Consequences of switch from residential to buy to let mortgage?

Peterhoffmeister

This is my situation......I have decided to buy a family home to keep it in the family etc, I have just switched jobs with a promotion. Now I am not wanting to buy the home, I still live with parents as re-building my career, all is going really well but this purchase has came slightly too early for me, but I am willing to give it the very best go I can to buy.

Now on my wage at present (£2k a month before tax) and £4k saved, I can make £8k deposit and get £80k mortgage in 6 months, all is well.......However that is a first time buyer/residential mortgage. I am going to rent the house out, so for that I have been told by Natwest I need 25% of deposit (unable to get for about a year) and need to earn £25k a year (£1k short). Is there anyway I could buy residential and switch? If I was to just get residential and rent is there much of a penalty/charge increase on mortgage etc?

So desperate to get this house but struggling to get buy to let mortgage!

Please help

ACG

You need a minimum 20% deposit really. Income should be fine with other lenders.

If you purchase it on a residential basis and let it out:
1) The lender may call in the loan.
2) The lender may put you on the fraud watch list (applying for a resi knowing it will be let out is mortgage fraud).
3) Possibly even tax evasion with you not having to pay higher rate stamp duty(?) - I could be wrong there.


You could possibly get a residential mortgage and then ask the lender if you can let it out, but they may decline, in which case you are left with an empty property.

If it is too soon to buy, it is too soon.

Peterhoffmeister

Thanks for that info, really appreciate it. I may look at other lenders and see if I can find lower income and deposit for buy to rent, any recommendations?

ACG

A broker.
As soon as you look for BTL Mortgages with a 20% deposit, the market reduces to maybe less than 10 lenders, many of which can only be accessed via a broker. Combine that with less than £25k income and your options are quite slim.

Peterhoffmeister

Perfect thanks mate

davidmcn

ACG wrote: »

3) Possibly even tax evasion with you not having to pay higher rate stamp duty(?) - I could be wrong there.

Yep! Purpose of the purchase makes no difference to the SDLT - if it's their only property then no higher rate applies[strike], if they're also a FTB then they get the relevant concession[/strike]. They don't need to live there.

ACG

davidmcn wrote: »

Yep! Purpose of the purchase makes no difference to the SDLT - if it's their only property then no higher rate applies, if they're also a FTB then they get the relevant concession. They don't need to live there.

I wasnt 100% whether it was chargeable on BTLs as a first time buyer or not. I have all but pulled out of BTLs now unless it is for existing customers so that is my excuse

kingstreet

david - can we check that?

"To be classified as a first-time buyer you must never have owned a residential property in the UK or abroad. This includes freeholds and interests in leaseholds. You must also be purchasing your only or main residence. This means first-time buyers cannot get Stamp Duty relief on buy-to-let properties."

https://www.moneyadviceservice.org.uk/blog/stamp-duty-for-first-time-buyers-your-questions-answered

Can I get Stamp Duty relief if I’m purchasing a buy-to-let property?

No. To be a first-time buyer you must be purchasing a property you intend to live in. However, you can still sub-let a spare room and get Stamp Duty relief as long as you intend on living in the property.

davidmcn

kingstreet wrote: »

david - can we check that?

"To be classified as a first-time buyer you must never have owned a residential property in the UK or abroad. This includes freeholds and interests in leaseholds. You must also be purchasing your only or main residence. This means first-time buyers cannot get Stamp Duty relief on buy-to-let properties."

https://www.moneyadviceservice.org.uk/blog/stamp-duty-for-first-time-buyers-your-questions-answered

Ah! Hadn't spotted that. Fair enough, though still correct in relation to the additional property surcharge. And may be worthwhile avoiding it by living in the property initially before letting it.

Thrugelmir

Peterhoffmeister wrote: »

If I was to just get residential and rent is there much of a penalty/charge increase on mortgage etc?

Requires lenders permission to let. Interest loading is at lenders discretion.

To state the obvious. If there's obviously no intent to live in the property long term. Then it's your reputation that gets tarnished. That's something that may impact you dearly with any form of finance.

ACG

So stamp duty is due to first time buyers who are buying BTLs?

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