changing from interest only to buy-to-let

neilsc99

Hi all,

I have done some research on the net and could not really find any help.

Myslelf and my girlfriend have a two bed flat which we are trying to sell but due to the current market it's not going that well. We were thinking of renting our place out and moving into a house...we think the rent on our flat would easy cover the monthly payments so thats not the issue but i have some questions which im hoping people can advise.

1. Would we need to change our mortgage which is interest only to buy-to-let
2. The house we were looking to buy, would would have about 20k downpayment from the sale of the flat but as we would not have sold our flat we would not have any downpayment apart from about 7K in savings
3. Could we use our flat as some kind of deposit on the house ?

Im going to contact our finacial advisor tomorrow so see what he says but any help before hand would be very much appriciated.

Thanks all, Neil

brit1234

You will have to change your mortgage for a buy to let one, however that might be very difficult in the current climate especially as banks turn their backs on buy to let.

Again £7k will be in most cases far too insufficient for a deposit and costs. Your more likely need £20-30k again for the current climate.

I also see it difficult to use equity in your current property as a deposit as by the sound of it your £20k profit would of been wiped out in national property falls already.

Save4ArainyDay

You can get a BTL mortgage of 85% of the value of the flat. Any equity left would come back to you and could be added to your £7k. However if you do not have at least 15% equity in the flat you will not get a BTL mortgage.

neilsc99

hmmm...well becuase we are interest only we have not paid anything of the flat, we we have some dont know how but our statement says we have but it's not alot. I read on the net / papers that buy-to-let is back on the up (i try not to read to much what the papers etc say becuase they are never 100 percent right) but how can this be if lenders are turning there back on the BTL market.

I will call my finacial advisor tomorrow anyway to see what he says in the mean time anyone wanna buy a 2 bed flat in greater london :beer:

silvercar

If you didn't need to release some equity for your deposit, you could ask your lender for consent to lease under your current mortgage rather than change to a BTL mortgage.

silvercar

Lenders are turning their back on a lot of lending nowadays not just BTL.

You need to find out what your flat is currently worth. Try nethouseprices or houseprices.co.uk to find recent sale prices and search estate agent websits to see what the current market is like.

dopester

Because of the market conditions, with few people coming to view with an interest to buy, you are looking at keeping your flat and renting it out (moving it to a BTL mortgage).

And you would then buy a house, so as to be in a position where you are obligated to two properties.

Personally I think it's as clever as covering yourself in petrol and dancing around a bonfire.

Have you considered that we might be in the early stage of a full-on house price crash? If you can't sell your flat for the money you would like, what YOU think it's worth, how will you cope if a neighbour slashed £50K off theirs in desperation to sell. Can you cope with such falls? Possible heavy falls in real market value, which might take a decade to recover or more, and possible heavy falls on the new house you'd like to buy? A double-whammy to me.

Have you also considered higher rents might only be transitory during the early part of a crash, and have you examined how many people are doing exactly the same thing.. flooding market with new rentals? Do you think that such competition will continue to keep rents high? Have you examined the possibility we are headed in to a recession which might be bloody with jobs?

I'd sell my flat before buying a new house.

neilsc99

we did have an offer put in for 183K and we paid 152K 18 months ago, the offer fell through or did not even take off due to the couple not being 100 percent straight with the estate agents but still the estate agents finacial advisor did not do his job correct imo

silvercar

Post the rightmove link and get peoples opinion?

neilsc99

dopester wrote: »

Because of the market conditions, with few people coming to view with an interest to buy, you are looking at keeping your flat and renting it out (moving it to a BTL mortgage).

And you would then buy a house, so as to be in a position where you are obligated to two properties.

Personally I think it's as clever as covering yourself in petrol and dancing around a bonfire.

Have you considered that we might be in the early stage of a full-on house price crash? If you can't sell your flat for the money you would like, what YOU think it's worth, how will you cope if a neighbour slashed £50K off theirs in desperation to sell. Can you cope with such falls? Possible heavy falls in real market value, which might take a decade to recover or more, and possible heavy falls on the new house you'd like to buy? A double-whammy to me.

Have you also considered higher rents might only be transitory during the early part of a crash, and have you examined how many people are doing exactly the same thing.. flooding market with new rentals? Do you think that such competition will continue to keep rents high? Have you examined the possibility we are headed in to a recession which might be bloody with jobs?

I'd sell my flat before buying a new house.

of course we have not thought about the if and but's we are looking into the possibilities into doing this, who knows whats around the corner in the current housing market or life in fact, we just thought this maybe an option for us then we would have the best of both and have a property for fall back on if needed but i understand what you are saying.

Thanks for your comments and everyone else

neilsc99

http://www.rightmove.co.uk/viewdetails-21196091.rsp?pa_n=1&tr_t=buy
http://www.rightmove.co.uk/viewdetails-19649939.rsp?pa_n=1&tr_t=buy

we do know the bathroom and kitchen need updating but we thought we would get knocked down in price to reflect this, plus both estate agents said if we did this now it may not increase the price that much but it may get more to the asking price (pinch of salt springs to mind)