BTL mortage borrowing

nickyg2000

Hello,

Everything where we live is so expensive. We were wondering if we would borrow more using a btl mortage and let it for 5 years + as mine and my partners salerys will be a lot higher after this time and we have some inheritance in the pipeline. It also gives us more freedom to move around etc until we want to start a family. We could then apply for a residentual mortage on the property. We own a flat but would have to sell to raise the £150k equity then go into rented for 5 years +.

Is there an issue with this? Can you borrow more aganist btl than a standard residentual mortage. Will the fact we wont own any other property cause issue getting a btl?
We were thinking property circa £450k
Any helpful advise welcome :-)

HappyMJ

nickyg2000 wrote: »

Hello,

Everything where we live is so expensive. We were wondering if we would borrow more using a btl mortage and let it for 5 years + as mine and my partners salerys will be a lot higher after this time and we have some inheritance in the pipeline. It also gives us more freedom to move around etc until we want to start a family. We could then apply for a residentual mortage on the property. We own a flat but would have to sell to raise the £150k equity then go into rented for 5 years +.

Is there an issue with this? Can you borrow more aganist btl than a standard residentual mortage. Will the fact we wont own any other property cause issue getting a btl?
We were thinking property circa £450k
Any helpful advise welcome :-)

£450k? Why not buy maybe 4 smaller properties to spread your risk? Tenants may not pay rent, tenants can damage your property requiring renovations during which time you aren't getting rent. If you spread your risk by having multiple properties it is very likely you will get at least 3 out of the 4 rent payments in any one month. Returns on smaller properties also tend to be higher than larger more expensive properties as there is more demand for smaller lower rent properties.

You can borrow money without owning a property of your own. The amount you can borrow will be based on an affordability calculation for the first property after which you will be a property owner and can borrow against the rental income for future properties.

nickyg2000

Sorry,

We own a flat worth £300k we are selling it. We will then have £152k in the bank and own no property.
We want to buy a large family home in a town we love, rent it for 5+ years the get a residentual mortage on it and live in it.

HappyMJ

nickyg2000 wrote: »

Sorry,

We own a flat worth £300k we are selling it. We will then have £152k in the bank and own no property.
We want to buy a large family home in a town we love, rent it for 5+ years the get a residentual mortage on it and live in it.

Why would you do that for? When you sell it you would have to pay capital gains tax for the period it was let for which if property prices keep increasing it could increase your CGT bill to more than you made on it whilst it was let out. If you lived in it from purchase date you would be exempt from capital gains tax.

If you purchased 4 smaller properties you can, as the increase in equity builds up to your CGT exemption limits sell one in each financial year and never pay capital gains tax.

_CC_

HappyMJ wrote: »

Why would you do that for? When you sell it you would have to pay capital gains tax for the period it was let for which if property prices keep increasing it could increase your CGT bill to more than you made on it whilst it was let out. If you lived in it from purchase date you would be exempt from capital gains tax.

Not to mention they'd have income tax to pay on the rent, yet would have to pay rent for wherever they plan to live from their take home pay.

GMS

The plausibility check may well be where it falls down.

nickyg2000

GMS wrote: »

The plausibility check may well be where it falls down.

So how would you pull this off? is there a way?

Guest101

Are you actually going to buy this house or is it another pointless thread?

Thrugelmir

nickyg2000 wrote: »

We want to buy a large family home in a town we love, rent it for 5+ years the get a residentual mortage on it and live in it.

Why not buy a smaller family home, live in it and use it as a stepping stone.

kingstreet

nickyg2000 wrote: »

So how would you pull this off? is there a way?

No. Lenders use the residential affordability rules on non-owners to make sure if they are most likely buying a place to live in, they can't use the BTL rules to get round residential affordability.

chappers

seems daft to me, far too complicated and fraught with un-necessary risk.
The sensible way to bridge the differential between what you have and what you want is to overpay your mortgage or save some cash, whichever is the most efficient. I would say BTL has an uncertain future at the moment and isn't something I would be dipping my toe into half heartedly at the moment, even without the complexity you are considering introducing to the equation.