Switching to BTL in first two years of mortgage?

hounsehunterftb

Hello all,

Our background: We currently have mortgage offer from Principality Building Society and are almost ready to exchange and complete in the coming weeks. We currently have a 2 years fixed apr product with them.

My question:
How easy would it be for us to switch to BTL to put the property on rent in say 3-6 months of living in the property?

I am only asking this to know about our choices because it has just today cropped up that my husband was head hunted for MUCH better opportunity (biggies in the market!) . I know the interview process would go for longgggg and would be extremely challenging. But if this does happen, want to weigh our options!

We do not want to stall our exchange and completion at this point based on a opportunity that may or may not even happen!

Your inputs would be highly appreciated!

Thank you!

glosoli

The first thing to consider would be if the mortgage product you are obtaining through Principality has early repayment charges applicable, as by switching onto a buy to let product or remortgaging elsewhere in 3-6 months time is likely to have an early repayment charge you have to consider..

The second thing would be do you have sufficient equity in your property to switch it onto a buy to let contract, as typically the maximum loan to value for a buy to let is 75% or 80%. Would you have the funds available to reduce the loan to value to this amount in order to switch it onto a buy to let, bearing in mind the early repayment charge.

The third issue may be (presuming neither of you have had landlord experience previously), that the application would be a consumer buy to let application, as you are an accidental landlord. You would need to do your research into whether your lender, or what other lenders are willing to process this type of application.

Fourthly can you really be bothered with the hassle of being a landlord, it is not the money spinner it is made out to be, and you have to be sure that you can afford periods of rental voids, maintenance, repairs etc to the property. You also should read up on the tax changes regarding buy to lets, it may in actual fact run at a loss rather than a profit.

You could also investigate consent to let, however the criteria for this varies, and many providers have minimum periods that you need to have the mortgage for prior to being accepted for consent to let. Furthermore, if it is deemed to be a long term affair, they may require you to swap onto a full buy to let mortgage contract.

Also if your husband is potentially changing jobs, it may be something the lender is made aware of, even at this late stage of the application. Are you not better off maybe postponing the purchase of the home until the situation becomes clearer?

hounsehunterftb

glosoli wrote: »

The first thing to consider would be if the mortgage product you are obtaining through Principality has early repayment charges applicable, as by switching onto a buy to let product or remortgaging elsewhere in 3-6 months time is likely to have an early repayment charge you have to consider..

The second thing would be do you have sufficient equity in your property to switch it onto a buy to let contract, as typically the maximum loan to value for a buy to let is 75% or 80%. Would you have the funds available to reduce the loan to value to this amount in order to switch it onto a buy to let, bearing in mind the early repayment charge.

The third issue may be (presuming neither of you have had landlord experience previously), that the application would be a consumer buy to let application, as you are an accidental landlord. You would need to do your research into whether your lender, or what other lenders are willing to process this type of application.

Fourthly can you really be bothered with the hassle of being a landlord, it is not the money spinner it is made out to be, and you have to be sure that you can afford periods of rental voids, maintenance, repairs etc to the property. You also should read up on the tax changes regarding buy to lets, it may in actual fact run at a loss rather than a profit.

You could also investigate consent to let, however the criteria for this varies, and many providers have minimum periods that you need to have the mortgage for prior to being accepted for consent to let. Furthermore, if it is deemed to be a long term affair, they may require you to swap onto a full buy to let mortgage contract.

Also if your husband is potentially changing jobs, it may be something the lender is made aware of, even at this late stage of the application. Are you not better off maybe postponing the purchase of the home until the situation becomes clearer?

Thanks for your detailed reply glosoli. I just wanted to know about my chances. As I mentioned its toooo early to postpone anything at this stage. Because this might not happen at all. But wanted some light on what our options would be.

csgohan4

Why not wait, at least you will know what happens at the end of it, maybe even get a better LTV for your next house as your still saving. Being a LL is alot of responsibility

phillw

glosoli wrote: »

Fourthly can you really be bothered with the hassle of being a landlord, it is not the money spinner it is made out to be, and you have to be sure that you can afford periods of rental voids, maintenance, repairs etc to the property. You also should read up on the tax changes regarding buy to lets, it may in actual fact run at a loss rather than a profit.

If you buy a dump in a cheap area and rent it out to problem tenants then the return can be good, but you will have lots of headaches. You'd need to be pretty ruthless.

If you buy a house somewhere nice and then try to rent it out you'll probably make a cash loss on it in the short term and then you'll get clobbered for capital gains tax if you ever sell it. You might make money in the medium to long term if rents keep going up & it's always useful to have two houses in case you get divorced.

However, I wouldn't worry about it at all today as he might not get the job. If he does and they are paying relocation expenses then you can ask them to pay the early repayment charge. Have you asked if the mortgage is portable? You might be able to move and keep the existing mortgage anyway.

I know someone who was approached about a job and went through the hiring process, to only be told they had hired internally. They just needed to be seen to have looked externally as a box ticking exercise & they weren't getting enough applicants so they had to hurry it along.

hounsehunterftb

phillw wrote: »

If you buy a dump in a cheap area and rent it out to problem tenants then the return can be good, but you will have lots of headaches. You'd need to be pretty ruthless.

If you buy a house somewhere nice and then try to rent it out you'll probably make a cash loss on it in the short term and then you'll get clobbered for capital gains tax if you ever sell it. You might make money in the medium to long term if rents keep going up & it's always useful to have two houses in case you get divorced.

However, I wouldn't worry about it at all today as he might not get the job. If he does and they are paying relocation expenses then you can ask them to pay the early repayment charge. Have you asked if the mortgage is portable? You might be able to move and keep the existing mortgage anyway.

I know someone who was approached about a job and went through the hiring process, to only be told they had hired internally. They just needed to be seen to have looked externally as a box ticking exercise & they weren't getting enough applicants so they had to hurry it along.

Thanks for your reply Phil. Yes the mortgage is portable however it would be difficult to find a house with available funds as the possible relocation would be to London :P can't afford x 5 house prices.

Fingers crossed now. We discussed and decided that we will exchange regardless because we are soo close. And this job scenario looks like a LONG shot as well. Worst worst case (in terms of house) if we do have to relocate, we will consider selling it. (which would be a shame because we love this house)

Whatever it is, we are prepared that it will happen for all good reasons!!

phillw

hounsehunterftb wrote: »

Yes the mortgage is portable however it would be difficult to find a house with available funds as the possible relocation would be to London :P can't afford x 5 house prices.

No, but you might be able to afford somewhere closer that is commutable. If the salary is good enough then you may be able to get a second mortgage to cover any increase. If he gets the job then that is when you need to make some hard decisions about moving your family etc.