1st time buyer who wants buy to let 60k with 10% depoist.

F_Bear

background: 23 yrs old earning 23k with 10k savings. living in parnters house, soley his mortgage, with little equtity <10%.

we were planing on saving a little more and buying another bigger house and renting OH's. seen this today tho and thinking about buying it to rent out and staying were we are:

http://www.rightmove.co.uk/property-for-sale/property-28573030.html

with a 6k depoist i can get a tracker with no ERC mortgage for £275 a month, 4.5%. this is a first time buyers mortgage. once renovated the house will rent for £450 and have a market value of roughly £80k

when using a buy to let calculator they want 10% depoist and payments are £300, 5.5%.

would it be possible to buy as a 1st time buyer, increase its value then convert the mortgage to buy to let with a higher LTV after a few months?

tbs624

F_Bear wrote: »

once renovated the house will rent for £450 and have a market value of roughly £80k

How have you arrived at these figures and do your overall calculations involve a contingency fund to cover void periods etc?

Have you done any research on what becoming a LL involves? You may find it useful to seek out G_M's lengthy post on here for newbie LLs. (edited to add - see Werdnal's post below for the link)

when using a buy to let calculator they want 10% depoist and payments are £300, 5.5%.

Which Lender is offering a BTL mortgage product with just a 10% deposit requirement?

would it be possible to buy as a 1st time buyer, increase its value then convert the mortgage to buy to let with a higher LTV after a few months?

If you mean to buy it on a cheaper rate residential mortgage, that would require you to be living there as your main residence.

Fire_Fox

Will £4K cover your survey, mortgage application, legal fees, letting agent, safety certificates, repairs and renovations, council tax buildings insurance and mortgage until you find a tenant AND still leave you a float in case your tenant does not pay rent, you fall ill or injured and cannot work, something breaks down needing urgent repairs? I suspect not.

You should not be applying for a residential mortgage unless you intend to live in the house, that could be deemed mortgage fraud. How do you know you will increase the value, have you done detailed costings which include ALL your running costs during the renovation?

Lovelyjoolz

Firstly, I doubt very much that property will achieve anywhere near 80K once 'renovated'. This property on the same street sold for £57k a year ago:

http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=19763871&sale=23629689&country=england

And it looks pretty nice inside. From the looks of it, the house you linked to is overpriced as it is, more so if it requires modernisation.

Secondly, I've not seen any BTL products that require less than a 25% deposit. Which lender have you spoken to?

You cannot buy a house on a standard mortgage and then convert it later. Quite aside from it being fraudulent, you're likely to be fixed in to a 2 year period and there's no guarantee that your lender will give you consent to let during that fixed period.

I think your only option is to continue to save until you have a 25% deposit.

F_Bear

Quote:
when using a buy to let calculator they want 10% depoist and payments are £300, 5.5%. Which Lender is offering a BTL mortgage product with just a 10% deposit requirement?

sorry, mean 20% depoist.

regarding the rental figures i spoke to 2 letting agents and the £80k figure is what similar properties on the street are advertised at before, not sold at i know.

we have researched been a LL as we intend to rent OH's house. we'd be using a letting agent as we understand theres a great deal involved.

regarding the 4k for renovation etc we could also use the money we currently save on a monthly basis to fund this. periods of void wouldnt be a big issue as the mortgage would be managable on our wage, and we both have extensive sick pay cover.

thanks for the advice re the mortgage, we would defo not want to commit fraud.

if i was to move into the house how long would i need to reside before i converted to buy to let? i know it sounds the same question but would this be a grey area or black and white, with dont pass go and straight to jail?

Lovelyjoolz

F_Bear wrote: »

sorry, mean 20% depoist.

Still don't know where you're getting that from. I last took out a new BTL mortgage a year ago and noone would lend more than 75% LTV. Who are you talking to about this?

F_Bear wrote: »

regarding the rental figures i spoke to 2 letting agents and the £80k figure is what similar properties on the street are advertised at before, not sold at i know.

The link I posted proves that 80K isn't likely to be achieveable right now.

F_Bear wrote: »

we have researched been a LL as we intend to rent OH's house. we'd be using a letting agent as we understand theres a great deal involved.

Yes, there's a hell of a lot involved. And using a letting agent does not let you off the hook. Make sure you are exceedinly well informed about your rights and responsibilities and those of your tenants.

F_Bear wrote: »

regarding the 4k for renovation etc we could also use the money we currently save on a monthly basis to fund this. periods of void wouldnt be a big issue as the mortgage would be managable on our wage, and we both have extensive sick pay cover.

I don't think your sums add up. Aside from the fact that 6k is not 25% of 62k your savings need to also cover conveyancing costs, as well as the the renovations.

