Buy to let question

03jatkin

I've been reading up on lots of the posts on the forum particularly regarding lenders permission to let a property.

I currently live at home with the parents and am saving up for a deposit but I don't want to buy a house to live in as with my job I may be moving very shortly and renting suits me better for the time being as my partner and myself may be renting one of her dads houses.

So I was looking at buying a house to then let out alongside renting however a lot of the buy to let mortgages look like they need a 25% deposit, I would like to get on the ladder sooner but in the next few months would only have about £8000-£10,000 for a deposit and most decent houses in my area to rent and get a decent return seem to be around £60-£100K.

Can anybody give me any advise on if you can get a normal mortgage with a 10% deposit and the lenders permission to rent before you purchase the house or if there are any tips and tricks when looking at buy to let for a first time buyer.

Sorry it any typos .. On my phone at work.

Cheers!
Jamie

Yorkie1

No, what you propose is not possible.

You either buy on a residential product e.g. at 10% LTV, and move in. Or you buy on a BTL e.g. at max 75% LTV, and let it out. If you buy on the residential product with the intention of letting it out, that is mortgage fraud.

You should be aware that many BTL products are not available to borrowers who are not already homeowners.

In addition to the LTV / home ownership requirement, many BTL products require the rent to be 125% of the mortgage repayments at 6% interest rate.

If your savings are so low, you seem unlikely to have the financial resilience to be a LL too. How will you deal with void periods, unexpected finances, tenants who trash the place or refuse to pay rent, annual LL's insurance and gas safety requirements etc?

03jatkin

Good points but in terms of stability I think I'm in an ok position as should there be void periods I could cover the payments myself, I have enough disposable income with my job, but I definetly need to get the 25% deposit then? Or is there any flexibility on that? I had read on the 125% return rate, is that based on a repayment mortgage or could it be based on an interest only mortgage.
If for example on the other hand then I lived in the house but then had to move for my job would I be allowed to rent it out then? I want to try and avoid having to sell it and making a loss.

Werdnal

If you apply with the specific intention to let, you cannot get anything but a BTL mortgage.

You are also going to have other costs such as annual safety checks, insurance, repairs and maintenance, not to mention voids in letting, bad paying tenants and possible court costs for eviction. You also have to declare the rental income for tax.

TBH, if you do not have sufficient financial reserves to cover the equivalent of 6 months missing rent (whilst still paying the mortgage), and a major repair expense - blown boiler - then it is not a wise move to start letting property, as it will quickly drown you in expenses before it makes you any profit!

You could live in the property, then apply for consent to let, but as a FTB, it is likely the lender will be suspicious of your intentions, and they do not have to agree consent. If they do, they will add extra costs, sometimes an annual renewal/admin fee, plus dictate who you can let to and how much rent you have to charge!

03jatkin

So what would be your best advice on the direction I take? As I had kind of figured whilst I was renting out a buy to let I wouldn't really do it to make money but just to break even to effectively be paying the mortgage and I was then going to overpay with some of what I would save each month hopefully £500-£1000.
What would be the better option to get a house to live in and just save up for a 2nd deposit whilst living in there?

Edit - really appreciate the response by the way thanks!

Thrugelmir

First property you buy should be your home. Once established and can afford to take the risk, then buy a property to start a business.

Read up some more on the topic. Before leaping in. Not always as profitable as it may seem. May even ruin you.

Mrs_Z

I agree with Thrugelmir, it's best to buy your first property to be your home. Therefore, in your position, I would wait (and save) a bit until you know where you'll be based workwise, then get a 2 bed property within commuting distance and rent out the spare room (see https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme)

Linton

Agree with the other posters. Your first priority should be to get sufficient savings to support yourself for 6 months. Dont consider serious investing until you have done that.

Why? What happens if you get your mortgaged BTL and a couple of bits of bad luck hit you - you lose your job and your tenant stops paying. You could end up bankrupt.

kingstreet

A typical BTL lender/product means;-

- maximum loan to value of 75%
- rental income to be 125% of monthly mortgage interest at 6%
- a personal income of £20k+
- being a homeowner before you'll be considered.

As it will be considered that you intended to let the property at the outset, a request for consent to let in the first six to twelve months of a residential mortgage will be likely to be declined.

03jatkin

Thank you all guys for your advice, I think then rather than looking to get a cheap place to buy to let I will set myself to getting a nice 2 bed and look at renting out the room and save for a 2nd place.