Can a shared ownership mortgage be bought out with a BTL mortgage?

TatyDanny

Hi there,

1. Shared ownership, own 40%, purchase price £155k 

2. Granted permission by HA and bank to sublet due to changes in personal circumstances 

3. Current mortgage deal has come to an end, bank cannot offer a deal due to the sublet so must be on variable (high)

4. Asked if it's possible to buy the HA out with a BTL mortgage bank said yes (despite saying no previously) - could they have made a mistake this time? Is one able to buy shared ownership with a BTL mortgage? 

5. Bank estimate current property value at £308k or lower possibly £300k 

6. Will need to pay a small deposit as 75% will be mortgaged, the rest made up by equity 

7. Current rental £1,385, declared with the tax man

8. Current HA rent £440, mortgage £243 (going up to £270 with variable rate)

9. Questions -

    A. If it is possible to do a BTL mortgage is it wise? 

    B. Will I be subjected to pay more taxes? 

    C. If I chose to sell it later will I be subjected to numerous taxes such as CGT due to it being a BTL mortgage?

    D. Can I turn it into a residential mortgage (do not own another property) later to swerve the extra tax? (Thinking possibly no as I'd be asked to put down a high deposit - is that right?)

    E. Affordability - Will the rental income and my employment income be considered together? 

    D. Are there any better ways of buying out the HA?

Many thanks in advance. T 

    

dimbo61

Lots of questions to answer!
Off course you have to pay Tax on your rental income ( after deductions for running your rental business )
Your earned income and rental income might push you into higher rate tax if your not already paying higher rate tax.
No you can't swerve Tax both Income , Capital Gains Tax ( unless your very rich ) and 3% extra stamp duty if you buy a property to live in.
What does it say about the Shared ownership and Renting ?
Many SO don't allow subletting or BTL business full stop 
I could talk about the tax changes for Landlords which means you get a 20% refund but pay 40/45% tax on rental income if your a higher rate tax payer.
The mortgage is only going up £27 a month ?
Most BTL mortgage deals want a 2+% Fee and rates are higher than residential mortgages even on SVR.
See an accountant or FA who deals in BTL
You need to look at the Big picture 
Age, Job, Income, long term plans, relationship, kids, pensions, savings, etc

simon_or

If your HA is fine with you letting out the property, and they are fine with you staircasing to 100% ownership, and you will have 25% equity after the remortgage, then I don't see why it would be a problem remortgaging to a 75% LTV BTL mortgage.

It should be quite straightforward as long as the rental affordability adds up. With £1,385 rental income on a 300k property, even if you're a higher rate taxpayer (which means a tougher 'stress test'), the rental affordability numbers should be ok for a 75% LTV loan size.

Given that the property is already rented out, where do you live now? If it's in owned accomodation, you'll have plenty of lenders, if it's rented/family, then you'll have fewer lenders.

K_S

@tatydanny Limited to your questions that are related to mortgages -

A. As per what the poster above has said. 

E. With interest-only BTL mortgages, affordability will usually be based on the rental income. Where there is a shortfall (unlikely given the numbers in your post), there are some lenders that will allow you to use income-slicing, i.e. boost BTL affordability using your personal income.