DP would like to pick your brains again please...

[CharminglyOdd]

...he is considering buying a house mostly outright in his name (all his money, we have no DCs and I have no money to contribute atm). Although we would live in it now it would probably be rented out later as we live in a student town where rental places are at a premium.

Lloyds have offered him a £100k mortgage on a £150k house (generally, he doesn't have a specific one in mind) but he has approx £130k in savings and would never take such a huge mortgage on a rental house. He would like to know which is the best mortgage company and if you guys have any advice please? I thought Nationwide is meant to be the best but really haven't a clue Any advice welcome!

[CharminglyOdd]

Oh and I should add it could also be a flat with the same outcome (living there now but probably renting within a couple of years). All properties are near the bottom of their value now as we live in a depressed area so not worried too much about losing value (especially compared to currency crashing, which would be worse). It's more a safe place to store the money and gain rent (worth more than the interest) until he feels like selling.

[lalalonglegs]

I'm not sure there is such thing as the "best" mortgage company any more than there is the "best" supermarket or car - it all depends on (a) what they can offer you (b) how you are treated by them when you are sorting out your mortgage applicaton (and that, like many companies, will depend a great deal on the person you end up dealing with).

Go for the best deal for your circumstances, perhaps take advice from a mortgage broker who will have ideas about which companies are quickest at processing paperwork etc. It is probably worth thinking about how long you intend to stay in the flat until you move on so that you can structure your mortgage offer around that - you don't want to be trapped in a 5-year residential mortgage deal if you will need to convert it to BTL after two years, for example.

[CharminglyOdd]

Thank you - I hadn't even thought about time before conversion. I will mention that.

[tricot39]

I bought my first place on a cheap 1 year fix and later swapped to nationwide with another fix. when i later switched to rent it out it didn't change the deal. they charged a fee to approve the letting - £100? They then lent to us again to buy our current house but took the original loan into account when they worked out affordability. so also check that buy having this property you could also borrow on another if you move on/rent out.

i would say that you need to be more careful than me about the finances if you have a definite plan to rent. both income and capital gains taxes, as well as making it worthwhile month to month. expenses did seem to mount up quite quickly from unexpected areas.

if rental is a key issue find out what rental you could achieve for your area. if the annual rent is less than 8% of the purchase price then it may not be worth it.... ie you may have to subsidise the property which would be a bitter pill if property prices fall further.

[CharminglyOdd]

Hmm, thank you. That's exactly the sort of information we need as I knew rental income would be taxed but I wasn't sure how much % we needed to have in mind. Currently the average rental income around for that property would be 11.7% of the asking price. There are also way more rooms than we need at present so we will take two lodgers through DP's contacts at the university and get their rooms ready first so we have income asap.

I'm getting excited but apparently a lot of people are interested in the house, so we'll see :)

[CharminglyOdd]

Sorry, not 11.7% of the asking price but 11.7% of the maximum we are willing to pay.

[mathanxiety]

Have you looked into the implications for you of living in a house where your name is not on the deeds? (Is this a DP or a DH?)

Is it joint income from the rental that is going to be taxed or just his? -- Are your taxes separate?

[tricot39]

you need to work out the % based on the total cost of buying - fees, stamp, etc.

[tricot39]

plus the cost of work you would do to make it lettable.

[financialwizard]

I would recommend seeing a good financial advisor in the first instance for all the above reasons. Plus letting a property is not all it is cracked up to be.

[CharminglyOdd]

Yes our taxes are separate. The implications for me are not as severe as they sound - my job would require us to move away in the medium-term (hence then renting it out) so then we would go back to splitting the costs together/having joint names. It's basically somewhere to keep DP's money as safe as possible as at the moment it is tied up in his home country in currency (Eurozone) and very vulnerable. We have looked at costs to make it rentable etc.

However... It's now not going ahead :( See my post here on my other thread as it's too long to type again. Thank you for your advice though :)