Buy-to-let, let-to-buy or remortgage?

holly_hobby

You advise your BTL lender you are now residing there, and they will take you through residential lending.

Or you remortgage away from your BTL lender onto a residential mge.

In both cases under a residential mortgage (which is regulated) your income and status will be assessed at that point, and you may also have ERCs from your BTL mge, depending upon the criteria it was effected under.

If your current home is unmortgaged - then there isn't any mge arrangements to change when you vacate and let it out.

However, now you've engaged a broker I would hope he would be able to explain and assist with this, as and when you require him/her.

Hope this helps

Holly

Laurence_WMF

Thanks yet again, Holly.

holly_hobby wrote: »

You advise your BTL lender you are now residing there, and they will take you through residential lending.

Or you remortgage away from your BTL lender onto a residential mge.

In both cases under a residential mortgage (which is regulated) your income and status will be assessed at that point, and you may also have ERCs from your BTL mge, depending upon the criteria it was effected under.

However, now you've engaged a broker I would hope he would be able to explain and assist with this, as and when you require him/her.

Problem is my income (other than rental) will be too low to qualify for residential at existing mortgage level.

Please forgive my ignorance, but an ERC is?

As my broker just said that there wouldn't be a problem with transfering the mortgage, I'm wary of just relying on him at the time.

Laurence

holly_hobby

Sorry .... Early redemption charge.

If you move into your BTL , then you must advise your lender that it is your main residence. They will then assess your income (which some lenders will include rental income if from a mge free/unemcumbered property). I wouldn't advise not coming clean about moving in, as lenders are pretty hot these days on peeps trying to use a BTL application to avoid earned income assessments .... and don't take kindly to it ! Now, I'm not saying this is what your attempting or trying to work out how to do here ... but you can see how it may appear, certainly if I were reviewing the case.

Question - If you have little or no income, apart from what you anticipate receiving from renting either unit, how will you service any mortgage in the absence of tenants and said rental income ?

This could all go horribly wrong if you don't think this out properly ...

Hope this helps

Holly

Laurence_WMF

Thanks again Holly.

I am completely sincere about intending to rely on rental (plus some savings) for my livelihood. It's just a matter of establishing myself in new property and preparing old property before rental from bigger old property is main source of income.

I have savings - plus small income from part-time work - which will tide me through periods without rent. We are talking about an interest-only mortgage of around £50,000. After 20 years, or earlier, will sell property - probably my current home.

You wrote 'If you move into your BTL , then you must advise your lender that it is your main residence. They will then assess your income (which some lenders will include rental income if from a mge free/unemcumbered property).'

Could this be estimated rental income from letting out property, rather than proof of income from property already let out?

I really do appreciate all this advice.
Laurence

holly_hobby

No, evidenced income, min 6 mths historical on an AST.

I would be concerned re what happens when your savings are exhausted for prolonged periods of unoccupancy.

I have to be honest, I don't think in its current form, this is a particularly robust business plan.

Anyhoo, you've the bones of what the issues will be - your broker should be taking you through this.

Hope this helps .. .wish you well

Holly x

Cornucopia

If your plan is to swap properties in a year's time, you need to plan that in now.

You won't qualify for a residential mortgage without an income that supports the multiple you'll need to borrow.

If your broker can find a BTL that will allow you to apply without evidence of personal income, use that to buy the second property - you will also need a c. 30% deposit. When you want to swap over, you would take a LTB mortgage on the original property and you would use the advance to pay off the BTL mortgage on the second property - allowing you to live in it. With all the fees and ERCs, I think you'll find this an expensive thing to do for the sake of a year.

Ultimately, I think this is the only way to do what you want - whether it's a viable plan will depend on rental demand/rental yield in the area you are in.

Laurence_WMF

Thanks a lot, Cornucopia.

Would the LTB be dependent on evidence of existing income?

Laurence

Cornucopia

Laurence_WMF wrote: »

Thanks a lot, Cornucopia.

Would the LTB be dependent on evidence of existing income?

Your broker will be able to advise as to whether such a product is available at the time. You might by then qualify as a professional landlord, depending on the Lender's criteria for this, in which case evidence of income would not be necessary (e.g. with BM Solutions, The Mortgage Works).

Laurence_WMF

Many thanks Cornucopia; that's very useful.

One scenario: I take out a BTL on new property. I move in after a year. I tell the lender this; they insist on changing mortgage to residential. However my salary does not meet their minimum income requiremments. What could they do, given that my payments are up-to-date and I have been completely honest?

Thanks again,
Laurence

Cornucopia

I have no idea. I do think that you ought to be approaching this with an attitude of good faith, though.

The mortgage contract will have within it clauses for both financial penalties and repossession in the event that the contract terms are infringed.