Buy to Let mortgage advice.

jonnyashworth

This is my first post here so I'm sorry if this isn't strictly the right forum.
I have just completed a project that took 20 months (full time) converting a large town house into 4, 1 bedroom flats I have no borrowing at present and the flats have been valued at between 100k-110k each. I need to get buy to let mortgages for 3 of the flats for 60k each (total borrowing 180k). I have 3 months rental income on each of these flats at £500pcm but presently have no other form of income myself (between projects). I have been finding that the fees for borrowing this money are somewhat staggering so would like some advice on where to look? or to hear from anyone who has been in a similar situation. Many thanks Jonny

holly_hobby

The flats will all have to be on their own seperate title deed to try and achieve what you want (otherwise you are looking at true commerical lending of multi units ).

IMHO you will struggle to find the same lender will mortgage all 3 units, due to the combined exposure risks, as such after splitting deeds you would need to source alternative lenders for the units.

Speak to a commercial broker ....

Hope this helps

Holly

jonnyashworth

Thanks for the advice Holly, I am in the process of transfering the freehold into joint names with myself and my fiancee and having 4 lease holds drawn up in my sole name by my solicotor. I realise that the same lender wont lend on all three. so far all I have managed to do is speak to a financial advisor who has put forward 3 separate buy to lets on trackers for 2 year terms with interest rates of about 4% (currently) and setup and valuation fees totaling £5500 for the 3 separate mortgages (on an interest only basis).

These fees just seem so high can you point me in a direction where I can better them?

holly_hobby

Rates and fees are higher on buy to let mortgages than residential, as in essence a BTL arrangement is actually semi-commercial lending - with rates and fees pitched at that level, so I am afraid they are what they are !

All fees and mge interest may offset agasint gross rental income for HMRC purposes, is the only silver lining to them I'm afraid.

The above info has been on the assumption that you are also not a FTB (as you state you/the project are currently mge free).

Hope this helps

Holly

ACG

If you dont own your own property as holly says the deals available drastically reduce.

However, there is another way... The fees the lender charges can be added to the loan. It will cost you move in the long run, but it will cost maybe £5 a month more than without the fees so it would seem like you have had to fork out a large amoutn in fees.

jonnyashworth

I realise that that is a possability however I am planning on selling the properties in the next 30 months so by adding the fees on I will end up paying them before too long.

meercatsunited

the mortgage works is a good bet, will send you a pm with my brokers details, used him for years

holly_hobby

You don't need to have a current mortgage - but you do need to have some previous mge history. I would assume that as you have an FA proposing deals that you aren't - but I don't know how proficient your adviser is.

The situation is this ..

• You need to have a current or previous mge history
• Fees and interest rates are higher on a BTL - as it is a semi-commerical mortgage
• You also need to source a lender that is happy with a porfolio landlord i.e more than 1 mortgaged BTL property
• Fees may be able to be added - which will obviously increase the overall interest cost, or you may stump up the the fees up front - either way they are a permitted expense against gross rental income
• As you intend to let the properties, following their development - you wil be exposed to a cgt calculation on disposal. With liability on any gain in excess of your un-used annual CGT allowance at the time. (so you could stagger their sale over the end and beginning of 2 fiscal years to maximise your permitted allowances).

Hope this helps

Holly

meercatsunited

CGT can be reduced if you live in one property and girlfriend lives in other for 6 months, need bills to prove it to revenue...you can then let each property for up to 3 years without CGT being charged

jonnyashworth

I can claim CGT exemption on 2 of the flats, also due to rennovation costs if I stagger the sale of the other 2 over the end of the financial year there will be little CGT to pay as my fiancee and I will be married by the time of sale and be able to combine out annual allowance (or so my accountant tells me).

I think I am just going to have to swallow adding the £5500 setup costs to the mortgages unfortunately.

ACG

You have 3 properties valued at £300-330k combined. You want a mortgage of £180k for approximately 3 years.

Could you not get away with borrowing say £80k on 2 properties (80% ltv) - total borrowing of £160k? Saves you a few thousand in fees.
OR
Could you not sell 1 for £100k, mortgage 1 for £80k, that way your only paying 1 lot of fees?