First Time Buyer Mortgage with intention to let out.

wiley25

Hello,

I have heard lots of rumors saying it is totally legal to purchase a house on a first time buyer mortgage (and benefit from lower deposits/rates) and then once all the paperwork is completed, just write a letter to the bank saying you now intend to rent out the property (for a small service charge).

Can I have some confirmation if this is true or not?

Thanks,

Wiley25

BitterAndTwisted

Each lender's policy will be different.

Some lenders will give Consent-To-Let for a flat annual fee for a limited period but only once you've been in the property for a certain amount of time.

Some lenders will not give Consent-To-Let at all with a residential mortgage and insist you convert to a Buy-To-Let one which requires a 25% deposit and the proposed rent at 125% of the monthly mortgage-payment.

I would not advise you to buy with a residential mortgage and then expect to be given CTL. BTL is a business proposition and a residential mortgage isn't the right vehicle

wiley25

Cheers for the input, my situation is that I am currently serving in the Armed forces and want to buy a house whilst I have a disposable income.. but being away from home all the time I would never live in it, so renting it out makes sense.

I think I'll start looking at some buy to let mortgages, I think natwest do one of the best deals, 85% LTV with 5.9%.

EDIT: If I in later years chose to live in the house, can I convert the mortgage from a BTL to a residential?

BitterAndTwisted

Don't become another Bikingbarney

Yorkie1

Yes you can apply to re-mortgage from BTL to residential if / when you return to live in the property.

Are you up to speed with what being a LL would entail?

Also, if you're resident outside UK, familiar with the HMRC rules for tax re non-resident LLs?

wiley25

Yeah, I'm all up to speed of what is required of me as a landlord.

And about the living overseas, as it is with the military and I still pay tax etc... I am still classed as living in the UK.

BitterAndTwisted

Armed Forces are resident for UK tax-purposes regardless of foreign postings.

DVardysShadow

Unless you have worked out on paper that you are going to turn in a stonking profit by renting out, then I would suggest that you put you money into savings products. Unless you have a huge deposit, you will be lucky if the rent covers the mortgage. Then factor in rental voids maintenance etc etc.

And house prices are unlikely to go anywhere for a while.

wiley25

I'm inclined to disagree a little there, I'm not really doing this for a profit. I'm doing it because of where I'm at in life I am earning around 1800 a month after all my taxes and bills. This money just gets spent on beer, clothes and gadgets.

I am looking for a house around 80k, I have 14k saved up for a 15% deposit and the extra three thousand to cover costs and start a 'house fund'.

Average mortgage on a 80k house for me would be around 350 a month, average rent in the area is 450 a month, that extra 100 would cover insurance, estate agent fees and go into the 'house fund' that would cover maintenance.

I think it is smarter to invest my money into a house and get someone moving in to pay it off, than to just chuck my money in a savings account and probably dip into it.

Plus a can put a substantial amount of money from my wages into the 'house fund' or overpay the capital of the mortgage, it's win win in my eyes.

jimjames

Even if it isn't "making" any money I'd think the BTL is still worthwhile as your mortgage is covered and you then have a property to live in when you return home - assuming the place and location is suitable for you.

You should be able to get a better deal than that Natwest but most BTL will require 30% deposit.

Thrugelmir

wiley25 wrote: »

I think it is smarter to invest my money into a house and get someone moving in to pay it off, than to just chuck my money in a savings account and probably dip into it.

Only the interest element of your mortgage repayment is tax deductible.

The capital will be repaid out of after tax earnings. Which diminishes the return somewhat.

You can earn in excess of 4% per annum by utilising your ISa every year.