Buy to let mortgages

[noddyholder]

I know v little about these and just want to ask someone who does know. A close friend of mine took one out about 4 years ago on a flat in London. She has another house elsewhere and she got the BTL to actually live in M to Fri for work and has never let it out. So in effect she lives there. The mortgage was calculated on potential rental as she couldn't have got a residential mortgage as she has one to her max on her other house. Is this allowed can you get one of these mortgages and then live in it? I think its a dangerous strategy but she says as long as she makes the payments it doesn't matter!

please

I'm not sure if it's allowed but don't see why she can't essentially 'pay the rent' rather than a third party doing so. We've got a BTL mortgage on a flat we used to live in and now rent out and I can't see how the mortgage company would know, or frankly care, who was living in it as long as the payments are made.

I can't imagine it's the most cost effective way of getting a mortgage though as the arragement fees are shocking, you're generally paying interest only and you need a pretty hefty deposit.

Not an expert, but I would have thought that the mortgage co is unlikely to find out so she'll be ok unless something goes wrong and she comes to their attention. If they find out she's living in it they might ask for the mortgage to be redeemed and at the moment it would be v difficult to get another one without a hefty deposit.

So I think you're right, it's a strategy with low, but potentially disastrous, risks. Really depends on the lender's policy.
Hopefully a mortgage expert will be along in a minute tho

Thanks I am concerned as they are planning to sell the other house and buy somewhere else and I worry they will be 'caught' and they are not young!

Will they need another mortgage for the new property? If so they'll have to declare the BTL mortgage, and if they give their address as the 'BTL' one they'll be rumbled.

The house they are selling is mortgaged 50/50. They want to port the mortgage to new place they have that house as main residence although rarely there comp to BTL place. One of them is retired and the other has 6 years to retirement so my worry is they won't be able to get another big mortgage. Salary of the one working not huge. I don't think they had to declare the BTL when they bought this one

Mortgage co will likely do a credit check, I would have thought BTL mortgage would show up? Also they will be asked about outgoings and if they don't declare the BTL mortgage that could cause probs. But again, depends on the lender.

Does sound a bit risky, although I am risk averse person when it comes to finance!

Thanks I thought that. I am just concerned firstly they will be refused due to age etc and also that they will be in trouble as they have always lived in it. They wanted to buy a 2nd place through the normal channels but couldn't as they didn't earn enough. They did it as BTL as they could raise the capital based on rental figures.

If the BTL shows up which it will and they say the outgoing £ is covered by the rental could they ask to see proof eg tenancy agreement. This is what I warned them about but they seemed to think I was wrong. I think they asked me as I buy and sell but know nothing much about BTL

Don't know what they'll ask for, but everything is so much tighter these days I would think they'll want to check everything. Just a thought, but why don't they have a word with an independent broker and see what they advise?

Fresh thanks.I doubt they will listen. I told them they check things more now than even 2 or 3 years ago but they seem unbothered. The BTL is about to come to the end of the 2 yrs iirc so that may change things as I heard you need v high LTV for IO. I am hoping they can still buy somewhere but am worried about the debt they are taking on at their ages. One retired teh other 5/6 yrs to retire.

Can only wish them good luck!

Technically speaking I think it's fraud - basically any lie to a finance company is fraud.

If they need another mortgage, then a credit check will turn up the other BTL and then they will be asked to provide the lease etc to ensure affordability on the new mortgage.

Also, lending into retirement is highly regulated, so they may have further issues, unless they lie on that application and say it is also BTL.

Mszoid I thought that too but they bought the property they are selling while they had the BTL and no one said anything?????I am worried for them as things have tightened and I think they don't know

Rules & regs have tightened up a lot due to the financial issues we're having, so if they bought before 2009 they won't have had so many hoops to get through as they might now.

Having said that, it is often down to the lender, some do not ask for BTL agreements, some do and ask for bank statements showing the rental coming in as well.

How will they show affordability to pay back a mortgage if one is retired and the other retiring soon? If taking out a BTL the lender may waive proof of income as the rental should cover the mortgage, but they willl need to prove affordability for a residential mortgage.

IO is also being tightened up. They would need to show a means of paying back the capital after the IO mortgage finishes, the lenders are now not so keen if you say that you will sell the house.

I hope you can talk some sense into them, but if not, try and get them to go through a broker as a decent one will tell them all this.