[col type=”one-third”]
Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
[/col]
[col type=”two-third last”]
Question
Switching from a residential to buy-to-let
My partner and I are buying a house together and I am looking at letting out my current property, a two-bedroom flat.
As this will be a long-term let, which I am hoping to help fund my pension, I am remortgaging to a buy-to-let mortgage. Do I need to inform the freeholder of my property about this change of mortgage? Is there anything else I need to consider when changing from a residential to buy-to-let mortgage?
Answer
Congratulations – it sounds like you have some exciting times ahead! You don’t need to inform the freeholder in terms of the change of mortgage per se, but you should inform them that you plan to rent out the property and get their consent.
Another thing you will need to consider when switching across to a buy-to-let mortgage, is your repayment strategy (i.e. will you use repayment or interest-only) and the type of interest rate you wish to take.
Please also keep in mind that your new purchase will incur the 3% stamp duty surcharge and I would also suggest you get some advice on how the rental income will be taxed so you can you plan your cashflow.
[hr style=”single”]
Question
Holiday let – can I get a buy-to-let mortgage?
What is the best way of funding a holiday let property? I am considering purchasing a home in the Cotswolds which my family and I will use occasionally but which I will mainly be letting out to holidaymakers.
Do people normally get residential or buy-to-let mortgages for this purpose? If the latter, are there any tax implications – aside from the 3% stamp duty surcharge, of course?
Answer
The answer to this will really depend on how much you plan to let the property for. Some residential mortgages on second homes will allow you to rent the property out for a few weeks a year.
But, if you plan to use the property as a holiday let for most weeks, then you would need a holiday let mortgage (or a buy-to-let mortgage which allows holiday letting). However, be careful as some of these lenders won’t permit you to stay there at all – a good broker will be able to put you onto the right lender depending on your plans.
The type of mortgage you take will not have any impact on how you are taxed on the income you receive from this property going forwards.
[hr style=”single”]
Question
Getting the best mortgage rate – what can I do?
I hear buy-to-let interest rates have increased, something which I am a bit concerned about as I am about to buy a property to rent out.
Do you have any tips for things I can do to enable me to get the best rate? For your information, I am in my late 30s and already own a residential property with about 80% equity. I have about 20% to put down on a BTL.
Answer
Buy-to-let rates have moved around slightly from lender to lender (both up and down), but our quarterly indices showed that compared to the previous quarter, five-year fixed rate pricing is on average, the same.
In terms of what you can do to get the best rate, the lowest pricing comes when you put down a deposit of 40%, buy in your own name (rather than a limited company) and acquire a very standard property. However, you would need to balance this with your tax position. A limited company may be better for you from a tax perspective and although the interest rate would be a little more expensive, the net cashflow would be more favourable.
Plus, you currently do not have that level of deposit (perhaps you could raise some further funds against your own home) or be considering a less standard property type. I would suggest you speak to a broker who can show you in real terms, how your options would land looking at all of the above.
[hr style=”single”]
Question
Taking out a mortgage when pregnant
My husband and I have decided to enter the buy-to-let market. However, we have also recently found out I am pregnant. We are really happy about this news but obviously we are a little bit concerned about the risk it poses to our potential mortgage application.
The baby is due in December, but we are looking at properties now. As such it’s looking highly likely the application will go through whilst I am on maternity leave! How will this affect our application? Should we abandon it and wait until I return to work after maternity leave or will a lender write off this short-term salary reduction?
Answer
Congratulations!
Lenders are not able to discriminate against you if you are on maternity leave. What they will want is a letter from your employer confirming your return to work date, the terms you will be returning on, and then they will work on the basis set out.
I would also add that most buy-to-let mortgages are based on the rental income the property will achieve, rather than your affordability to cover this mortgage. With lenders generally saying they want the applicant’s income to be £25k, it may be that your husband has sufficient income to cover this figure alone.
[hr style=”single”]
[/col]
