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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
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Question
Minimum deposit for buy-to-let
I have decided to invest an inheritance I received recently in the property market and would like to rent out a home to tenants.
I received £45k and wondered if this was enough for a deposit on a buy-to-let mortgage? I am looking at a terraced house in the £225k to £250k region. What is the minimum deposit required?
Answer
There are two things which factor into the amount of deposit you will need:
1. The maximum loan-to-value (LTV) on the mortgage product (some go as high as 80%, meaning you would need to put in 20%)
2. The rental income you will receive from the property
Lenders will want the rent to cover the mortgage interest costs at a surplus to cover unforeseen circumstances you may face such as rental void periods, repairs, and maintenance, plus tax you pay on your profits.
While the LTV element is pretty straightforward, the rental calculation is not. I would encourage you speak to a mortgage broker who will be able to do the maths on this with you, to illustrate how these costs will work out for your specific situation.
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Question
Can we live in our buy-to-let temporarily?
My husband and I have separated and whilst we wait for assets to be divided, he has decided to stay in our buy-to-let which our tenants are due to vacate in April.
Do we need to inform our lender and switch to a residential mortgage for the period he’s living there or can we continue with the buy-to-let mortgage? Thanks for your advice.
Answer
I am sorry to hear about your separation and hope you can find a conclusion quickly. I am afraid that the T&Cs of your buy to let mortgage preclude you from living in the property.
I would encourage you to call your lender as soon as possible and see if they can work with you on this as an exception but, if they cannot, then I would urge you to speak to a mortgage broker who will be able to help navigate you through this.
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Question
Unemployed: Am I eligible for buy-to-let?
I am currently unemployed as I have taken time out of work to care for my young children. My husband and I have over £100,000 in our ISA and we were thinking of transferring some or all of it into a buy-to-let property and getting a mortgage for the rest.
It would be registered in my name, for tax reasons. However, I don’t work, have never had a buy-to-let before and we are also paying off our current mortgage so would I be eligible for a buy-to-let mortgage?
Answer
Some lenders can exercise discretion in situations such as yours so I think you will have options available to you. However, another possibility is to purchase the property with your husband but set up the ownership (via your solicitor) on a ‘Tenants in Common’ basis.
By doing so, you can each have your set shareholding amount (although you remain jointly and severally liable for the mortgage), meaning that if you have a 99% share, you will get 99% of the rent. You will find this option is more favourable in terms of getting a mortgage.
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Question
How do I pay for EPC upgrades?
I own a buy-to-let outright. It’s valued at £370,000. I need to make some quite substantial upgrades in order for it to meet new Energy Performance Certificate (EPC) rules. There is also some major work to be done on the roof and I plan to do a complete refurb.
I have been quoted £80,000. To obtain the money for this I am considering either remortgaging my home (residential mortgage) or taking out a buy-to-let mortgage. Do you think either of these options will be viable?
Answer
This is a conundrum some 40% of landlords will be facing as the new EPC requirements draw closer. Both of those options are viable, in principle at least; however, I think what you really need to do is speak to a mortgage broker.
Your broker can perform a cost comparison on both of your options to find which is more favourable in terms of the mortgage costs and tax. They will also look into any issues you may face along the way with either properties or the numbers.
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