First home vs buy-to-let mortgage

mikey41

So, I'm about to jump on the property ladder, buy a flat and rent it out basically. But as far as I'm aware buy-to-let mortgages have wayyy higher deposit requirements (Halifax: min 25k, Santander: don't even offer it)..

To avoid that route, would it be possible to just get a FH mortgage initially then convert it to a BTL, to allow for a lower deposit? But then I'm not going to be living in it, so... apparently it's fraud if you buy a FH mortgage then rent it out straight off the bat.

What are my options?

Yorkie1

Yes, it is fraud if you apply for a BTL intending it to be residential. So that route is best discounted right away for that reason alone.

NB. Many lenders are reluctant to provide BTL mortgages to people who are not already homeowners, so there's no guarantee that you'd have been successful in any event.

What is your salary, how much savings do you have, and how much do properties cost in your area?

mikey41

Yorkie1 wrote: »

Yes, it is fraud if you apply for a BTL intending it to be residential. So that route is best discounted right away for that reason alone.

NB. Many lenders are reluctant to provide BTL mortgages to people who are not already homeowners, so there's no guarantee that you'd have been successful in any event.

What is your salary, how much savings do you have, and how much do properties cost in your area?

Salary: 30k+, savings: ~12k, two thirds of the properties are <£200k where the highest is about 600k.

Typhoon2000

Of course if you bought the property with the intention of living there, did just that for a year and then got consent to let from the lender it would be fine.

Wh05apk

Can't work out your figures here, are you saying you want to buy a property for £200k? if so for a BTL generally you will need 25% deposit which you do not have, if you go down the resi route, potentially you could get a mortgage of up to about 5x income so about £150k, but with only £12k savings, you would be looking at 95% after fees, giving you a possible property value of about £155k?

mikey41

Wh05apk wrote: »

Can't work out your figures here, are you saying you want to buy a property for £200k? if so for a BTL generally you will need 25% deposit which you do not have, if you go down the resi route, potentially you could get a mortgage of up to about 5x income so about £150k, but with only £12k savings, you would be looking at 95% after fees, giving you a possible property value of about £155k?

Deposit matters aside, I was looking at a ~125-130k property, so ~32.5k on a 75% LTV BTL mortgage. (Parents willing to help, so assume deposit is covered)

I'm basically trying to avoid paying such a high deposit with a BTL mortgage. I mean, if I bought a property with an intention to rent. I could in theory get a FH mortgage and live in it for a month? Then... Remortgage (not sure if correct terminology used here?) to a BTL mortgage?

I'm not sure how what I said would work, but overall, just trying to avoid high deposit with an intention to BTL.

[Deleted User]

mikey41 wrote: »

I'm basically trying to avoid paying such a high deposit with a BTL mortgage. I mean, if I bought a property with an intention to rent. I could in theory get a FH mortgage and live in it for a month? Then... Remortgage (not sure if correct terminology used here?) to a BTL mortgage? I'm not sure how what I said would work, but overall, just trying to avoid high deposit with an intention to BTL.

What you're looking for is "consent to let". Consent to let is how someone on a residential mortgage can let out their property without needing a BTL mortgage.

1. Purchase a property on a residential mortgage
2. Live in property for a period of time (a year for example)
3. Apply to lender for consent to let

Assuming consent to let is granted you will then be allowed to let the property, it won't require any sort of re-mortgage or any sort of further deposit... however it's likely your interest rate will go up and you'll probably have to pay an application fee (~£1000 seems to be normal). If you're going to do this make sure you pick a residential lender that does provide consent to let (some don't).

Yorkie1

mikey41 wrote: »

I'm basically trying to avoid paying such a high deposit with a BTL mortgage. I mean, if I bought a property with an intention to rent. I could in theory get a FH mortgage and live in it for a month? Then... Remortgage (not sure if correct terminology used here?) to a BTL mortgage?

I'm not sure how what I said would work, but overall, just trying to avoid high deposit with an intention to BTL.

As previously said, if you buy a resi mortgage intending from the outset to let it out then that is fraud. However, that doesn't seem to bother you.

If you get a resi mortgage and live in it, you will need to live there for at least 6 months, if not a year, before CTL may be granted. Not all lenders will give it.

Note that lenders didn't come down on the last shower and are alert to this sort of activity. Also bear in mind that CTL is - even if granted - only for a limited period of time.

If you get a resi mortgage and live in it, and wish to remortgage onto a BTL, that seems pointless. You'll have double fees and still have to raise the deposit.

This all stinks of seeking to find the best way to lie to achieve something the rules don't permit.

mikey41

Yorkie1 wrote: »

As previously said, if you buy a resi mortgage intending from the outset to let it out then that is fraud. However, that doesn't seem to bother you.

If you get a resi mortgage and live in it, you will need to live there for at least 6 months, if not a year, before CTL may be granted. Not all lenders will give it.

Note that lenders didn't come down on the last shower and are alert to this sort of activity. Also bear in mind that CTL is - even if granted - only for a limited period of time.

If you get a resi mortgage and live in it, and wish to remortgage onto a BTL, that seems pointless. You'll have double fees and still have to raise the deposit.

This all stinks of seeking to find the best way to lie to achieve something the rules don't permit.

Not sure why you think I would do such thing - it was not my intention to come across this way.

Overall, there are no other option but to pay the high deposit for a BTL if I was to let and not live in it myself.