F_Bear wrote: »

if i was to move into the house how long would i need to reside before i converted to buy to let? i know it sounds the same question but would this be a grey area or black and white, with dont pass go and straight to jail?

At the end of your fixed mortgage period, you should be able to find someone to give you a BTL mortgage, as long as the LTV is right. It may or may not be your original lender, because not all lenders do BTL products.

Fire_Fox

F_Bear wrote: »

sorry, mean 20% depoist.

regarding the rental figures i spoke to 2 letting agents and the £80k figure is what similar properties on the street are advertised at before, not sold at i know.

we have researched been a LL as we intend to rent OH's house. we'd be using a letting agent as we understand theres a great deal involved.

regarding the 4k for renovation etc we could also use the money we currently save on a monthly basis to fund this. periods of void wouldnt be a big issue as the mortgage would be managable on our wage, and we both have extensive sick pay cover.

thanks for the advice re the mortgage, we would defo not want to commit fraud.

if i was to move into the house how long would i need to reside before i converted to buy to let? i know it sounds the same question but would this be a grey area or black and white, with dont pass go and straight to jail?

You cannot delegate your legal responsibilities to a letting agent, if you read around the board many agents try to enforce all sorts of unfair or unenforceable clauses/ charges on tenants and breach their rights. The buck stops with you, worst case scenario you end up in court.

How have you got anything like a 20% deposit, money for renovations and a decent contingency fund? It is very unwise to rely on the money you have coming in every month, that is how amateur landlords or developers get into trouble when something unexpected happens. Unplanned pregnancy and very sick baby(s), unfair dismissal, relationship breakdown, house totally trashed by tenants or criminals, builder runs off with the money you paid up front, last year's riots, major storm .... :eek:

Lovelyjoolz

Fire_Fox wrote: »

You cannot delegate your legal responsibilities to a letting agent, if you read around the board many agents try to enforce all sorts of unfair or unenforceable clauses/ charges on tenants and breach their rights. The buck stops with you, worst case scenario you end up in court.

OP, those are wise words from Fire Fox. Take note.

Fire_Fox wrote: »

How have you got anything like a 20% deposit, money for renovations and a decent contingency fund? It is very unwise to rely on the money you have coming in every month, that is how amateur landlords or developers get into trouble when something unexpected happens. Unplanned pregnancy and very sick baby(s), unfair dismissal, relationship breakdown, house totally trashed by tenants or criminals, builder runs off with the money you paid up front, last year's riots, major storm .... :eek:

... floods, fire, blown-up boiler, rising damp, woodworm in the attic....

The list goes on. You need much, much more than JUST enough to cover renovations. You need contingency money. And that means CASH - not a good credit card limit.

I'm still trying to find out who offers a 80% LTV BTL mortgage though......

F_Bear

thanks for the replys. the 20% was on money supermarket comparison site.

Quote:
Originally Posted by F_Bear
if i was to move into the house how long would i need to reside before i converted to buy to let? i know it sounds the same question but would this be a grey area or black and white, with dont pass go and straight to jail?

At the end of your fixed mortgage period, you should be able to find someone to give you a BTL mortgage, as long as the LTV is right. It may or may not be your original lender, because not all lenders do BTL products.

the idea was to get a first time buyer tracker mortgage with no fixed period then go on the buy to let once the renovations have finished.

but from the advice given this looks like fraud!

Vachequirit

You're in the same predicament as all savers. There is simply nowhere to invest. Share prices have all been bid up by banks, making them a really poor investment, there is no interest on savings and bonds, which small investors don't usually bother with anyway, are in a huge bubble. So BTL is the only investment anyone can think of.

But in a falling market BTL is not a great investment.You are likely to lose more money in capital loss than you make in rent. Maybe you could even end up making a loss. You need to factor in repairs, voids (when you can't find a tenant but still have to pay the mortgage) agent fees and so on. It could still work out, but there is a fair bit of risk involved.

I can't really suggest any good investments these days. There don't seem to be any. This is actually government policy. The government wants you to spend all your money on ipods, holidays and cheap plastic tat from China 'to get the economy going', instead of investing.

Werdnal

As a FTB, many lenders will be wary of you taking a mortgage then suddenly changing to BTL/CTL so soon after buying the property. If they do agree to the change (many will suspect you inteded to let out from the start), they will impose higher % payments, admin/set-up fees and can even stipulate how much rent you charge, who you let too and for how long.

Before you launch into this letting business - yes even one property is a business, with tax implications, legal regulations and laws to abide by (with serious financial penalties and even prison sentences/criminal records for those who don't), you need to do much more research. It is evident from your posts here that you know very little at the moment.

Read this:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

and all the links it contains, to see what you need to understand and rules to observe before you go any further.