Fixed Rate Expired but want to change to BTL in 12-18 months, what to do?

19lottie82

Hello.... I realise seeing a broker would be my best bet here, but I was just after a bit of general info / advice first, to see how things lie at the moment.

My situation is I currently own a 2 bed flat worth £110k (maybe £115k at a push, for a valuations sake). I paid £105k for it in July 2009, but as you can see by the figures I don't really think it has gone up much.

I got married recently and my DH has 2 kids, who we have a week on / week off. We are currently living in my flat, but it's a bit of a squeeze and 9 miles away from the kids school / friends, so not ideal.

We are currently saving for a deposit for a house nearer the kids schools, and with the fees on top, we should have this in 12-18 months.

I have decided to rent out my flat, as I have a decent amount of equity, could get 150% of the mortgage payment in monthly rental price, it's in a popular location, and after all my fees involved in selling, I would prob walk away with nothing. Also, my Mother gave / lent me the 25% deposit when I bought it, on the understanding that if I sold it, I would give it back. She is happy with the idea of letting the place out., rather than selling at the moment. I am aware of all the potential problems involved in letting a property, and currently manage my fathers place, as he is abroad for 3 years.

Anyway....... my fixed rate on my flat mortgage has just ran out, pushing my payments up by about £50 a month.

What would my best options be in terms of another mortgage for the flat based on getting the best deal, but wanting to switch it to a BTL in 12-18 months, and then take out another residential mortgage?

Thanks in advance

Charlotte

kingstreet

Why not ask your current lender for consent to let when you want to let it? Are you insistent on remortgaging to a BTL at that time?

If taking CTL, you should be able to see out any residential product you take now, or pay a fee/rate rise.

You need to establish what is best for your circumstances and your lender's consent to let terms/policy.

19lottie82

Hi Kingstreet - Thanks for the reply ......

Well, I thought BTL would be best as we won't be moving back to the flat (i.e. the letting won't be a temporary thing), so don't see what the point of CTL would be, unless I'm missing something?

Also, would I get another residential mortgage if I had CTL, rather than BTL? My income won't cover 2 residential mortgages, so on paper my income would cover the new house, and the rental income the BTL.

IF the worst came to the worst we could afford to pay both (if there was a rental void). My DH has a decent ish wage, but a wrecked credit rating, due to his last relationship.

My other point was, would it be worth switching to another deal (or lender) to get reduced payments until we DO switch to a BTL? If I took out a fixed, would most lenders sting me for switching to a BTL with them before the fixed term expires?

Would it be worth looking for another fixed rate with a lender with decent BTL rates, just now?
(I'm currently with RBS)

Again, I realise I need to speak to a broker / my lender, but just trying to get my head round this a bit!

kingstreet

You could have temporary CTL until it is advantageous for you to remortgage to BTL.

As long as your CTL property/mortgage is self-financing, many lenders will ignore it. They will ignore it if CTL or BTL it's the self-financing that matters.

If you had a tenant void you would have to pay both regardless of what it's called - CTL or BTL.

You can't normally switch from residential to buy to let. You normally have to change lenders as the change of terms requires a new mortgage deed. Hence, a remortgage would be required in most circumstances.

Without knowing what your lender would currently offer and what policy it has on CTL, it's impossible to say if any fee/rate increase would be applied for CTL if you take a residential customer retention product now.

No-one here can give you information on which you can rely. A residential customer retention product now may be a good idea, but only if your lender's CTL policy in the future ensures it remains a good idea. Therefore speculation is pretty pointless.

dimbo61

You have not given the outstanding mortgage balance so we do not know the LTV

kingstreet

As the parent gifted 25% deposit, I assumed LTV of 75% or less.

19lottie82

I have £75k outstanding and the property is worth £110-115k

dimbo61

I am sorry but I think becoming a landlord would be a bad idea!
You have at best £35/40K equity in the property and if you went for a BTL mortgage the may lend you £82,500/£85,000 Interest Only BTL mortgage.
You also have fees to pay sometimes 2/3% and other costs.
Lenders like you to be a home owner and earning over £25,000 a year.
Now you could get Consent To Let and see how things go for 12/18 months.
Then you could change to a BTL or sell ( No Capital Gains Tax if you sell within 18 months)
Becoming a Landlord some times needs deep pockets to get the property right and up to standard for renting and repairs when needed

19lottie82

dimbo61 wrote: »

I am sorry but I think becoming a landlord would be a bad idea!
You have at best £35/40K equity in the property and if you went for a BTL mortgage the may lend you £82,500/£85,000 Interest Only BTL mortgage.
You also have fees to pay sometimes 2/3% and other costs.
Lenders like you to be a home owner and earning over £25,000 a year.
Now you could get Consent To Let and see how things go for 12/18 months.
Then you could change to a BTL or sell ( No Capital Gains Tax if you sell within 18 months)
Becoming a Landlord some times needs deep pockets to get the property right and up to standard for renting and repairs when needed[/QUOTE

I don't think I said that I earned under 25k a year, did I? Or that the property wasn't up to the standard required to let out. Quite the opposite for both.

I had a provisional discussion with my current lender and he said that looking at the figures on paper a BTL shouldn't be a problem. He showed me a few figures and none of them were interest only.

19lottie82

So just to confirm, CTL would be an option, and I could still apply for another (residential) mortgage? I had just assumed that if I wanted to do this then I would need a BTL mortgage, as CTL is just a temp measure?

I do earn slightly over 25k, plus I have my own business that makes about 6-8k profit a year. I have just paid my second year of taxes with the HMRC, so I'm hoping when we want to make the transition to a new place, I will have 3 years accounts under my belt.

My DH makes 30k, but again, his credit rating is shot, while mine is perfect (don't worry we don't and have never had any joint accounts, ive been very careful there!) hence why the mortgages would be in my name, BUT we would have no problem paying both, in the event of a rental void etc.

kingstreet

19lottie82 wrote: »

So just to confirm, CTL would be an option, and I could still apply for another (residential) mortgage? I had just assumed that if I wanted to do this then I would need a BTL mortgage, as CTL is just a temp measure?

That's what you were supposed to be asking your lender;-

1. What is CTL policy re rates/fees etc

2. Can I take residential customer retention product now and ask for CTL before it expires

3. If I do 2. what happens to rate?