Property rented out but live with parents

dkb

Hi
I currently have a property (from a break up) but I have consent to let until dec 2014 and rent it out.

In the meantime I am staying with my parents and saving enough money to switch it to buy to let and purchase another property.

My first target is to get it on BTL. However, I've read that you can't get a BTL on a property unless you already have a mortgage on another property you live in. Is this correct?

That seems a bit daft and scuppers me a bit, for example, take this scenario. I buy another property first to meet their requirements, then my consent to let runs out, a BTL is rejected as I don't have enough equity or charge enough rent, the CTL is not extended by my current provider leaving me to tell my tenants to go and me having to fund two mortgages.

So, my question is, what is the BTL ruling about having a BTL mortgage on the only property you own?

Annisele

There isn't a universal rule. Some lenders won't do a BTL mortgage for people who don't own another property, but some lenders do.

How much equity do you have in the property? If it's less than 25% that might scupper your BTL plans by itself.

dkb

At the moment I don't have 25%, I have 18% but my plan was to save until I have 25% then switch the mortgage to BTL, then save for another property.

I don't really want to do it the other way round because it will be more difficult to save to get the equity down on the rental property once I buy another property to live in.


I'm glad it's not universal this rule, thanks for your reply.

Annisele

Why the rush to switch to BTL? If your lender is happy with CTL, the rates are (probably) better than you'd get with a BTL mortgage.

dkb

Just planning for the future. The CTL is for three years with nationwide so am just thinking ahead of an eventuality where they don't let me extend it beyond that. If I knew I could get another three years I would do that.

bluesnake

just be vigilant, on that the gap between you savings and the rising house prices.

Currently I am saving, but this £ gap in my area London is growing, and I now can not keep up and the market has priced me out from a deposit.

Annisele

Ah. Well, pretty much the only thing I can tell you about future lending criteria is that it won't be the same as today's. Lenders are always tinkering with it, so the fact that you can (or can't) get a mortgage now doesn't necessarily mean you'll be able to get a mortgage in a year - even if your circumstances don't change.

dkb

Yeah i understand the savings v house price rises gap. Thankfully im in the north. As long as I keep saving though I should be fine as by default, if house prices rise I may hit the 25% without having to pay anything off meaning I can then put everything I've saved as a deposit in a new property. Then again, I might just pay what I've saved off the current house and move back in when the CTL is up.

One thing is for sure, things are never easy and there are always lots of decisions to be made.