Re-mortgaging from residential to buy to let

Debtfree2024

Hi,

I’m currently in the process of remortgaging my house which is currently residential, to a buy to let mortgage as I am moving in with my partner, there’s a future plan for me to be added to his mortgage at some point but this won’t be immediate. I have a 3 bedroom semi-detached. 

I have a mortgage broker who has put me in touch with the letting agent they work with who have given a quote of £875 a month rental value. 

My mortgage advisor has done a few quotes for me as follows for options on monthly mortgage price:

5 year fixed interest only: £435 a month
5 year fixed repayment: £572 a month
2 year fixed interest only taking my salary into account: £610 a month

I am aware I’m going to have agents fees (I’d be going through an agent) and costs for any repairs, payments for times when someone isn’t in the house on top of this too.

I really don’t want to sell my house and would like to keep it as a future investment to sell in the future or keep. However the idea of being tied into a 5 year fixed makes me uncomfortable in case life circumstances change, I know I’d still be able to sell earlier than this if I wanted but with a fee to buy out. However if I went with the two year option I don’t feel that I would break even with the rental income and other fees on top, whereas I would with the 5 year options.


Has anyone ever been in this position and can offer some advice? 

born_again

The worry of the 5 year fixed mortgage would be the least of my worries.

https://www.gov.uk/renting-out-a-property

BarelySentientAI

Debtfree2024 said:

Has anyone ever been in this position and can offer some advice? 

Many people have, and most of them don't seem to have realised how complex becoming a landlord is.

Financially, take the rent you expect, remove 15% for agents fees, then another 10% for empty periods between tenants, 10% more for repairs and refurbishments, and also whatever you would lose in tax - then decide whether it's worth it.

On the other side, you will need to research all the legal things you would need to do as a landlord.  The agent would help with that, but it's you that would end up in court or with tenants that you can't evict.

housebuyer143

I did a rental successfully for many years with a rent of £475 and a mortgage payment of £130. Did we make loads from the rent, not really - but we didn't lose money - I did the management myself. Saying that though, the boiler needed doing and we managed to get rid of it before it went down (that's £2-3k lost just there if it had).
Our money came from resale - thought I'm not sure if that ship has sailed. 

Would i rent the house with a margin you have of £265? No I wouldn't. Even the smallest void will destroy any profit for months, and with agent fees you are down a further £100 a month roughly - so now your profit could be closer to £165. 
Now deduct maintenance and tax etc. It's not really stacking up in my opinion. 5yr I/O is a better option if you need to do it.

alanyau88

With Section 24 firmly in place and higher interest rates, if your turnover from the rental income pushes you into the higher tax bracket, then your rental income will be taxed on turnover and not on the profits.  Which means, your rental property can make a loss and losing £1k every year is not unheard of.  Being a Landlord/Landlady is a very professional job which is heavily regulated.  You may not be able to evict your tenants if you do not comply with the regulations.  I would speak to a reliable accountant first being taking the plunge.

silvercar

I can see the sense in keeping hold of your current property when you first move in with a partner.

Why not ask your existing lender for consent to let on your existing mortgage? That should give you a breathing space of a couple of years and save you the hassle and cost of moving mortgage.