Convert to buy-to-let and buy new house

njsjl

My wife and I are looking to re-mortgage our current house (standard mortgage) as a buy-to-let mortgage and purchase a new property as a standard mortgage. I'd like some advice on what order things will need to happen.

Am I correct in thinking that we can only apply for the mortgage to purchase the new house once the process of switching the existing mortgage to buy-to-let has been completed? Are we able to get an agreement in principal on the new house before completing the buy-to-let mortgage? Ideally so, as we would like to be able to tell the vendor we have this in place.

Can anyone give a run down of their experience or knowledge in this area?

Thanks,
Nick

Meeper

Both transactions can occur simultaneously, with the same solicitor acting for both transactions. He will need to complete the rental property transaction first if it is going to be providing deposit monies for the second one, but this can be co-ordinated to complete on subsequent days.

It's certainly do-able, but you should visit an adviser to assist as the timings and complexities of doing this can be a pain.

Wh05apk

Are you looking to raise extra funds on your current property? if not, you could just get a consent to let from your current lender, that way you would stay on your existing deal without going onto probably more expensive BTL rates, and incurring extra costs.

njsjl

Wh05apk - yes, we do need to raise funds from the current property so the consent to let is not possible.

Thanks for the advice. I'm waiting to hear back from an adviser. Hopefully we can get things moving. Who knows we could be in our new house for Christmas!

Hoploz

We did this when we lost our buyer at the 11th hour. We got a BTL mortgage on the old house to release the money for the new house, which was also mortgaged. It was all done at the same time, it just took us an extra few weeks to get everything organised but the vendor held on for us. It cost a few grand in extra payments but we got what we wanted, and it even enabled us to work on the new house while we still lived in the old one. Perfect! Luckily we got another buyer so we owned both properties for about 2 months in the end. However, I will add, that was when mortgages were easier to come by, in the heady days of 2007, just before the crash!

milanos

I am thinking of doing this as well to be honest, we have had no luck selling our property so am thinking about releasing some money and renting it out. Seems like I'd have to go through a specialised lender and while I'm not overly concerned by the rates on the existing property, I don't wan't to get a raw deal on the mortgage on the one we buy

Charlton_Taz

Sorry if this is a stupid question...but doesn't the mortgage company for your 'second' home take into account the BTL mortgage as outstanding borrowing commitments when they do they calculations on what they could lend to you (well..unless you have already secured tenants to cover the BTL mortgage)? I have always presumed they would so I thought your earnings would have to cover both mortgages???!

milanos

In my example, Yorkshire would take the full amount of the mortgage owed on the BTL property for the calculations on the new one, unless I had a tenant in for 12 months. They passed me onto a broker who told me about deals for lenders who will not take the BTL property into the considerations, provided the expected rental income was above the mortgage payment. A lot more risky definitely, hence the increased rates.

Wh05apk

Most lenders will disregard btl mortgages (or consent to let), sometimes subject to an excess of rent over mortgage.

milanos

Wh05apk wrote: »

Most lenders will disregard btl mortgages (or consent to let), sometimes subject to an excess of rent over mortgage.

Interesting. I would be looking at an excess of £150+ per month. Yorkshire didn't want to take it on, do you know other well known ones that might?

Wh05apk

milanos wrote: »

Interesting. I would be looking at an excess of £150+ per month. Yorkshire didn't want to take it on, do you know other well known ones that might?

Most of the larger lenders will do it, they normally like to see an excess of 25% otherwise they may take the shortfall as a commitment, the building societies tend to like you to have rented the property for a while before they will ignore it.