DILEMMA: best action to take?

doughuelas

Hello

I currently live at home and plan to continue living there for the next 2-3 years at least

With inheritance and savings I can potentially 'buy' my late Grandmothers property from my family with no need for a mortgage.

The property in question has no current mortgage outstanding either

The original plan had been to 'buy' this property (without incurring large solicitor fees, mortgage arrangement fees etc etc) with my sister - but she has decided it isnt really for her. I still plan to buy the property myself. I currently earn £22,676

I do not intend to live in this property.

The plan is to upgrade and rent it out (I acknowldege I will require other funding to upgrade the property slightly)

I have thoughts around releasing equity within the property in 6-12 months time in order to obtain another BTL property.

Having discussed my plans with friends/family a minority have mentioned that if i ever want to release equity and acquire a further BTL property I may run into trouble doing so because I dont have a residential mortgage myself

Is this potentially a BIG problem that requires further investigation from myself?

Or based on the fact I am refinancing from a property that holds 100% equity should I be safe enough?

I have no qualms whatsoever taking an alternative approach - but saying that I want to ensure this is done in as much 'moneysavingexpert' fashion as possible

Any info would be greatly appreciated

Thanks

D

kingstreet

Some lenders won't lend to you if you don't have a residential property which you occupy, be this your first, or a later let property.

doughuelas

kingstreet wrote: »

Some lenders won't lend to you if you don't have a residential property which you occupy, be this your first, or a later let property.

Many Thanks

I dont have a problem buying the property as a residential property with a mortgage etc

But looking at it (perhaps naively) the property would only be a residential property for however long it takes to renovate - then i would need to apply for a 'consent to let'

No doubt additional paperwork/fees would be involved and even then i would be back to square one; not having a residential mortgage...

Is there anything really obvious I am overlooking that I should start considering in more detail?

Thanks

D

Conrad

It sounds reasonably simple. In your position people could simplky buy as a resi place, and arrange a normal mortgage although the place needs to be habitable as far as most lenders go.

Then apply for consent to let. Like you say you might not get it, but I can't see any other option other than suck n see.

You mention being adverse to 'large fees'. Typically a mortgage will involve lenders fees of c£1500. Solicitors fees I guess about £1000 including all statutory dispersements. You will find threads here where epople shopped around for lowest fees and got duly burned.

Smart people recognise you have to pay fair fees if you want decent outcomes. Neither you nor anyone else likes working for nothing, and aren't we always saying we want people to earn fair incomes and not slave wages?

kingstreet

If you plan to renovate property, but need a mortgage to buy in the first place, I suggest you read up on retentions.

Lenders are wont to hold back part of the money you need to purchase the property when there are essential repairs needed. This would result in you having to increase your deposit by the amount of the retention, get the work done after completion, then request the retained funds from the lender when you can evidence the repairs.

BTL lenders aren't keen on property developers. They like property which is readily lettable.

doughuelas

kingstreet wrote: »

If you plan to renovate property, but need a mortgage to buy in the first place, I suggest you read up on retentions.

Lenders are wont to hold back part of the money you need to purchase the property when there are essential repairs needed. This would result in you having to increase your deposit by the amount of the retention, get the work done after completion, then request the retained funds from the lender when you can evidence the repairs.

BTL lenders aren't keen on property developers. They like property which is readily lettable.

Thanks

I dont anticipate having to mortgage the property

I would only mortgage the property in order to give myself 'residential property' status (in order to satisfy some lenders so I can then release funds from the property to buy another BTL property)

Admittedly, Im not 100% sure why NOT having a residential property is a deal breaker for some lenders?

I wouldve thought that because i'm living at home with very little outgoings and have a property with 100% equity, it would've made things easier??

Property 1 - £0 mortgage outstanding
6-12 months later
Re-finance for £30k to buy property 2
= £30k mortgage balance outstanding

Property 2 - buy for approx £70k (less £30k released from property 1)
= £40k mortgage balance outstanding

Property 1+2 combined = £70k exposure

There must be something I am missing?

Thanks

D

kingstreet

Presumably, their arrears/repossessions data indicates those who do not own their own residence are more likely to default on a mortgage on a let property.

My guess.

The bit about renovating wasn't aimed at your initial property development, it was for future consideration.

Thrugelmir

doughuelas wrote: »

There must be something I am missing?

You may struggle to release equity from the property. Given the proposed purpose.