Advice required - remortgaging, travelling, letting...

eastonian

Hi, I'm trying to plan out some large life decisions, and wonder if anyone would care to share their opinion before I seek professional advice.

Currently have a fixed term mortgage (3.8%) which ends in April 2016, at which point we will have ~£135k outstanding. We will have finished a complete renovation by this time, and currently similar properties sell in my area for ~£290-300k, so I am hoping to remortgage at well under 50% LTV, and contemplating a 2 year fix when we do so.

Before myself and my partner settle down / start a family, we are considering taking 6 months out next year to do some travelling and, if possible, might want to borrow against our house to do so.

Can we do something along the following lines?

- remortgage
- borrow an amount (e.g. £10k), either on the mortgage or as homeowner loan
- seek Consent To Let (CTL) at time of remortgage
- sod off round the world for 6 months


Or is that a ridiculous idea? This will be my first time re-mortgaging so I'm not sure what is/isn't possible.

Would wanting CTL exclude me from getting the best products/rates, or is it relatively easy to get? Are there costs are involved?


Obviously all of the above assumes no nasty shocks in interest rates/house prices in the next 12 months, and of course I would't undertake lightly letting our house out to strangers. With those caveats, I would appreciate if anyone had any thoughts on whether the above is feasible, or of any glaring holes in my plan!

Thanks.

Foxy-Stoat_3

If your current fix ends in just under a years time, I would do nothing apart from seek consent to let from your existing lender.

If/when you let out the property you will become a Landlord, you should read up on everything that entails. You will need a good enough cushion for voids, repairs and possible missed rent payments.

Once you let your property to tenants it ceases to become your home, if you will be letting to friends only this has certain pitfuls and you will not be able to strictly let this to your family, depending on the lender. What will you do in 6 months time, rent somewhere until you re-gain possession of your home? Short term lets are not very apealing to tenants.

You are in a good place LTV wise, I would not be borrowing from your equity to go travelling, I am not even sure a lender will allow you to draw equity out for this reason - sod off around the world for 6 months - with no income apart from rental payments.

eastonian

Hi, thanks for your reply.

As above, I wouldn't undertake letting my house lightly, and am aware of the many risks, responsibilities etc. In my mind I was considering a specialist lettings agent e.g. Medics on the Move who specialise in short-term lets for locums etc.

I wouldn't be applying for CTL during my current mortgage term - we hope to start our trip after the current fixed term ends. I suppose what I'm wondering is whether all/most lenders will agree to CTL, or whether I will need to specify this as a requirement to my broker who will limit their search accordingly.

Interesting what you say about borrowing against equity, and also the potential issue about borrowing at all. This is just the sort of info I'm in need of, thank you.

Foxy-Stoat_3

If you are going to need CTL then you should stick with your existing lender obtaining CTL from a new lender will have restrictions, some are 6 months, some are 12.

I am all for enjoying the money you have while you are able, but paying into a repayment mortgage is not just for a roof over your head, its so you do not have a mortgage in your older years.

eastonian

Foxy-Stoat wrote: »

If you are going to need CTL then you should stick with your existing lender obtaining CTL from a new lender will have restrictions, some are 6 months, some are 12.

Noted.

Foxy-Stoat wrote: »

I am all for enjoying the money you have while you are able, but paying into a repayment mortgage is not just for a roof over your head, its so you do not have a mortgage in your older years.

Agreed, however this may be our only opportunity to make such a trip for a good many years, hence why I'm inspecting all potential ways to make it happen.

Thanks again for your input.

eastonian

Thought I'd update this thread in case it's of interest to anyone.

Having spoken with our IFA's mortgage specialist, we anticipate no problem in doing what we suggest:

- remortgage in early 2016 when our fix ends, to move off current lender's SVR of 5% and take advantage of significant change in LTV (85% to ~50%)

- we will stay put for 6+ months before seeking Consent to Let; our advisor sees no impediment to us receiving this, even in light of our plans

- we intend to borrow a sum (£5-10k) in addition to our total mortgage to pay for travels, whilst renting out the house in our absence.


We are young-ish couple who have sunk all our disposable income for 2+ years into renovation work, and want to take this opportunity to do something different before we 'settle down' for good. I appreciate that throwing money at travelling may not be in the MSE spirit for some, but I am of the opinion that life experiences often have more value than material wealth and we may never get the chance to do this in the future.

