First time buy to let/ investment - advice please

caligulablushed

Thank you for the cautionary advice, these are exactly the sort of things I need to weigh up.

- On stamp duty relief, isn't it only 10k relief until June and then it's 5k thereafter, unless the property is over 600k in which case you entirely forfeit first time buyer relief? Stamp duty on a BTL or second property usually incur an additional hefty payment but first time buyers are exempt. It was this I was wondering about. 
- Mortgage fees appear to be about 1k but I have the option of buying something under 200k outright to swerve this, weighed against the loss of the HTB ISA. Unless it would make financial sense to get a tiny mortgage (10k?) to make use of it and then pay off the mortgage straight away, depending on the penalty fee. I have no idea about conveyancing but the costs also appear to be about 1k when buying. Grateful for any further advice.
- When I buy my own house is flexible, 2023 seemed more likely but this isn't a major issue for me. I could wait. 

I will look further into other investment products as you've suggested, though i'd understood that stock market funds also needed a long term commitment. 

(My boyfriend's CCJ is not satisfied. I'm assuming a broker might be able to sort something regardless, as it was over 4 years ago and his credit history is otherwise in order, but would it likely be at much worse rates?)

AdrianC

caligulablushed said:

One option was to buy something I'd be happy to live in myself if necessary, in case there were selling issues.

Manchester or London...? And, of course, the really slow bit of regaining the property is persuading the recalcitrant tenants to move out, before it can be marketed...

How easy is it change a btl mortgage to residential and vice versa?

You just remortgage.

grumiofoundation

caligulablushed said:

Thank you for the cautionary advice, these are exactly the sort of things I need to weigh up.

- On stamp duty relief, isn't it only 10k relief until June and then it's 5k thereafter, unless the property is over 600k in which case you entirely forfeit first time buyer relief? Stamp duty on a BTL or second property usually incur an additional hefty payment but first time buyers are exempt. It was this I was wondering about. 

I think you may be mixing up FTB stamp duty relief and the stamp duty holiday.

But you are correct that FTB relief has a cut off. FTB Stamp duty relief is only applicable if property is 500k or less. If your first home is over 500k you pay normal stamp duty (so if your first home will be more than 500k  that you aren't 'losing' FTB relief that by buying a BTL now).

Someone buying a second property pays +3% SDLT (generally case with BTLs).

As a FTB buying a BTL you will pay 'normal' stamp duty (you won't get FTB stamp duty relief on a BTL). 

https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

- Mortgage fees appear to be about 1k but I have the option of buying something under 200k outright to swerve this, weighed against the loss of the HTB ISA. Unless it would make financial sense to get a tiny mortgage (10k?) to make use of it and then pay off the mortgage straight away, depending on the penalty fee. I have no idea about conveyancing but the costs also appear to be about 1k when buying. Grateful for any further advice.

You wouldn't be able to use HTB ISA bonus if buying a BTL. 

- When I buy my own house is flexible, 2023 seemed more likely but this isn't a major issue for me. I could wait. 

I will look further into other investment products as you've suggested, though i'd understood that stock market funds also needed a long term commitment. 

(My boyfriend's CCJ is not satisfied. I'm assuming a broker might be able to sort something regardless, as it was over 4 years ago and his credit history is otherwise in order, but would it likely be at much worse rates?)

Really neither are suitable for money that you would need in <5 years. Somewhat different type of long-term commitment though.

Stock market need long term commitment in order to be able to ride out any drops but money is accessible in a few days (although might not be worth as much...).

BTL also ideally needs long term commitment to ride out any drops (whether drop from house price, drop from tenant not paying rent/repairs needed, to recover up-front costs) but also crucially the money is not easily accessible (maybe 3-12 months?). 


Seems to me like you view the attractiveness of getting a BTL as enabling you to keep up with any house price inflation (I will ignore any rental 'profits' since they will be eaten up by buying/selling costs if this is only going to be for a few years). 

Even assuming you can sell 'in time' and can realise a profit your plan might not achieve this goal. 

Lets say the property you want to buy in 2023 is worth 700k today.

Need a mortgage of 500k.

Assume property prices rise by 10% in next 2 years (in both London and Manchester)

House in London now costs 770k to buy

Property you bought in Manchester for 200k now worth 220k.

Need a mortgage of 550k.

if you hadn't bought property in Manchester your need a mortgage of 570k. For me thats not a huge difference considering the downsides of buying a property to rent out for only a few years (explained by various previous posters).

MaryNB

I think mortgage fees for BTL are higher than for residential mortgages (which are usually about £1k). Generally with residential mortgages you can add the fee to the mortgage so you pay nothing up front, check if it's the same for BTL mortgages. 

I have no idea what it would be for BTL but for a residential purchase I'd put conveyancing (with searches) at approx £1.1k to £1.8k. It can vary widely depending on the solicitor. Some solicitors (including the ones I used) have put their prices up because of increased demand with the SDLT holiday. If you do buy a residential property solicitors often charge extra for HTB.