Changing to Buy To Let - how does it work?

titusbungle

We bought our apartment for £85k in 2006 and owe £73k now, we're thinking about possibly letting it out if we move but how does it work with regards to property valuation? I know we'd need a 25% deposit, will they base it on its worth as it is now or on it being an investment that is being paid for by a tenant?

GMS

Valuer would value the property and give a rental assessment. Rent typically needs to be 125% of the mortgage payment based on interest only at a rate of approx 6%.

Do you have the additional funds to allow a Buy to Let mortgage to be possible?

Could you not get consent to let from current lender?

Also keep in mind that many lenders restrict the loan to value on a second property so what percentage deposit do you have for the new purchase?

titusbungle

GMS wrote: »

Valuer would value the property and give a rental assessment. Rent typically needs to be 125% of the mortgage payment based on interest only at a rate of approx 6%.

Do you have the additional funds to allow a Buy to Let mortgage to be possible?

Could you not get consent to let from current lender?

Also keep in mind that many lenders restrict the loan to value on a second property so what percentage deposit do you have for the new purchase?

We have the most unhelpful lender ever in the Co-Operative, at best we can have consent to let for 6 months!

In total we have £32k saved, with this we want to buy a property for £130k and either change the apartment to BTL or pay towards the negative equity to sell it which could be up to £13k

Annisele

If you owe £73k on the flat and think you'd need to put £13k towards the negative equity, presumably you think the flat is worth £60k? In that case, I think the plan is a non-starter:

For a BTL mortgage, you'd need a 25% deposit for the flat (in other words, you could only borrow 75% of its value). So, the maximum BTL loan would be £45k. £73k - £45k = £28k, so only £4k of your left over savings would be available for a deposit on your new place.

Thrugelmir

titusbungle wrote: »

We have the most unhelpful lender ever in the Co-Operative, at best we can have consent to let for 6 months!

It's you that wishes to change the contract terms. Some lenders are not interested in commercial property lending. Not their line of business.

Yorkie1

Have you double checked that the terms of your leasehold allow you to rent the flat out?

titusbungle

Thrugelmir wrote: »

It's you that wishes to change the contract terms. Some lenders are not interested in commercial property lending. Not their line of business.

That's amongst other things..... Until mortgage providers start helping their customers move up the ladder, the market is never going to improve

bigadaj

titusbungle wrote: »

That's amongst other things..... Until mortgage providers start helping their customers move up the ladder, the market is never going to improve

That's one perspective. The problem we have is that by most measures property is still over valued in the UK, even after the falls at the end of the last decade and the moribund market more recently.

The only way to get this back into line is moderate falls now or, more likely, flat prices for years relying on inflation to erode the real value.

Thrugelmir

titusbungle wrote: »

That's amongst other things..... Until mortgage providers start helping their customers move up the ladder, the market is never going to improve

Customers need to channel their income into reducing the mortgage debt or savings to fund the move up the ladder. Customers choice as to how they spend their money. What their priority is.

Days are over where lenders advanced sums that put borrowers in financial danger. The lenders that did have either left the market or under new management.