Help needed, first time buyer wanting a BTL.

maxtuuuu

..........

ACG

This will be very difficult to place:
Im assuming your income is around £23k? - that in itself will limit your options.
Also as a first time buyer getting a BTL is another massive issue.

It may be possible, but you will without doubt need a broker to help you on this as your options are very very limited.

ACG

I would speak to a broker but i wouldnt hold my breath then.

I can literally only think of 1 lender who may consider it, but i dont know their criteria fully.

Also applying for a mortgage on a residential basis with the intention of converting to a BTL in 6 months is (1) mortgage fraud as its a lie and (2) very risky... what happens if they do not agree the consent to let?

Yorkie1

maxtuuuu wrote: »

Its not mortgage fraud if the lender agrees to a change of circumstances and consent to let?
If they do not agree, i would probably sell the property. Its in need of modernization and some other work so there would be a profit in it that way..

This assumes that your modernisation work will add more value to the house than you spend, and will also cover the buying and selling fees you'd incur.

In today's market that cannot always be guaranteed ...

holly_hobby

maxtuuuu wrote: »

Its not mortgage fraud if the lender agrees to a change of circumstances and consent to let?

Not correct, as to apply for a residential mge with the intention of letting from outset would constitute a fraudulent app as ACG has correctly stated.

Also, unless there was a really demonstrable reason supporting your request for you officially vacating the property and seeking consent to let, after only 6mths of ownership, your request would probably be refused, as it will be pretty obvious that this was a back door BTL from outset.

As stated, there is a lender or 2 whom don't have a minumum income figure, but there are other borrowing constraints, the added complicaton of you having no mge history of your own is a real killer.

Hope this helps

Holly

Gold_bullion

Several things to consider here:

1) I would seriously consider Nat West's offer, particularly as they have mentioned the letting scenario in 6 months' time. However, ask how the residential terms would be changed if you did let the property. You may well get quite favourable mortgage terms on a residential basis, but much worse ones if you rent it (although residential to let path is probably more favourable that going for BTL from day 1). Typically if you let later a percentage increment is applied to your residential mortgage rate, but you may escape any criteria that would have been placed on the rent received and your own income that would have applied had you rented the place from scratch! I don't agree there is any fraudulent intent here. You can simply say to Nat West that you are applying for a residential mortgage but would like to know what would happen if in six months' time you decided to let the property.

2) Are you sure that the improvements you plan are definitely going to improve its market value for your "Plan B"? It's very easy to overspend doing up a property and never recoup the extra spend.

3) Assuming you don't have any other property as your main residence, actually living in the house first before it is rented has potentially big tax advantages. As long as you notify HMRC it is your main residence when you move in, then for three years after you move out, the property would be exempt from Capital Gains Tax on any gain in house prices, whereas if you never live there it will be liable or CGT from day 1.

As stated you run the risk they will refuse the application to then rent it, but then if house prices are rising you still have your foot on the ladder as you put it and are gaining on your own (and CGT exempt) residence, and still have the option to do the rental a bit later when the lender's letting criteria are met (e.g. after a year, 18 months or whatever). There are many reasons to want to let it later - a new job elsewhere, family circumstances, etc - you can't be expected to predict the future.

Good luck with being a landlord at age 22 if that's what you become. I can assure you it's hard work for the extra income, which of course is taxable at your marginal rate.

holly_hobby

If they live in it pre-letting - they will also qualify for lettings relief, in addition to PRR, last 36 mths of ownership and annual unused CGT exemption as you mention.

Holly x

Gold_bullion

"Not correct, as to apply for a residential mge with the intention of letting from outset would constitute a fraudulent app as ACG has correctly stated."

But he is not intending to let from the outset - he is accepting the mortgage on the terms it is offered, and simply asking the question what would happen if his circumstances changed in the future and he needed to rent the property in six months' time.

Fraud is where you misrepresent what is true now. There is no law against exploring the possibility of what would happen if your circumstances change. Indeed good financial planning demands this.

holly_hobby

Gold_bullion wrote: »

But he is not intending to let from the outset - he is accepting the mortgage on the terms it is offered, and simply asking the question what would happen if his circumstances changed in the future and he needed to rent the property in six months' time.

Fraud is where you misrepresent what is true now. There is no law against exploring the possibility of what would happen if your circumstances change. Indeed good financial planning demands this.

You've misunderstood his intention, re-read his opening post ....

maxtuuuu wrote: »

.
I am a first time buyer at 22 and wanting a BTL mortgage

Holly

Gold_bullion

Whatever anyone's view now, the reality is that intentions can change in an instant, and then again a week or a month later - do you have kids? It's a pretty naïve stance Holly - a bit like saying in a job interview you've always wanted to work for the company. Of course you haven't really but you say that to get the job. 6 months later there is another very important factor or factors to consider when you decide to move on ... !

No residential lender is going to begrudge you changing your mind - that's why they have rules to cater for people who do. No harm in asking what those rules are at the outset and in being uncertain of your long term plans - what 22 year old isn't?

It's clear they want his business, even prepared to offer residential initially with potentially BTL later. As such there is no way he could be accused of hiding anything, so I think your suggestion of any kind of "fraud" is inappropriate in this case. The banks do not try to assess what people's intentions were - they simply look objectively at the risk, and have rules to apply should people change their minds, which of course they often do for any number of reasons. Whether the borrower had this idea to let the place 6 months or a year earlier or 5 minutes ago is not relevant to their decision as the risk to the bank going forward is the same.

holly_hobby

Then mge adviser or whomever suggested this route doesn't understand the uw and post completion issues surrounding their "suggestion" to bend the rules.

As there is no gte that CTL would be granted upon your application, which lenders can and do refuse (esp if they suspect a back door BTL exercise), and neither does that change the point that if you actively seek a resi mge as a back door route for commerical funding, its fundamentally a fraudulent app, as ACG has pointed out, no matter how its dressed up - and I'm talking from a compliance and audit position.

Ultimately though, how you proceed with this is your choice, but advice and comment was requested, which although may not meet your wishes in being supportive of the discussed alternative BTL route, is imporant to consider all the same.

Hope this helps

Holly