Move mortgage to BTL or Consent to Let

IAMIAM

I have a property I want to keep and this year have finally decided to move for work. I want to keep the property long term (desirable area, pension pot etc). Currently 75% LTV.

1. Do I move it to BTL Interest Only on my next remortgage straight away and take rental payments as normal for a BTL property and move on. Rental payments would be approx double the mortgage payment.

2. Draw some equity out, take it to 85-90%% LTV roughly, on residential mortgage with current lender (HSBC), fix for 5 years, agree CTL, then by next renewal, it will be back down to 75% LTV and ready to move to an appropriate BTL mortgage. HSBC said two years max CTL but after that they would expect me to move it to BTL but wouldn't force me until the fixed deal is over....I could stay with them and they would switch it under current rules as long as I had bought a second property by then. Rental payment would be approx a third more than the mortgage payment.

I want to rent for a year or two and then buy another property to live in using the equity alongside savings....

Dazed_and_C0nfused

I presume you are aware that you can no longer claim finance costs such as mortgage interest as an expense against your rental income.

For example,
£6,000 rent less £750 agent fees, £250 misc expenses and £4,000 interest = £5,000 profit in HMRC's eyes.

You can claim a separate deduction in relation to the interest but it doesn't alter the fact that you have £5,000 taxable profit.

IAMIAM

Dazed_and_C0nfused said:

I presume you are aware that you can no longer claim finance costs such as mortgage interest as an expense against your rental income.

For example,
£6,000 rent less £750 agent fees, £250 misc expenses and £4,000 interest = £5,000 profit in HMRC's eyes.

You can claim a separate deduction in relation to the interest but it doesn't alter the fact that you have £5,000 taxable profit.

Correct. It will be 10800 annually in rental income. 

simon_or

If you don't have any cashflow issues then you're likely to get a better rate on the residential consent to let rather than a BTL mortgage, so I would go with that

IAMIAM

simon_or said:

If you don't have any cashflow issues then you're likely to get a better rate on the residential consent to let rather than a BTL mortgage, so I would go with that

Thanks. I am more inclined to this option as well. Potentially releasing around 30-35k in addition to savings to bank for future deposit.

dimbo61

I don't think HSBC will allow you to increase the debt on the property, take out a 5 years residential fix and then give you Consent to Let.
You need at least 20/25% equity to get a BTL mortgage.
Is the property suitable for Renting ?

How much will the yield be ?
EPC ?
EICR?
Fit for habitation ?
Are you ready to be a Landlord and set up a new business.
Will this push you into Higher rate tax 

Grumpy_chap

For the rental payments to be that much more as suggested than the mortgage payments is unusual at 75% LTV or higher

IAMIAM

dimbo61 said:

I don't think HSBC will allow you to increase the debt on the property, take out a 5 years residential fix and then give you Consent to Let. They have said yes to this scenario. I am already with them.
You need at least 20/25% equity to get a BTL mortgage. I will have in 3-4 years after CTL.
Is the property suitable for Renting ? Yes

How much will the yield be ?
EPC ? D
EICR? Fine
Fit for habitation ? Yes
Are you ready to be a Landlord and set up a new business. Yes
Will this push you into Higher rate tax Yes

Thanks.....

dimbo61

So with the rental income pushing you into Higher rate tax and being on a residential mortgage so Interest and Repayment each month it could cost you money each month to have tenants ?
Yours Long suffering LL