BTL before moving abroad

wlei34

Tried to look through the forum, but couldn't quite find an existing thread with similar circumstances, so I created this new one.

I live in an apartment and rental prices have dramatically gone up in my area. House prices have not increased as much. So I am thinking of moving to a friend's house and rent my own. The move to my friend's wouldn't be permanent, as I have enough to place a deposit for another property, but I wouldn't be buying straight away.

Why not buy straight away you might ask? Well there is a good chance that I will be moving abroad for an international assignment for some time at the end of the year.

Getting a BTL mortgage now won't be a problem, as my LTV is quite low, but, as part of the application, how would the bank's underwriter consider the following:
- I am renting a property I own to move to a place I don't (my friend does)
- A few months later I might need to inform them that I'm moving abroad
- My correspondence address in the UK can remain my friend's

Is there a chance the bank will ask me to settle the mortgage in full as soon as I inform them? Perhaps I shouldn't tell them at all as I have enough funds to cover the mortgage instalments in the unlikely event I don't find a tenant?

AnotherJoe

What is your plan for managing a BTL remotely? That's not cheap.

Are you aware that when you return you may not be able to get your tenants to leave without court action (same as now in a way, but even more so in future)
Are you aware of all the numerous tax rules regarding letting a property?
Plus the numerous other rules and costs?

Are you prepared to take the risk of your mortgage and tax fraud being discovered?

wlei34

Thanks a lot AnotherJoe, a devil's advocate is perfect to get me thinking!

AnotherJoe wrote: »

What is your plan for managing a BTL remotely? That's not cheap.

Approximately 14% of rental value according to my calculations, and that still leaves me a small profit margin

AnotherJoe wrote: »

Are you aware that when you return you may not be able to get your tenants to leave without court action (same as now in a way, but even more so in future)

Yes, but I do not plan to go live back in the property (besides, isn't that the problem with any letting?)

AnotherJoe wrote: »

Are you aware of all the numerous tax rules regarding letting a property?
Plus the numerous other rules and costs?

Not in full, but it's unlikely I'll go above my personal allowance. In any case I plan to submit a tax return for full transparency with HMRC

AnotherJoe wrote: »

Are you prepared to take the risk of your mortgage and tax fraud being discovered?

Absolutely not, hence my questions. Anyway, I don't get why what I plan to do constitutes a tax fraud?

What would be the most catastrophic risk with the mortgage?Surely I'm not the first landlord renting with a UK BTL mortgage whilst living abroad?

AnotherJoe

wlei34 wrote: »

Absolutely not, hence my questions. Anyway, I don't get why what I plan to do constitutes a tax fraud?

What would be the most catastrophic risk with the mortgage?Surely I'm not the first landlord renting with a UK BTL mortgage whilst living abroad?

• Not telling the mortgage co you are letting it.
• Not telling HMRC and the tenant you are abroad.

Both these are very serious. First could indeed see the mortgage called in and also get you blacklisted.
Second has various tax implications including tenants can withhold 20% of their rent and if I'm not mistaken, if you haven't told them your address they arent obliged to pay you rent. I believe thats the case anyway.

wlei34

Sorry AnotherJoe, now I'm not following you

AnotherJoe wrote: »

• Not telling the mortgage co you are letting it.

.

What do you mean I'm not telling them? Not only I'm telling them, I'm even applying for a buy-to-let mortgage!

AnotherJoe wrote: »

• Not telling HMRC and the tenant you are abroad.

.

Of course I'm telling HMRC, how else would I be submitting a self assessment to offset my personal allowance vs rent?!


Please take a look at my initial post, sounds like you're making some assumptions which are not quite right.

AnotherJoe

wlei34 wrote: »

Sorry AnotherJoe, now I'm not following you
What do you mean I'm not telling them? Not only I'm telling them, I'm even applying for a buy-to-let mortgage! .

Perhaps I shouldn't tell them at all

wlei34 wrote: »

Of course I'm telling HMRC, how else would I be submitting a self assessment to offset my personal allowance vs rent?!

My correspondence address in the UK can remain my friend's

wlei34 wrote: »

Please take a look at my initial post, sounds like you're making some assumptions which are not quite right.

Both bolded quotes are unchanged from your OP

silvercar

Hi wlei34, welcome to the forum.

I think that applying for a BTL mortgage whilst not owning your own property will limit the number of lenders available to you, but won't make it impossible.

Unless the mortgage comes with terms and conditions that require you to live in the UK (unlikely) then there is no obligation for you to keep the mortgage while you go overseas. It may make remortgaging a whole lot harder, so make sure you get a mortgage that you are happy to keep for a few years.

Obviously there are tax implications and it would make sense to have agents handling the property for you.

wlei34

AnotherJoe wrote: »

Both bolded quotes are unchanged from your OP

Yes, referring to the bank though, not HRMC (whom I would never ever ever f around with :money:)

wlei34

silvercar wrote: »

Hi wlei34, welcome to the forum.

Thanks, silvercar!

silvercar wrote: »

I think that applying for a BTL mortgage whilst not owning your own property will limit the number of lenders available to you, but won't make it impossible.

Thanks, that's exactly what I was worried about. So you think I could potentially have an issue if I don't own where I live, but rent what I own?

silvercar wrote: »

then there is no obligation for you to keep the mortgage while you go overseas.

Agreed, but if I tell the bank I live abroad, what are the chances of them requiring me to settle the mortgage in full as I no longer live here (it mightn't be a contractual obligation, yet I'm sure the small print would allow them to)

silvercar

Thanks, that's exactly what I was worried about. So you think I could potentially have an issue if I don't own where I live, but rent what I own?

It could be an issue. It was an easy (but fraudulent) way to get a mortgage. When your income didn't justify the loan size, but the rental income did, you apply for a BTL mortgage and live in the property. That is why some lenders won't entertain the idea. Others like the security that you own another property so there is potentially some equity there if it all fails and also as a home owner you have some experience of looking after a property. I would say it would limit your options not rule them out.

Agreed, but if I tell the bank I live abroad, what are the chances of them requiring me to settle the mortgage in full as I no longer live here (it mightn't be a contractual obligation, yet I'm sure the small print would allow them to)

Negligible, unless you default on payments. It will limit your opportunity to remortgage though. Lenders aren't keen on giving money to people overseas.

wlei34

Thank you so much silvercar, very helpful indeed.

silvercar wrote: »

It could be an issue. It was an easy (but fraudulent) way to get a mortgage. When your income didn't justify the loan size, but the rental income did, you apply for a BTL mortgage and live in the property. That is why some lenders won't entertain the idea. Others like the security that you own another property so there is potentially some equity there if it all fails and also as a home owner you have some experience of looking after a property. I would say it would limit your options not rule them out.

Well but to be clear I wouldn't "own" any other property, just live at a friend's (and subsequently abroad) whilst I rent the only flat I own. So the lender would only have security on the rented flat's equity. Could that still work?

silvercar wrote: »

Negligible, unless you default on payments. It will limit your opportunity to remortgage though. Lenders aren't keen on giving money to people overseas.

True, but then again worst case scenario I can always go for a lifetime tracker which would make possible not to remortgage until the end of the term. So would you suggest to inform the BTL lender after I move abroad, once a few installments have been successfully paid to demonstrate good faith?