Using my H2B ISA - How long until I can sell or rent out the property?

RobsonMJ

Hi,

Was wondering if anybody could give me any information or a rough idea on this. 

Questions:
How long should a property bought, in part with a H2B ISA, be used as a residential property before it can be used as a rental? I've seen things saying the government would take a commonsense approach but wasn't sure if there has been any official clarification on any clear timescales since this.


Back story:
I'm currently a private tenant, I'm in a very fortunate situation in which I'm not required to pay any rent. Myself and my partner live in a property that previously belonged to her grandfather which was left to her mum, it was rented out to a gentleman that unfortunately passed away. After this, my partner's parents offered us the flat to live in for free, we just pay the utilities and council tax, etc. As good as a situation this is for us I'm very keen to get myself on the property ladder. I'd love to be in a position in which I had my own properties that I could rent out.

I'm on a fairly low wage, I get about 16K a year but I'm a pretty aggressive saver and live quite frugally. I currently have about 10K in savings and my grandparents left me 1/4 of their home in their will's which is currently on the market and has had a few offers accepted on it but they've fallen through, the viewings for it seem to be increasing though. But say that sold for 105,000 after fees etc I'm expecting to get around 10-15,000 from that (trying to be conservative). 

grumiofoundation

HTB ISA Must be used on a property you intend to live in. 

Obviously would be near impossible to prove you didn’t intend to live in it if you changed it to a BTL mortgage after say 2 years. 

I may be reading this wrong (apologies if so) but your post could be read that you are trying to buy a BTL but use HTB ISA bonus. But to use HTB ISA bonus you will need to buy using a residential mortgage, if you want to rent out you will need to convert to a BTL mortgage or get consent to let (May struggle to get this if try to rent out very quickly). 

To convert to a BTL mortgage you generally need higher equity, often 25%. 

If you plan to convert this property to a BTL and buy a new property for you to live in don’t forget you will have t pay +3% extra SDLT* on the second property (plus normal stamp duty due). *different taxes in wales/Scotland. 

RobsonMJ

grumiofoundation said:

HTB ISA Must be used on a property you intend to live in. 

Obviously would be near impossible to prove you didn’t intend to live in it if you changed it to a BTL mortgage after say 2 years. 

I may be reading this wrong (apologies if so) but your post could be read that you are trying to buy a BTL but use HTB ISA bonus. But to use HTB ISA bonus you will need to buy using a residential mortgage, if you want to rent out you will need to convert to a BTL mortgage or get consent to let (May struggle to get this if try to rent out very quickly). 

To convert to a BTL mortgage you generally need higher equity, often 25%. 

If you plan to convert this property to a BTL and buy a new property for you to live in don’t forget you will have t pay +3% extra SDLT* on the second property (plus normal stamp duty due). *different taxes in wales/Scotland. 

Thank you for the help!

Sorry about my explanation, I'll try to clarify. I'd buy the property to initially live in but I'd like to, later on, be able to rent it out. I'd not be doing this for at least a few years at the very least while I saved for another deposit, I just wasn't sure if there was any sort of time limit on how long it would have to be a residential property before turning it into a property I'd be letting out.
The property I'm looking at currently is a flat on the market for 65,000 - if I were to buy it, I'd live in it whilst simultaneously 'doing it up' to try to increase the value. 

[Deleted User]

RobsonMJ said:

grumiofoundation said:

HTB ISA Must be used on a property you intend to live in. 

Obviously would be near impossible to prove you didn’t intend to live in it if you changed it to a BTL mortgage after say 2 years. 

I may be reading this wrong (apologies if so) but your post could be read that you are trying to buy a BTL but use HTB ISA bonus. But to use HTB ISA bonus you will need to buy using a residential mortgage, if you want to rent out you will need to convert to a BTL mortgage or get consent to let (May struggle to get this if try to rent out very quickly). 

To convert to a BTL mortgage you generally need higher equity, often 25%. 

If you plan to convert this property to a BTL and buy a new property for you to live in don’t forget you will have t pay +3% extra SDLT* on the second property (plus normal stamp duty due). *different taxes in wales/Scotland. 

Thank you for the help!

Sorry about my explanation, I'll try to clarify. I'd buy the property to initially live in but I'd like to, later on, be able to rent it out. I'd not be doing this for at least a few years at the very least while I saved for another deposit, I just wasn't sure if there was any sort of time limit on how long it would have to be a residential property before turning it into a property I'd be letting out.
The property I'm looking at currently is a flat on the market for 65,000 - if I were to buy it, I'd live in it whilst simultaneously 'doing it up' to try to increase the value. 

Doing up properties doesn’t really increase the value. Adding square footage, very difficult with a flat, or extending a short lease are what add value. Would this £65k property make a good investment property and what kind of tenant would it attract. Those are the sorts of questions you need to be asking. 

You’d not also need to save a deposit for your onward purchase but you’d also need to factor in paying a higher rate of SDLT/LTT/LBTT as it would be an additional residential property. 

I’m not saying you shouldn’t do it but do be realistic about the finances.