Buy to Let question.

simpleguy_blr

Hi,

We had to move home due to our child's school and have rented out our home and we are currently renting.

Our mortgage is currently with Nationwide (3.99 SVR) who have given us consent to let for a year but with a clause that they will increase the interest rate by 1.5% after the initial 6 months.

We want to retain the house, outstanding mortgage is £110K and the house is probably worth 220K. Would it be a good idea to go for buy to let with some other provider (have HSBC in mind as we bank with them)?

I have in the past preferred to go for fixed mortgages 2-3 years as I know exactly what is the outgoing that I need to budget and plan for.

Thanks

Thrugelmir

HSBC criteria,

Borrower Eligibility

Our Buy to let mortgages are available to:
HSBC Premier customers, or
HSBC current account customers providing you meet all of the points below:
you hold a HSBC current account, into which your salary has been paid, for at least 3 months; and
if you are a sole applicant, you have an annual salary of at least £50,000 and if you are joint applicants, you have a combined annual salary of at least £75,000 or one party has an individual salary of £50,000 or more.

Affordability
The affordability of a Buy to let mortgage can be assessed from either rental income and/or salaried income.

Rental income
If you intend to pay your Buy to Let mortgage payments from the property's rental income, the rent must be at least 130% of the mortgage payments. For example, if the monthly payment is £100 (100%), the monthly rental income must be at least £130 (130%). To assess how much you can afford to borrow, a Rental Income affordability assessment is carried out. We will also undertake a broader review of your financial circumstances, which is in addition to the rental cover requirement.

Salaried income
If you intend to pay your Buy to Let mortgage payments from your salaried income, we will assess your mortgage application taking into consideration any associated bills for the Buy to let property in addition to your other monthly financial commitments, for example residential mortgage payments, utility bills etc.

amnblog

Our local authority have a problem if you are renting in catchment but own out of catchment.

dimbo61

Long term plans and IF you want to buy another property come to mind!
You have a lot of money tied up in your home at the moment.
Why do you want to become a Long term landlord?
Can you afford 2 mortgages ? Income, Age, savings etc all come into the equation
You really need to speak to a Whole of market mortgage broker who deals in BTL mortgages and maybe an IFA to discuss your long term plans

simpleguy_blr

Thrugelmir:
Thanks for highlighting the criteria, makes me now think it is going to be harder to get a new mortgage!
Our current job situation changed, I am now self employed and that in itself will pose issues in obtaining a mortgage I think.

dimbo61:
The reason I am holding on to the current house is that I am not sure if being self employed will I be able to obtain a new mortgage, so my initial thoughts were hold on to the existing property and when I know for sure I can get a mortgage for a slightly bigger house in a year or two when my accounts looks good then sell the current house and buy a new house by using the money as deposit for the new house.
I am not looking to be a long term landlord, we want to buy a bigger house if we can, the problem of being self employed is low salary and most of the income is taken as dividends, I will have to approach a few banks to see what they can offer, I am just 8 months into self employment so thought it might be worth waiting a for another 6+ months before approaching a bank.
In the meantime wanted to find out if I could bring down my monthly mortgage repayment by going for a BTL, but it looks like I might not have many options but to stay put with Nationwide!

amnblog:
I wasn't aware of this, my local council is aware of my current address which is out of catchment and so far have not raised any issues, so hoping that should not be a problem.

dimbo61

Many lenders now want to see 2/3 years of accounts so again one for a broker I am afraid.

amnblog

simpleguy_blr wrote: »

hoping that should not be a problem.

I wouldn't go buying a property on that basis.

silvercar

amnblog wrote: »

Our local authority have a problem if you are renting in catchment but own out of catchment.

Mainly because of a suspicion that you are not really living in the catchment (or certainly not for longer than necessary to acquire a school place).

Anecdotedly people rent a cheap as chips one bed flat as near as possible to school and continue to live in their 4 bed detached in another area.

If you can prove that the move is genuine it should stand up to scrutiny.

amnblog

Not in my LA

simpleguy_blr

silvercar wrote: »

Mainly because of a suspicion that you are not really living in the catchment (or certainly not for longer than necessary to acquire a school place).

Anecdotedly people rent a cheap as chips one bed flat as near as possible to school and continue to live in their 4 bed detached in another area.

If you can prove that the move is genuine it should stand up to scrutiny.

Thanks for the pointer.

The move is genuine as my DD was offered a place in a very good school, we accepted the place and had to move as commuting from where we lived to the school was not feasible. So I am sure we have a good case as we did not move before the place was offered so the case of moving to acquire a school place is ruled out.

simpleguy_blr

Looks like in my current situation best option would be to hold on to the property as getting a new mortgage seems tricky for now, I am aware that this means I will have to consider the long term landlord option and the pros and cons of doing so, At the moment I have a good tenant so has been smooth so far.

The reason I see in doing this is that we have a nice two bed property in a good locality, which is appreciating in value and I am unsure that I will be able to get back into the property ladder if I sell this.

with the above thoughts in mind would be a good idea to overpay the mortgage whenever possible? The interest rate would be 3.99+1.5 (Nationwide will add this 1.5 as I have taken a consent to let last September)?