House letting - what can we do mortgage wise?

ellesbellesxxx

Hi
We were struggling to sell my fiance's house, when wanting to buy our own. We ended up buying a house together, using my deposit, then keeping his house and renting it out hoping that it would go back up in value. We currently have a tenant who has been in for 6 months already and who has signed up for another 12 months - so far so good!
We have consent to let from his mortgage company (Nat-wide) which lasts for another 18 months I think.
It started off that we had a little left over after the rent each month, but after 6 months of consent to let, we are now being charged an extra 1.5% interest. At the moment, we are not quite breaking even, the mortgage is pretty much covered then it works out that we pay 10/20 a month towards insurance/rest of mortgage - which I know is still not bad at all!!!! Certainly, what we made before will even this out so we will break even at the end of this tax year at least.


What we were wondering, is having now had a tenant in and seeing it as an investment rather than just biding our time before we sell it, would we better off keeping our consent to let (which works out at 4% interest total) or CAN we ask for a buy to let mortgage? The house is worth 95000 minimum at the moment (according to estate agents) and the mortgage outstanding is 70000.
If this is the case, I don't know where to start -would we be best off going to a broker?
Many thanks in anticipation!!!!

ACG

4% isnt bad, but i think there will be lower rates out there on a BTL mortgage... the downside is there may be fees to pay which may not make it worthwhile, the upside is that you can put it on interest only if you prefer and generate an income from it rather than pay down the mortgage.

If you want a BTL mortgage then the chances are you will be better with a broker as there are lenders who are quite competitive that only deal with brokers.

ellesbellesxxx

Thank you... so I guess maybe go to a broker and weigh up the costs on top of a BTL interest rate and see what we are best off doing.
Ideally we would like to keep paying off the mortgage so that one day, either we use the equity to pay a chunk off ours, or we keep it long term and once it is paid (22 years to go...!) it is an income.
Thanks so much

ACG

BTL lenders typically want the rent to be 125% of the mortgage repayments at 6%. Some will calculate it on interest only even if it is on repayment but i dont think they all will.

Another option would be to put it on interest only and any excess each month put into a savings pot.

Also don forget you may be able to offset any interest against any income for tax purposes so although you are paying £10-20 a month at the minute, at the end of te tax year you may be due some tax back.

ellesbellesxxx

Ok! That's good to know...so definitely no way at the moment we can get 125% rent. Maybe we will leave it on consent to let, see what interest rates do... look into interest only.
Thank you - lots of food for thought.

ethank

Are you charging market-rate for the rent? Can you put the rent up?

Dave_Ham

This has been debated a fair bit on here and cannot imagine there is any better option than sticking to the 4% Nationwide are offering.

The associated costs of moving to a buy to let will almost certainly outweigh any marginal rate gain.

All the best

ellesbellesxxx

Thanks for all your replies... yes we definitely are charging market rate and yes, could potentially put rent up next March
I agree..just flicking through some sites and costs are astronomical!
Many thanks