Yes we are aware of all the requirements, pitfalls, obligations etc. of renting one's house and I intend to arm myself with all the facts well in advance. We will have alternative accommodation options upon our return to the UK in 2017, so immediate vacancy of our own property will not be imperative.


Anyway thanks again to those who took the time to offer advice/opinion, I will update this thread again if any points of interest come to light.

Thrugelmir

eastonian wrote: »

I appreciate that throwing money at travelling may not be in the MSE spirit for some, but I am of the opinion that life experiences often have more value than material wealth and we may never get the chance to do this in the future.

I doubt many people care how you spend your money. It's your to do with as you wish. My concern would be that if you are unfortunate enough to meet the tenant from hell. Then the downsides are potentially financially severe. Doesn't matter how much you prepare yourself for the event. You'll have not the slightest inkling until it's to late.

eastonian

Further update in case anyone has followed this thread, or if it proves useful to other users in the future.

Remortgage completed yesterday with Nationwide, borrowing £145k (against NW valuation of £310k), including £8.5k in addition to the redemption value of our last mortgage. 5-yr fix @ 2.54%.

Consent to Let application pack on its way to me - NW's advisor knew nothing about any requirement for payment history before Consent would be granted. This 6 month period seems to be some widely-held apocryphal rule imagined by my (and other?) brokers. No charge for lets up to 6 months (bar £40 admin fee), but a 1% loading is added for periods from 6 months - 3 years, with maximum period of 3 years.

Letting agent estimated monthly rent of £1,300 which is 200% of our monthly mortgage payments. I am of course arming myself with all the knowledge I can find on becoming a landlord relating to my responsibilities and the associated risks. A close friend (also a neighbour and tradesman) will be managing the property for me.

We have moved our plans forward, and now hope to be leaving for S America within 2-3 months.

Thrugelmir wrote: »

My concern would be that if you are unfortunate enough to meet the tenant from hell. Then the downsides are potentially financially severe. Doesn't matter how much you prepare yourself for the event. You'll have not the slightest inkling until it's to late.

I do appreciate your concern and your replies, but I think this is a little alarmist! Yes of course I could encounter the tenant from hell, but I can only see 3 or 4 possible worst case scenarios:

- Tenant damages the property. We will have (landlord) insurance and a significant deposit. I have renovated the entire property, and am not squeamish about it requiring a little more post-tenants!

- Tenant burns down property. Again we will be appropriately insured.

- Tenant doesn't pay rent. We will always retain enough funds to cover mortgage & insurance payments while we are away.

- Tenant won't leave. We will have correct tenancy agreement in place, allowing us to issue the necessary notices, and can stay with family indefinitely upon our return should we need somewhere to stay before eviction can be effected.


There are risks everywhere - I am more concerned about trekking in remotest Patagonia than those (calculated) risks I will taking in letting my house out to professionals, which many people do painlessly and successfully all over the UK. I am taking what I think are adequate precautions and have fallback options should I need them. However, if there are other, unseen risks which I have not considered I would be very interested to hear them.

Once again, thanks to all for replies and input. The robust (albeit occasionally negative!) advice on these forums is an excellent resource, and I am grateful for it.

Clarabella123

Good on you!

Sounds like you are in a great position.

Enjoy your travels!

Thrugelmir

eastonian wrote: »

I do appreciate your concern and your replies, but I think this is a little alarmist!

As long as you've your eyes wide open then there shouldn't be any surprises. At the end of the day life is a series of experiences that you'll never stop learning from. Even when you think you've seen it all !

eastonian

In case this thread has proved a useful resource, here's a retrospective update following our return about 6 months ago:

- As outlined earlier, we borrowed an additional £8.5k when remortgaging which comprised our main travel fund.

- We were very lucky to find tenants via friends, so did not need to pay an EA finding fee (still did credit checks etc). As a first time landlord with only 1 property to let out, I used a free standard contract (adapted to suit my requirements), and an independent inventory/check-in service which both served us fine.

- We planned a 6-month trip but hoped to stay away longer if we could afford it (stayed away for 9 months in the end). We applied for a 12-month Consent to Let period as a result, which was given without any trouble.

- Perhaps we were lucky, but letting our house was largely trouble-free. A good friend (and builder) was able to manage the property on our behalf. The worst we suffered was some crap repairs on a tap, some messed up paintwork and some broken crockery.

- Hiking in remote Patagonia is not as risky as I expected.


All in all, would repeat the experience! I still appreciate the opinion of other posters here, and feel that what I've learned on these forums over the years helped me remortgage, borrow against and then rent out my house without too much fuss.