Buy house, live in then turn to buytolet

bluechilli2010

Hi there,

Looking at buying a house within our means (so to speak) but is not the dream house but what we can afford with x1 income.

If we bought this house, lived in it for say a couple of years & then looked at it becoming a rental rather than selling it (alot later down the track!)
how easy would it be to turn the first buy into a rental from a legal perspective given it originally was bought as our house of residence.

I know you'd have to change over to a buy to let mortgage but does it make it tricky given it was your house of residence so to speak, so in theory not bought for buy to let intially?

kingstreet

In the first instance, you ask your current lender for consent to let. You then compare the terms of that, to the terms you can obtain for a remortgage to a formal buy to let product and decide which is the most sensible option.

You declare your rental income to HMRC and you get to offset the running costs of the rental against the taxable income, such as mortgage interest and letting agent costs.

greenjellybean

kingstreet wrote: »

In the first instance, you ask your current lender for consent to let. You then compare the terms of that, to the terms you can obtain for a remortgage to a formal buy to let product and decide which is the most sensible option.

You declare your rental income to HMRC and you get to offset the running costs of the rental against the taxable income, such as mortgage interest and letting agent costs.

Kingstreet, can you explain the tax relief thing please? I am a higher rate tax payer, about to enter the LL world. What do I need to do to offset the interest and agent costs against the rental income? forms to fill in?

Thank you!

Mrs_Z

Easy enought to do if you got enough funds. You'd need to either get a consent from the Lender (likely to be cheaper but possibly only granted for a couple of years max) or re-mortgage it with a BTL loan - be aware though, deposit for BTL loans is likely to be in the region of 20-40% and the interest rates are not as competitive as residential mortgages. On top of that you would of course need also deposit to your new 'dream' home, assuming that you were to purchase.Aside from the finance and taxation issues - have you considered all the legal responsibilities, risk and potential hassle that being a landlord entiles? It is not for everyone and certainly not a licence to print money in the current climate.

kingstreet

greenjellybean wrote: »

Kingstreet, can you explain the tax relief thing please? I am a higher rate tax payer, about to enter the LL world. What do I need to do to offset the interest and agent costs against the rental income? forms to fill in?

Thank you!

When you declare your income, you complete a section of your tax return which sets out your income from property and the allowable expenses are added to another section to ensure you only pay the correct amount of tax.

You need to spend some time learning about the responsibilities of becoming a landlord and the other implications.

Start here;-

http://www.direct.gov.uk/en/moneytaxandbenefits/taxes/taxonpropertyandrentalincome/dg_10014027

You may also wish to request assistance on the HBR&S board as there are many landlords who will help you with the other non-mortgage related issues.

gwernybwch

Mrs_Z wrote: »

Easy enought to do if you got enough funds. You'd need to either get a consent from the Lender (likely to be cheaper but possibly only granted for a couple of years max) or re-mortgage it with a BTL loan.

I am doing exactly as the OP is asking about and wouldn't describe the process as 'easy enough'!

I'm changing my residential mortgage to a BTL mortgage and already on the fifth piece of additional information post application form stage and on the residential mortgage (on the new house that I plan to live in) are on second additional information request.

It seems that this type of arrangement registers as "does not compute" in mortgage lenders decision making processes.

Thrugelmir

gwernybwch wrote: »

It seems that this type of arrangement registers as "does not compute" in mortgage lenders decision making processes.

Different lending profiles. BTL is commercial, normal residential mortgage is consumer.

The_J

gwernybwch wrote: »

I am doing exactly as the OP is asking about and wouldn't describe the process as 'easy enough'!

I'm changing my residential mortgage to a BTL mortgage and already on the fifth piece of additional information post application form stage and on the residential mortgage (on the new house that I plan to live in) are on second additional information request.

It seems that this type of arrangement registers as "does not compute" in mortgage lenders decision making processes.

Odd, who are you getting the mortgage with?

Many BTL lenders can sort something out in a few days.

bluechilli2010

thanks all for the replies & feedback is food for thought. Back to the drawing board, maybe!

gwernybwch

Thrugelmir wrote: »

Different lending profiles. BTL is commercial, normal residential mortgage is consumer.

If lending profiles means 'we'd rather not do business with business', then yes, it is a different lending profile. I'm changing my rented property to a Leeds BS BTL mortgage. If I had known that they were going to be this difficult, I would have gone with one of many of the other BTL lenders that were willing to deal with me. Rant over!

bluechilli2010 wrote: »

thanks all for the replies & feedback is food for thought. Back to the drawing board, maybe!

Hopefully the hassle that I'm having in arranging the mortgage and remortgage isn't putting you off.
Being a Landlord isn't hassle free, but I've been a Landlord for almost three years now and I can honestly say that I have enjoyed almost every minute of it.