What sort of mortgage for Residential + BTL

RyanVince

Hi I'm looking at purchasing a plot of land with four flats with a view to living in one flat and letting out the remaining three. I could do with some help on working out how this should this be organised from a mortgage perspective as i'm not sure if I need one or multiple mortgages for the different flats, and if they should be residential or buy to let.

Thanks in advance

holly_hobby

Presume these flats are already built ? And you are not a FTB ?

If so, your own flat would obviously be a residential mge, the other 3 would all be BTL.

However, seeking one lender for all (or even just the same BTL lender) will cause issues exposure wise (indeed you may want to also give this some serious consideration yourself) - so you may need to choose separate lenders for each unit (if you elect to pch all units in the same block).

Deposit wise I would work on 25% for each unit - rental income 125% of the mge interest (use 6% as a ballpark calc fig). Your total BTL borrowing will also be assessed by the lender, as part of the exposure exercise.

Freehold tenure is also a no-no (unless in Scarborough) - but your mge adviser (of which you will need one given the dymanics of the enquiry) will guide you round those issues.

Hope this helps

Holly

RyanVince

Thanks Holly,

Yes & Yes,

I'm fairly comfortable with the exposure as I think I could cover the mortgage from my salary if they were all empty and as their are 3 I doubt they would ever all be empty. - however explaining this to a lender may not be so easy.

The rest of your numbers are re-assuring I think I've about 30-35% deposit on the whole lot and anticipate income (including the rent i would effectively pay myself) at about 200% of the mortgage interest.

I can see that i'm going to need to get professional advice but your thoughts are helping to set my thinking in the right direction

Ryan

Dave_Ham

Hi there,

Clearly there is significant information that will be required by any lender and questions you will also have.

By exposure wise, Holly means a lenders perspective is that on some developments they may well only want 25% of the block/development/site mortgaged by themselves so they do not over expose themselves to one localised risk.

How are the land & flats currently held, ownership wise?

This will be the starting point, before any %'s are to be ascertained that you can rely on as this will reflect type of lender/rate/deposit/fees and other considerations.

I suggest specific, professional advice is the only way to go as we are speculating at best with the information you are likely to be able to provide online publicly..

All the best

holly_hobby

No by exposure I really mean falling value/re-sale issues, both for a lender and yourself if you were trying to re-sell/rental demand - as you will have no diversification at all, and will essentially have all your investment eggs in one basket (whether you are able to secure a different lender for each unit or not, you will still be wholly overexposed to market fluctuations and demand).

25% deposit is per each BTL unit

A broker is def reqd.

Hope this helps

Holly

RyanVince

Thanks for your posts, To answer the questions raised

The 4 flats and plot are on the market as one unit. I.e. one house that has been converted into four flats and is up for sale as one unit.

From a capital exposure perspective its relatively low value so the exposure is no greater than if I were to purchase a detached house in the same area. Whilst this still presents a risk with the rental income I could pay of the capital far more quickly than If the money was tied up in a detached house so to my eyes its a reduction in risk.

I can see the complex nature demands professional advice so that will be my next stop.

Ryan

Dave_Ham

This makes more sense, thanks.

Have the title deeds been officially separated at the moment?

holly_hobby

You wont get a BTL mge for the single unit (ie its registered with LR as a single dwelling, albeit it may have been internally divided into 4 separate fully self contained dwellings).

So not only must planning permission and all local authority regs already be in place for the division, the fully self contained flats will have to each have their own separate title under a leasehold tenure (although you may be the actual freeholder).

Any title changes will obviously have to be effected pre- completion on the pch of any of the units.

Personally, if this is the situ, and as what apperas to be a new landlord, I may consider looking for something else to wet your feet, and gain some basic knowledge & experience before becoming a portfolio landlord, notwithstanding the exposure issues discussed. (which of course is your decision to accept if you feel absorbable).

Hope this helps

Holly

RyanVince

Thanks Holly and Dave,

Its still early in the purchase process so i'm not 100% on how its registered with the Planners & LR etc.

NB its not my first investment property but does represent a significant learning curve.

Dave_Ham

The legal representation of these property/properties will be significant to the proposed lending costs/availability.

The sellers Agents will have this information to hand it is genuinely is critical.

Thrugelmir

RyanVince wrote: »

The 4 flats and plot are on the market as one unit. I.e. one house that has been converted into four flats and is up for sale as one unit.

From a capital exposure perspective its relatively low value so the exposure is no greater than if I were to purchase a detached house in the same area.

Would be worth having the properties valued as separate units. May be less than a one unit as a whole.