Any body with buy to let knowledge around please?(11 Posts)
My DGran passed away a few months ago, she left myself & DM a 50% share each of her house.
DM wants to sell, I would like to keep the property & rent it out with a view to keeping it for DD when she's older. So we have agreed that I will buy DM out.
I will need to mortgage the property to raise the funds but I've never had experience of buy to let so unsure how the process works. Does the lender just take into account the rental income & mortgage repayment or your own income etc?
I would like to do the mortgage as a single application however DH is the higher earner (by a long shot) so I don't know if we would need to do a joint application. I'm self employed so already do a tax return & keep accounts etc but DH is PAYE & would prefer not to complete a tax return. However I only work 12 hours a week so although I have a well paid job (per hour) I have a small income. We just changed (stupidly in hindsight) changed our mortgage lender for our own house & although we got a better rate we had to increase our term by 4 years because of the change in income (I was employed full time & DC hadn't arrived when we first took it out) so we've increased the direct debit to overpay each month & hopefully balance out in the end.
Am I likely to get a buy to let mortgage with a low income? We've had a letting agent view the property & based on the most common rates on comparison sites the rental income would be around 165% of the mortgage payment.
Sorry that was so long winded. If anybody can give me an idea before I arrange to see mortgage advisor I'd be grateful. TIA
I would move this into property or money section. If you buy a a second house I believe you have to pay stamp duty and if. BTL you will need to pay tax on the income. You will will need landlord insurance, safety checks, agency agency fees iffy let via agent, ongoing repairs, solicitor fees, land registry fees etc. Suggest do your research first!!
Many BTL mortgages are broker only. Why dont you phone one of the fee-free brokers like London and Country and ask what might be available for you.
FWIW I think your mum is right. BTL is hard work and experience helps. Plus the economic climate is wrong. If you dont know what you are doing I would sell.
Only a lender or a broker will be able to tell you if you’re able to raise the mortgage without involving your DH based on a proper look at your financial situation. From my experience, banks tends to ask that your personal income is 25k+ a year and then look at the affordability based on rent. However, I would also say that if you’ll effectively have a 50% deposit and the rent will be only 165% of your monthly mortgage payment, then that’s sounds like a very poor return on your investment. It might be worth comparing those returns to getting an alternative property with better yields or going down the route of other investment vehicles.
My understanding is that BTL mortgages are based on a % of the rental income. It was 125% but I think that's gone up now. But if you're looking at 165% it sounds like you'd be ok. They didn't use to take your own income into account, but that may have changed.
If I were you, I'd get a 2 year deal and review it at the end of that. You may find that you have a succession of tenants and it's really hard work. Or you may get a lovely one in who wants to stay for 10 years.
I let a property for a few years a while back. The stamp duty is higher on a second property, so beware of this. You need landlord's insurance, and the interest rate is often higher on buy to let properties for a mortgage. i would always advise using a good agent to manage the lettings process for you. YOu can either get them to find the tenants, (they do the reference checks, employment checks, inventory etc) and then you take over from there, or they will manage the whole thing, take the rental payments, do the check out when tenants leave etc. Some agencies are really not great and others do a good job, so shop around ,meet the lettings agent etc. They take a percentage of the rent, so look at how much they take and what they do for the money. Or you can let yourself, but there are so many risks and so much stress, it depends on whether you feel you can cope with that.
You need insurance for buildings, contents, home emergency, malicious damage, legal expenses, rent guarantee.
That will tell you some of the things that can go wrong. You need to be able to cope with voids, lack of rent before the insurance kicks in ( if it does) and to have spare cash to fix anything.
Thank you all for the advice, some good points to consider. My intention is to borrow slightly more than 50% so that we can do it up a bit, nothing major but it's very dated. Has a new bathroom, kitchen & double glazing though so that's a bonus. Rental properties are let agreed within days in my town so hopefully we won't have a problem letting it out & I would intend to use an agent & let them deal with everything. I'm just loathed to sell as I don't think you'd get a property like that again if that makes sense. Also by the time we sold & split it I wouldn't get enough to pay my own mortgage off (admittedly it would make a hefty dent in it though). It's very similar to my own house but we extended & did a lot of improvements to ours when we bought 7 years ago so I wouldn't want to move into it personally. I've rung & made an appointment with a mortgage advisor for next week so will see what they say. Would just be easier with me being self employed already for the tax etc to be paid by me as DH has a very complicated pay structure & it would be muggins here who ended up doing his return etc!!
Can't really advise on your mortgage, but you have an appt to sort that. But I will advise you to think carefully.
We let out a really nice two bed flat. We may as well burn ten pound notes in the garden, anything at all that goes wrong needs fixing immediately, like there and then. This is expensive, it's not like you can get Dave down the road or your dad or someone to nip round there a week next Tuesday and ' have a look' like you would in your own home. It's call out fees and proper tradesmen, and certificates and a million different insurances and safety checks.
uf your tenants move in and stoop paying rent can you cover mortgage legal fees etc for the year it will take you to get them evicted. Can you afford the let tings agent fees? On Repeat. They are sharks to both landlord and tenant. I would sell personally.
Also if someone moves in and trashes the place wouldn't it be upsetting for you as it was your grandmothers home? It's a thought, it would me.
Tbh, if the property in question is similar to the one you live in (less the extension and spec), then you could make a killing by selling your own place and refurbing the inherited house to then go and live in it. By selling your family home, you’d release a lot of equity without paying any tax. You could spend that money on doing up the other property and then invest the rest.
I changed my mortgage to a BTL when I refinanced so my partner and I could free up money from my home to put a deposit on our joint house we now live in. From memory the amount loaned was based on the value of the house not how much the rent is. Because if it goes tits up the bank wants to know they will have a decent asset to sell. It does get you down sometimes; whilst it's a good regular income if you have good tenants (and I'm lucky that I've always had good payers) like someone else said the slightest thing that goes wrong (that you'd just live with if it were your own house) and they are on your case. So far this year I've had a boiler at 3k and various other smaller repairs costing out at another £500 or so which I've had to pay out of my personal savings. Plus insurance every month. Go through a tenant finding service (they will do all financial checks to ensure the tenants can afford it) then manage it yourself if you are local and able to go over at the drop of a hat when something goes wrong. And don't let anyone rent who you get a bad feeling from so always meet them first.
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