Living in your own BTL property

icstm

Hi All,

I am looking at upsizing and potentially holding on to my current flat if I can afford it.

To afford the new property I at the very least need to release significant equity in the current flat (which is almost mortgage free) or I need to sell it.

I would like to keep it, not least because property is a good investment but also because it allows for some flexibility when buying the new place in that I can do any repairs or decoration before I move in. I know that you are not supposed to rent out your property without consent, but do you need consent to live in your investment property?

To have the affordability assessment work maximise lending on the new residential mortgage on the new place, the other mortgage (on my flat) needs to already be a BTL. So the BTL will not impact the lending decision on the residential mortgage, even if there is no rental income YET. A simple contest to let would require 3 months rental to be treated the same way. At least this is my understanding speaking with my current mortgage provider.

Moreover to make myself ready for a quick purchase on my new place, I would rather than simple finacing, so have the equity released and added to the rest of my deposit for the new place making that mortgage easier to go through.

Would the BTL mortgage company have any issues with me continuing to live there for a few months whilst I ready my new home?

icstm

Does anyone have suitable thoughts, even if they are not professionals in this space?

Some ideas would be most welcome.

MWT

You will probably find that it is a condition of your BTL mortgage that you let the property to 3rd parties and do not occupy it yourself.

So you will be in breach of the conditions of your mortgage...

I guess it comes down to your tolerance for risk.

AFAIK, it isn't something the lender can consent to either as it would bring your unregulated mortgage within the scope of the FCA and would mess with the affordability criteria that caused you to put it under a BTL mortgage in the first place...

pjcox2005

Sorry not specific to the question but I'd make sure you're certain on this bit:
"not least because property is a good investment"
Additional stamp duty on new property purchase, removal of tax breaks on interest deductions if higher rate tax payer, unemployment and financial distress likely to increase so potential tenant issues, potentially a weakening of housing prices in recession plus all the issues of being a landlord. As well as normal issues like liquidity, wealth heavily in property with that and own home etc.

Not impossible that it is a good investment, I just think you've really got to question it so you're confident that's the best investment.

Thrugelmir

icstm said:

Would the BTL mortgage company have any issues with me continuing to live there for a few months whilst I ready my new home?

In principle, yes as will be a breach of your mortgage terms and conditions. Not going to be helpful if you wish to release equity from the property. 

icstm

Thanks for sharing your perspectives. This will require a little more thinking - as I am not looking to live in both.

Essentially we do want to rent out this flat, and could even rent out the house before we move in, so hoping there is a path forward.

icstm

pjcox2005 said:

Sorry not specific to the question but I'd make sure you're certain on this bit:
"not least because property is a good investment"
Additional stamp duty on new property purchase, removal of tax breaks on interest deductions if higher rate tax payer, unemployment and financial distress likely to increase so potential tenant issues, potentially a weakening of housing prices in recession plus all the issues of being a landlord. As well as normal issues like liquidity, wealth heavily in property with that and own home etc.

Not impossible that it is a good investment, I just think you've really got to question it so you're confident that's the best investment.

Yes, all worthy considerations. The usual rationale given for property is that for mainstream investors, it is one of the mainstream investment vehicles where you can apply leverage, ie debt, so support your capital growth.

Are there others I should consider?

Cscott139

You will need a 'let to buy mortgage'. You would remortgage your current property onto a buy to let and complete on your new purchase simultaneously meaning you don't need to live in your current property once its switched onto a buy to let. Your broker just needs to research the lenders that are ok with this but there are a few. You may need to get an ARLA registered letting agent to confirm the rental income that your current property can achieve.

icstm

Cscott139 said:

You will need a 'let to buy mortgage'. You would remortgage your current property onto a buy to let and complete on your new purchase simultaneously meaning you don't need to live in your current property once its switched onto a buy to let. Your broker just needs to research the lenders that are ok with this but there are a few. You may need to get an ARLA registered letting agent to confirm the rental income that your current property can achieve.

That is exactly how I understood it thank you for confirming.

I only found the term Let-to-Buy when researching over the weekend, before I wrote my question, as you say some, but not all major lenders offer this. HSBC have stopped.

Ideally I would like the first month or 2 to still be in the flat, so I can decorate the new place before we actually live there. It is this period of time that might be at issue, but I think if I Let-to-Buy with the same provider (ie get both mortgages through them, I hope they would understand).

theoretica

Sounds to me like you need to have a chat with a broker about what you want to do.    While hiring a third place while you decorate seems silly it might be worth it as a solution.