won't give a BTL mortgage to renters ie they require you to own the property you live in, even if it is mortgaged.

Ulfar

Your are asking two questions.

Can you get a buy to let mortgage possibly yes, but not from your current lender if they are Natwest.

In which case you will be looking to remortgage with a different lender with a buy to let mortgage for which consent to lease is irrelevant. Don't remortgage with an owner occupier mortgage, then ask for consent to lease or to swap to a BTL mortage, a lender will view this badly. It will also potentially cost you more in mortgage, solicitor fees.

In the current climate BTL mortgages are becoming rarer, where they do exist they have a lot more pre-conditions like you must own your primary residence, LTV must be 75% or lower, etc.

One condition that is increasingly relevant to your questions is that some lenders will give a BTL mortgage but not as interest only.