Stuck In The Middle

dkb

....and not sure where to go. Let me explain.

I have a property on consent to let and the fixed term is up in May. I'm in a position to move it onto a buy to let. There are two deals I have my eye on, one is an 80% and one is a 75%. Problem is a lot depends on the valuation of the property. I have a figure in mind of 115,000 which is what I paid for it 2 years ago. This means for the 80% I need to pay off 5,000, for the 75% I need to pay off 8,000.

Obviously I will need to pay a booking fee and survey but until I know the valuation I dont know which product to apply for. The easy option would be to go for the 80%. The 75% is a much better interest rate but I would need to save a bit longer, plus if I dont get a favourable valuation i.e. it comes back at 112,00 for example I'm then stuffed and wouldnt be able to proceed.

What would people suggest in this situation? If I go for the 75% and the valuation is unfavourable would I be allowed to then switch to the 80% without further cost?

Has anyone else been in this situation where an unkown house value is causing headaches as to which way to proceed?

Any guidance much appreciated.

kingstreet

Do you have to move it onto a BTL product?

Has your existing lender refused continued consent to let?

Jimbo1976

I think you need to do more research as to the current value using the property portals to check on local "sold prices" as these are what the surveyor will use. Simply saying its worth what you paid for it is too vague.

Speak to a broker as the vast majority of buy to let mortgages are offered through them. If you do proceed after researching house prices, then go for the 75% deal and then if the property isn't worth enough then you could have the 80% deal (assuming it works at that LTV)

The amount you can borrow with a BTL deal also depends on the rental assessment so you should discuss that as well

dkb

kingstreet wrote: »

Do you have to move it onto a BTL product?

Has your existing lender refused continued consent to let?

Hi

I dont have to move it onto BTL, consent to let doesnt expire until December 2014.

However, because my provider added 1.5% onto my interest rate for CTL, moving it to the 80% will save me £128 a month, moving it to 75% will save me £252 a month.

I just thought it might be the best way forward.

kingstreet

£115k x 75% = £86,250 x 6% = £431.25pm = £540 rental income needed.

£115k x 80% = £92,000 x 6% = £460pm = £575 rental income needed.

Does the rental income fit?

dkb

Should I speak to an independent broker or get in touch with the bank the deals are with? Zoopla says 119,000, The Nationwide house price tool http://www.nationwide.co.uk/hpi/default.htm says 115,000, this one says 111,000 http://www.lloydsbankinggroup.com/media1/economic_insight/halifax_house_price_index_page.asp

dkb

Ah. Rental income doesnt fit. I only charge £500

However, it does fit the going rate for the area so putting it up would mean my tenants find somewhere else and no one would want to move in at that rate.

Jimbo1976

Speak to a broker, banks only offer their own products and some buy to let lenders don't offer buy to let deals directly to customers.

Using house price inflation is not very useful. A surveyor valuing the property will use local recent sale figures. Use the sold price figures on Zoopla/Rightmove etc

kingstreet

BTL products normally have high set-up costs and the free legals and free valuation offered to residential customers may not be offered to you.

This means you have to be careful to calculate exactly what a remortgage will cost you, in comparison with staying with your existing lender.

So, find out from your existing lender what the rate will be when your current deal ends in May. This will tell you the new monthly payments.

Calculate the new payments based on your BTL remortgages, adding in any fees and other costs, including any discharge fees charged by your existing lender, of course.

Let us know what you come up with.

TBH I agree with Jimbo - a broker could do all this for you in two mins and tell you if it's going to be worthwhile. Especially if you actually have to reduce the mortgage, reducing the amount of interest you can offset against the rental income for tax purposes.

dkb

Oh, and Kingstreet, the 80% mortgage is a payment of £386 a month, the 75% is £262. Does this change anything?

dkb

These are the deals i'm looking at

http://www.leedsbuildingsociety.co.uk/mortgages/ratesbuytolet.html

I'm currently on an interest rate of 6.29% because of the +1.5% added by Nationwide.