Renting property instead of selling?

Pepperoni

Hi,

After some guidance on how it would work if you decided to rent out your property instead of sell it (i.e. because you want to buy another property).

We have 50K left on our mortgage, it's valued at 200K. Would we remortgage on a BTL mortgage to take out as much as we could? Then you use that money to fund the next house, with another mortgage to cover the remaining amount?

Any words of wisdom on how it all works welcome, we are in the very early stages of looking at it / trying to get our heads around how it all works.

Thank you.

Pixie5740

You'd apply for a Let to Buy mortgage which tend to have a maximum LTV of 75%. That means you could potentially take £100k of equity from your current property.

As you are not replacing your main home but are keeping hold of it and buying a second property you will pay an additional 3% SDLT (or LBTT if you're in Scotland).

Read G_M's guide to Tenancies in England & Wales. It contains information for new landlords, about repairing obligations, deposits and selecting letting agents (if you choose to use one).

G_M

* New landlords: advice, information & links

dimbo61

You need to speak to an accountant.
How much did you pay for the property?
How long have you lived in the property?
Would it be easy to rent out ?
With the new changes being rolled out you may find this harder to do and make a profit.

http://www.thisismoney.co.uk/money/buytolet/article-3513854/Buy-let-lending-tougher-Bank-England-looks-clamp-booming-market-just-stamp-duty-hike-bite.html

Thrugelmir

Pepperoni wrote: »

Any words of wisdom on how it all works welcome, we are in the very early stages of looking at it / trying to get our heads around how it all works.

What's your aim?

Is your existing property the best option if you intend letting property?

Cakeguts

There is no point in investigating the renting route rather than selling the property if it isn't the kind of property that works well as a rental. People assume that you can let anything and it will work well. This isn't the case. Some properties let more easily and at a better rent than others. What you have to do is to research what tenants are looking to rent in your area. There is point in trying to let an expensive 4 bed house in an area where most tenants are looking for 2 bed flats.

missyelliot123

You will be limited in who will provide you with a mortgage. This is called consumer buy to let. We have just been through exact same issue. An eu directive was brought in this year which has changed lending criteria. I know lloyds and HSBC won't do this type of mortgage. We went with virgin who are very competitive and I know Natwest also do consumer buy to let mortgages. Lenders are changing their criteria all the time as HSBC only changed a month ago. Yes unfortunately you will also have to pay the additional 3% stamp duty which is going to hammer us.

Bluebirdman_of_Alcathays

missyelliot123 wrote: »

You will be limited in who will provide you with a mortgage. This is called consumer buy to let. We have just been through exact same issue. An eu directive was brought in this year which has changed lending criteria. I know lloyds and HSBC won't do this type of mortgage. We went with virgin who are very competitive and I know Natwest also do consumer buy to let mortgages. Lenders are changing their criteria all the time as HSBC only changed a month ago. Yes unfortunately you will also have to pay the additional 3% stamp duty which is going to hammer us.

If the SDLT is going to hammer you why not just sell the property? People I've met that have to pay it are seeing their first 1 sometime 2 years of rental profit wiped out. Given the current risky climate it just seems madness to me.

AdrianC

Bluebirdman_of_Alcathays wrote: »

If the SDLT is going to hammer you why not just sell the property? People I've met that have to pay it are seeing their first 1 sometime 2 years of rental profit wiped out.

Indeed.

It's 3% of the purchase price. A decent rental is looking at 5% yield - before mortgage payments, voids etc. It's very easy to see how that SDLT can cover two years - or more - of actual rental profits, if there's any kind of BtL mortgage in place.