Need some advice on letting to buy

Vegeta

I am thinking of moving but I want to buy a house without the hassle of a chain and competition from other no chain buyers.

I have been thinking of getting an interest only buy-to-let mortgage with an LTV of 75% on my house which is fully paid off (no mortgage) and use the 75% equity and my cash as a deposit with a standard repayment mortage for my next house as I want to upsize. I would easily be able to pay the BTL mortgage and the standard repayment mortgage even if the BTL mortgaged house has not got tenants in it.

Now I know these kind of mortgages are known as let-to-buy but from what I can see, they are the same as BTL mortgages.

From what I know, the rent of the house would need to cover 125% of the monthly BTL mortgage payment. From my calculations, the rent would cover nearly triple the amount on interest only so not a problem.

As for getting another mortgage alongside the BTL mortgage, I understand that a bank won't mind and it should not affect my ability to get a standard residential repayment mortgage? The BTL mortgage can easily be covered by the rent.

I don't want to keep my current house though so the BTL mortgage would be temporary as I would want to sell my house as soon as I have moved into the new one. Would I have to put tenants in my house if I got a BTL/LTB mortgage or could I just move out and put the house up for sale?

Thanks.

tunnel

Wouldn't it be easier to take a remortgage that's portable than risk having tenants who may not leave. Don't understand why you want a LTB or BTL, just remortgage...I did.

Vegeta

tunnel wrote: »

Wouldn't it be easier to take a remortgage that's portable than risk having tenants who may not leave. Don't understand why you want a LTB or BTL, just remortgage...I did.

Wouldn't a remortgage affect the amount I can borrow on the second repayment mortgage whereas a BTL mortgage wouldn't?

tunnel

Possibly yes, depends how much more you would need I suppose. Can't you just sell the house you own,drop to your minimum if need be to guarantee a sale. Don't go down the BTL route if you don't need to.

Vegeta

tunnel wrote: »

Possibly yes, depends how much more you would need I suppose. Can't you just sell the house you own,drop to your minimum if need be to guarantee a sale. Don't go down the BTL route if you don't need to.

The problem is the type of house I'm after and the location, very few ever come on the market which is why I am thinking of the let to buy route. I also thought about selling and renting but I could be renting for 2-3 years or more waiting for the house I'm after and during that period, the landlord could give me notice to vacate the property because they've decided to sell or house their relatives/friends etc.

I want the security of my own house until I find the other and let to buy seems to be the answer but I don't know all of the details about going this route like will I have to put tenants in my house with a let to buy mortgage on it or can I just sell ASAP without ever putting tenants in it after having moved into my new house?

kingstreet

Can you find a LTB/BTL product without early redemption penalties, or are you accepting upto 5% loss on the mortgage repayment as part and parcel of the route you are taking?

Vegeta

kingstreet wrote: »

Can you find a LTB/BTL product without early redemption penalties, or are you accepting upto 5% loss on the mortgage repayment as part and parcel of the route you are taking?

There does seem to be quite a few BTL products without early repayment charges but if necessary, yes, I'll accept the 5% loss.

I noticed you are a mortgage advisor, it would be great if you could answer my remaining questions.

Will I have to put tenants in the house with a LTB/BTL mortgage on it or can I just sell ASAP without ever putting tenants in it? Would I also need a gas safety certificate before applying for a BTL mortgage?

Thanks.

kingstreet

If you choose not to let the property, that is your affair. As long as you can afford to pay the mortgage, that is your prerogative.

Safety certificates are nothing to do with mortgages, so no, you won't.

Vegeta

So I'm guessing when I'm ready to buy, I can submit 2 mortgage applications at the same time i.e LTB/BTL mortgage + the standard mortgage? That won't cause any problems will it or should the LTB/BTL mortgage be done beforehand? Problem is I don't know when a suitable house will come up for sale so I could be paying money on the LTB mortgage out of my pocket for quite some time.

Does it take the same amount of time to process a LTB/BTL mortgage as it does with a residential mortgage?

And will a LTB/BTL mortgage affect my affordability when applying for a standard residential mortgage i.e the amount I can borrow on top of having a BTL mortgage? Would the bank ignore the BTL mortgage payments as a commitment and allow the additional standard mortgage based on normal affordability criteria? The BTL mortgage payments would easily be overpaid by just the rental income if I rented it out.

Also, are there generally any restrictions in selling a house that has a BTL/LTB mortgage on it like not being allowed to sell it for a year etc?

Lastly, do most banks differ on the length of the BTL mortgage term when applying for capital repayment or interest only? HSBC for example allow a 25 year term for repayment and 15 year term for interest only.

Thanks.