creative ideas for buy to let and mortgage

jon0881

Hi,

ive consulted the bank but i thought i would put out the feelers to see if anyone has any other ideas.

We have a house currently for sale, say its worth £100K and we owe £20K on a +1% BR tracker.

Ideally we would buy/sell but we are concidering buying a new place and renting our old place out. Again, ideally we would like to take as much of the mortgage deal we have on the old place to the new one but im not sure how possible that will be.

Say the new place is £180k we would need to do a buy to let remorgage on the old place to release the deopsit for the new place and then move the mortgage over. most online calculators only do buy to let if you are buying, not remortgaging.

Im just wondering if there are any gotchas or there is a better way of doing things.

Regards

Jon

kingstreet

So you want to port the rate from the old mortgage to the new one without selling the current property?

Will your lender allow it?

jon0881

im really not sure. I doubt it because legally i would have to settle the balance on the current mortgage and transfer the deeds to the new buy to let lender.

kingstreet

There's no technical reason why it can't be done. You have the solicitor complete the remortgage at the same point he completes the house purchase. It's virtually the same as a sale and purchase transaction.

I think it's fair to say lenders aren't keen on allowing people to keep cheap tracker products if they can find a reason not to. That's why I asked if they will allow it.

TBH for £20k, it's not the end of the world if they won't.

You'll remortgage the old one on a BTL product, raising the realistic maximum of 75%? That will give you about £50k for the deposit on the new one. A £180k purchase means a £130k mortgage, unless you're putting some savings in to reduce the borrowing?

Your new mortgage will be under 75% so you should be able to get a rate under 3% anyway. 1.5% on £20k is about £20 a month. Better off in your pocket, yes, but if you want to move...

jon0881

Thanks for confirming that. Its pretty much what ive worked out in a spreadsheet. I just need to decide where the better LTV % should be on the B2L or the bigger mortgage.

I think i overestimated the outgoings on renting, we would probably be able to have a fully managed rental through an agent, pay landlords insurance and still cover the payments on the B2L mortgage.

thanks again

kingstreet

Professional landlords tend to go interest-only for their BTL lending, as only the mortgage interest can be offset against the rental income for tax purposes. You'll have other allowable expenses, such as repairs, insurance and letting agent fees, but capital repayments on the mortgage aren't.

Typically, a lender will apply a formula to work out the feasibility of a BTL proposition. It's based on the rent exceeding the mortgage interest by a set level.

You may be required to have a rent of 125% of the monthly mortgage interest, based on a mortgage rate of 6%. So coming back to my example in post #4;-

Rent must be at or above £470 for a £75k mortgage @ 6%pa.

You're probably going to be better off talking to an independent or whole market mortgage broker about this. He'll be able to find you the best BTL deal as many of them aren't available directly.

jon0881

Thanks again. I will look to speak to an independent when it comes to the B2L. The rental should be more than £500 so that should be ok.

Im trying not to get too carried away as i would have to gazump and existing offer.

jon0881

Ive just spoke with a broker and he said what i am after is a let to buy mortgage. He says there are not many lenders out there that will support that as you are an accidental landlord. The information i can find on the net looks to be very similar requirements as a remortgage buy to let.

kingstreet

jon0881 wrote: »

Ive just spoke with a broker and he said what i am after is a let to buy mortgage. He says there are not many lenders out there that will support that as you are an accidental landlord. The information i can find on the net looks to be very similar requirements as a remortgage buy to let.

It doesn't really matter what label you put on it, it's a remortgage of a property to be used for letting purposes.

There are plenty of lenders who transact such business and whether you're accidental or not, becoming a landlord is perfectly acceptable to them, as long as you are aware of your responsibilities.

It's true you have to be careful in approaching the right lender for your mortgage on your new purchase. This is because some lenders will take the cost of the BTL mortgage off your income, or will take the capital value off your borrowing power. However, there are other lenders happy to ignore a single BTL "in the background" and not "tax" you on your next purchase.

It sounds like the broker in question was a bit of a chump. Have a shop around, take recommendations from friends and relatives and try here https://www.unbiased.co.uk remembering to turn off the "website/email only" option so you get a full list for your area, not just the ones who pay for the big adverts.

I'm sure one or two of the others will have some input, so come back to your thread from time to time for updates.