Our property investment expert is Steve Oljnik, head of sales at Mortgages for Business.
Q I have recently purchased a house with my partner to do up and sell on. However, we are considering letting the property as it seems like a more financially sensible move in this climate. What is the difference between the buy-to-let scheme and ‘consent-to-let’?
AConsent-to-let occurs where the lender on a residential homeowner mortgage agrees to allow the borrower to let out the property without having to change mortgage. Buy-to-let is a mortgage specifically for the purpose of buying a property to rent out. It sounds like you have a normal homeowner mortgage. If your lender will not allow you to let the property you will have to refinance onto a buy-to-let mortgage. Never let your home without consent from the lender as you will be in breach of your mortgage contract which could be viewed as fraud. Do be aware that most lenders do not allow you to refinance within six months of purchase, so you may want to talk to a broker that has access to the specialist buy-to-let lenders.
QI have a reasonable income and believe I have saved enough for around a 25 per cent deposit on my own. Is this enough to get a decent buy-to-let mortgage or do I need to keep saving for a higher deposit?
AA 25 per cent deposit is sufficient to get a buy-to-let mortgage although you will get a better rate if you can put in more money. You do not say whether you are an existing homeowner. If you are not, you will need to have an income of at least £25,000 to qualify for a buy-to-let mortgage from most mainstream lenders as well as a good credit rating.
QIs buy-to-let something that is expected to grow into the future, and what is the outcome for those who cannot resell?
APredictions for the buy-to-let sector are currently strong as demand for rental property continues to outstrip supply but it is important to choose the property and location wisely. Should a landlord be unable to resell an investment property, he may have to continue to rent it out to cover the mortgage payments. As with a homeowner mortgage, a rental property may be repossessed if you do not keep up repayments on the mortgage.
QMy wife and I already have a mortgage, which we expect to have paid off in two years. Are we eligible for a buy-to-let mortgage now, or do we have to wait until our current property is paid off?
AYou can have a buy-to-let mortgage at the same time as having a homeowner mortgage. Many investors and landlords have lots of mortgages. You will need to have a deposit of around 25 per cent or more to get a better rate. If you have equity in your home you could raise the deposit against the property. You will need a clean credit rating too. Some lenders will also require you to have an income of at least £25,000 per annum. If you are new to buy-to-let, it is important to do your homework. Do lots of research on the internet. Talk to estate and letting agents about which properties are popular near to your home (most landlords live near to their investments). Talk to other landlords about their experiences. Join a trade body such as the National Landlord’s Association. And definitely talk to a specialist buy-to-let broker about what kind of funding you can expect to obtain for your circumstances. Buy-to-let is not a get rich quick scheme; it is a medium to long term investment, so do think things through carefully before making any decisions. Good luck.
QIs there one buy-to-let mortgage that is best for everyone?
ANo. There are currently around 450 buy-to-let mortgage products on the market. Which one works for you will very much depend on your individual circumstances, your credit rating, the type of tenant and the property you are looking to buy. A buy-to-let broker can save you time and money trawling through the market to find the product that suits you best.
QWe are thinking of investing in a four bedroom property for our twins to live in while they are at university. The other two rooms would be let to fellow students. Would this be classed as an HMO (Houses in Multiple Occupation) even though our sons would be living there and we are buying it specifically for their use?
AYou would have to ask the local authority whether they would class the property as an HMO because all authorities have slightly different rules. More importantly, letting the property to your children would be classed as a regulated buy to let. There are only a handful of lenders operating in this niche and to gain access to them you will need to speak to a specialist broker who is authorised to transact regulated business. wm
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