Buying a house and renting my flat?

rickeshp1

Hi all, I am looking for some advice. I currently have a 1-bed flat in Zone 4 that I bought 3 years ago on a first time buyer mortgage. I am now looking to buy a house with my partner (who is a first time buyer) and rent my 1-bed flat out. I am hoping that the rent from the 1-bed flat will cover the monthly mortgage payments so that I don't have to sell the flat. My current mortgage payments are approx ~ 850/month. I am confused on what to do:

- Take a new joint mortgage with my partner. I suppose I then need to remortgage my 1-bed flat with a buy-to-let mortgage? Would I need to do this before buying the new place jointly with my partner or can I do it afterwards? Or is there such a thing as a grace period?

- Let my partner take a new mortgage for the new house on her name and pay her half of the mortgage repayment amount every month?

- Transfer my mortgage to the new place and add my partner's name to it (don't know if that's possible), and then presumably I also need to take another buy-to-let mortgage for the flat?

Also, I took my current mortgage on a 5-year fixed rate and it has a quite high early repayment charge (~7k) that I'd like to avoid if possible.

Any suggestions/recommendations on what a good approach would be?
Thanks!

Mrs_pbradley936

You might not need a buy to let mortgage. You might be able to get "consent to let" on your existing mortgage because this is all down to a change of personal circumstances rather than a business decision.

After that tread carefully because relationships can and do go sour. If this is a new relationship I would let her take out the mortgage in her name and you make reasonable contributions towards the living expenses. Then I would wait and see what happens - if you are still in love in a couple of years time then you can think about altering the dynamics.

That way you have a home, she has a home and nothing is joint for anything other than living expenses. If you do not rush to be on the mortgage/deeds and it all ends in tears you can just go back to your own place (having given the tenants all the correct Notices) and no legal wranglings or Capital Gains Tax for you do deal with.

That is what I would do. Then reassess a couple of years down the road.

rickeshp1

Thanks for the advice, that's useful. I've had a look at the bank's site and they do mention that I should be able to let the property if I've owned it for more than 6 months. That should make renting it out easier. I'll give them a call to confirm.

Yes, one reason I wanted to keep my flat is as a fallback in case things do go sour sometime in the future.

adonis10

Don't forget to massive hike in SDLT rates for someone buying a second (or more) home. Could end up costing a fair few k more depending on purchase price.

HappyMJ

rickeshp1 wrote: »

Hi all, I am looking for some advice. I currently have a 1-bed flat in Zone 4 that I bought 3 years ago on a first time buyer mortgage. I am now looking to buy a house with my partner (who is a first time buyer) and rent my 1-bed flat out. I am hoping that the rent from the 1-bed flat will cover the monthly mortgage payments so that I don't have to sell the flat. My current mortgage payments are approx ~ 850/month. I am confused on what to do:

- Take a new joint mortgage with my partner. I suppose I then need to remortgage my 1-bed flat with a buy-to-let mortgage? Would I need to do this before buying the new place jointly with my partner or can I do it afterwards? Or is there such a thing as a grace period?

- Let my partner take a new mortgage for the new house on her name and pay her half of the mortgage repayment amount every month?

- Transfer my mortgage to the new place and add my partner's name to it (don't know if that's possible), and then presumably I also need to take another buy-to-let mortgage for the flat?

Also, I took my current mortgage on a 5-year fixed rate and it has a quite high early repayment charge (~7k) that I'd like to avoid if possible.

Any suggestions/recommendations on what a good approach would be?
Thanks!

Are you married?

If you buy this new house together then you are treated as one unit and you or your partner won't qualify as a first time buyer as you already own a property.

Is it worth holding on to the flat?

How much is the flat worth? What is the interest rate on the mortgage? Amount outstanding? What is the rent you could achieve on the property? Any service charges? Will you manage the property yourself or outsource that task to a lettings agency? You have fixed costs each year such as buildings insurance and gas safety certificates to maintain. The property will require painting every few years and the carpet needs replacing at regular intervals. Are you going to take out a landlords insurance policy to cover the heating system or set aside a budget for maintenance costs on the boiler. If you read threads on here a boiler lasting for 15 years has done well. Figure it all out and you'll probably rethink your plans and sell investing the equity into a place you buy together which may qualify you for lower interest rates due to the higher deposit you will then have. A 90% LTV mortgage could be 4% interest. A 70% LTV mortgage could be 2% interest. That might make a big difference.

You can sometimes port your mortgage to keep the deal and avoid a ERC to another property but you will usually have to sell the existing property.

sarah69696pink

I've recently done similar. If you decide to get a joint mortgage for your new property you will not be able to rent out your existing flat with just consent to buy (you are not able to have two residential mortgages) so you will then have to get a BTL. We are doing this with the same bank and therefore the process is all going to happen at the same time - be aware though - you need to pay valuation fees for both, mortgage application fees for both etc etc!

G_M

I doubt you can switch to CTL on the existing mortgage if you are taking a 2nd residential mortgage. but why not ask?

I'd also talk to an independant mortgage broker.

and read:

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?

Beware the extra SDLT on 2nd property purchase after April 16.

LittleMax

sarah69696pink wrote: »

I've recently done similar. If you decide to get a joint mortgage for your new property you will not be able to rent out your existing flat with just consent to buy (you are not able to have two residential mortgages) so you will then have to get a BTL. We are doing this with the same bank and therefore the process is all going to happen at the same time - be aware though - you need to pay valuation fees for both, mortgage application fees for both etc etc!

This depends on the lender. We got consent to let on our house and purchased a second property with a second mortgage from the same lender (Nationwide). After 6 months we had to pay an additional 1% on the mortgage on the let property. The consent lasted for 3 years, and we were worried that they may not extend it, but it was automatically extended for a further 3 years.

DPDRC90

LittleMax wrote: »

This depends on the lender. We got consent to let on our house and purchased a second property with a second mortgage from the same lender (Nationwide). After 6 months we had to pay an additional 1% on the mortgage on the let property. The consent lasted for 3 years, and we were worried that they may not extend it, but it was automatically extended for a further 3 years.

Did you have to still pay a higher than normal deposit for the second mortgage?

LittleMax

DPDRC90 wrote: »

Did you have to still pay a higher than normal deposit for the second mortgage?

No - we got exactly the same rate on the second mortgage as we would have had it been our only mortgage. We only had a 15% deposit, as capital was still in the first property.

rickeshp1

Yes, I got married recently. My 1 bed flat is currently worth ~260k according to Zoopla. I took a 5yr fixed rate mortgage over 20 years at 3% when I bought it and there's approx ~130k left, with monthly payments of £850. Given that the flat was a new build, I'm hoping that the rent would be slightly above that, and just about enough to cover the maintenance costs - service charge, buildings insurance, repairs etc - need to speak to an agent next week to see if that's achievable.