Advice for first time buyer looking to buy to let

Jason879

Hi there, I was wondering if anyone with the knowledge could offer any thoughts or advice on my situation below:

I am 29 years old want to get onto the property ladder, but currently work/rent in central London on a relatively low salary of £25k. I have around £40k spread across various savings/isas, with access to a further ~£30k if needed from my family for a deposit.

I realise my chances of buying in or around London are zero, so I'm looking into possibility of buying a 2 bed flat in Manchester where I am originally from and renting it out.

I understand I won't qualify for stamp duty tax relief as a 1st time buyer when applying for a BTL mortgage, but I wanted to confirm I don't have to pay the additional 3% as I don't own a property? For example on a £180k property, i'd have to pay £1.1k?

Also in regards to the amount a bank would be willing to lend, from most of the online calculators I've used for a residential mortgage I could borrow around £110k - will this also apply for BTL mortgages and is it likely to differ if I speak to a mortgage broker or the lender directly? From what I understand, getting a BTL mortgage is much more complicated than a normal residential one...

Thanks in advance for any advice

System

BTL is a minimum 25% deposit. There are also £1000s in mortgage fees as well and the interest rates are higher. With not being anywhere near Manchester the cost of running the let will be quite high too - 10% of your pre-tax income will go to the letting agent.

Getting a BTL mortgage isn't any more complicated than a residential one but you will have different criteria to meet.

Cakeguts

http://www.rightmove.co.uk/property-to-rent/property-50153091.html This one is let. See if you can find any others. There are around 1000 2 bed flats advertised on Righmove to let in Manchester. What makes you think that you would be able to let one there?

ACG

I am not sure it is quite as bad as Tarambor makes out. The lenders fees may come out at £0 for instance. There are lenders who will accept a 20% deposit, although being a first time buyer you might be limited to a 25% deposit.

You do not necessarily need a management company, but tenants can be a PITA and call at all times day and night, so it might not be a bad idea.

BTLs are definitely not what they once were with the recent and upcoming tax changes. I would definitely look into what it will actually cost as a lot has changed.

I have been a landlord in the past and I would never do it again.

shirlgirl2004

Not sure jumping on the BTL Manchester wagon is a good one at least not in the apartment sector. Manchester is flooded with new apartments and you lose a lot of income in service charges. Lenders are also wary if lots of the apartments are BTL in a block. I'd be looking at a 3 bed family house in a decent area. Typical management fees are 10% +vat it's not cheap to get someone else to manage a property. there are cheaper options but I'm wary of how much they'd charge for fixing maintenance issues.

BTL mortgages tend to go on yield. You need to get 145% of the mortgage at a rate of 5.5% generally. You don't have to pay fees and in fact I find it's usually cheaper to pay a slightly higher APR. You need to find a decent broker to tell you what's available and at what rate for you.

G_M

Jason879 wrote: »

I understand I won't qualify for stamp duty tax relief as a 1st time buyer when applying for a BTL mortgage, but I wanted to confirm I don't have to pay the additional 3% as I don't own a property? For example on a £180k property, i'd have to pay £1.1k?

Good points in the previous replies.

On your specific question, no, as it's your first property you'd not be hit with the additional 3% SDLT.

But if/when you ever buy a home for yourself, you would pay the extra 3% unless you sold the BTL first.

SDLT_Geek

I agree with G M on the SDLT points.

[Deleted User]

Have you checked buy to let requirements with mortgage lenders? It might be difficult to get a BTL mortgage without already owning or having a residential mortgage for a property.

https://www.landc.co.uk/mortgage-guides/buy-to-let-mortgage-faqs/

Jason879

I've had limited internet access over the last 24 hours, but thanks so much for all your replies - certainly made me think it is not as straight forward as it could be and perhaps I was a little naive in my thinking...

From my understanding I don't think the 25% deposit should be an issue - more that the bank may not be willing to lend me enough to cover the remaining value of an average 2 bed apartment.

I think my next step will be to arrange with a mortgage broker on just what is available and the rates I would be looking at for this sort of mortgage.

Thanks all!

ACG

I received an email yesterday from a little building society and thought of this thread...then forgot all about it.

---

FTB & NON-HOMEOWNER BTL MORTGAGE, WITH NO CREDIT SCORE!
Offer your FTB/non-homeowner buy-to-let clients up to 75% LTV, with <lender name removed> two-year fixed rate mortgage.

Rental income must be just 140% of mortgage interest calculated at an interest rate of 5.5%

---

The last calculation, just to give you an idea - assuming a Mortgage of £100,000 at 5.5% on interest only, that comes to just shy of £700 a month (£697). Multiply the £697 by 145% = £975.

So the rent on this example would need to be £975 a month.

But other lenders have other calculations, some more favourable, others less so.

Speak to a broker, it wont be the easiest to place and with all the added rules around BTLs it wont be a bad thing to get some professional advice.

Crashy_Time

https://www.propertytribes.com/section-24-has-made-me-go-back-work-t-127631975.html