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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
Can I rent out a rental property on a residential mortgage for a year?
I recently bought a house which I had hoped to renovate and flip but the work is taking longer than expected due to supply problems with materials. To make matters worse, my numbers are out because supply costs have risen so much.
In addition, it seems house prices are looking likely to stop rising at a such a high rate and I feel like by the time the house is ready to flip, and taking into account the high and unforeseen costs, I’ll be making a very small profit
Therefore, I am considering letting it out. I purchased it with a two-year residential mortgage with a fixed rate. It’s due to expire in May 2024. Can I let it out on this mortgage or will I need to switch?
Answer
You’re right, it’s such a difficult time with costs spiralling – many developers are in a similar position. I would advise you to speak to your current lender and ask for their consent to rent the property out.
Most lenders are pretty good about this and will allow you to rent the property for a period of time, without changing your interest rate.
Failing this, your next option is to consider moving the mortgage onto a buy-to-let. If this is the route you end up taking, I would encourage you to speak to a broker, as they will be able to find the most cost-effective option that blends into your plans for the property going forwards.
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Question
What are the benefits of limited company structure for my buy-to-lets?
I own three buy-to-let properties across the UK which I purchased over the last 20 years. I am in my 40s, married, have two kids and own my own property too. I was chatting to one of the mums at the school recently who is also a landlord and she told me she had recently opened a limited company to run her lets and it had been very beneficial.
I felt it a bit rude quizzing her too much on this but she seemed very enthusiastic. I wondered whether your expert could help me find out more about why it’s a good idea and if I would be eligible.
Answer
I would absolutely encourage you to speak to a tax adviser who will be able to explain the pros and cons, and advise you on the most appropriate structure for you.
To give you a brief overview of why a Limited Company structure may work better for you, you will have seen your tax bill increase over the last few years, because the way landlord’s rental income is taxed has changed under Section 24.
Properties held in a Limited Company are taxed differently – some may say it is akin to how privately owned property rent was taxed before section 24. This means it can make more sense from a tax perspective to use a Limited Company as the ownership structure for your buy to lets.
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Question
How long does it take to purchase a buy-to-let?
I would like to purchase my first buy-to-let property but I’m up against a deadline so I am keen to establish what the time scales are, generally, for the whole process.
The reason I ask is, I am due to move to Switzerland in March for work and will remain there for at least two years, possibly three. I want to buy a house which I will rent whilst in Switzerland but which I can live in after my work is complete.
Do buy-to-let applications take a similar time to residential or should I prepare for a different process? Will I need to be in the UK to manage this process?
Answer
I would say that on the whole, the application times are similar, but these can range from a few days to a few months.
My advice would be to do this as soon as possible, so you have the maximum opportunity to get up straight before you go.
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Question
Can I get a buy-to-let mortgage on a holiday-let flat?
I’m about to dive in the deep end and buy a holiday let property in Cornwall. The home in question is already in good condition and has been beautifully renovated. It’s by the sea and is just wonderful.
Problem is, I am new to letting properties and I don’t know what type of mortgage to apply for. I plan to live in the property during off-peak times and rent it out on Airbnb for the summer (May to September) and school holidays such as Christmas, October half-term and Easter. What mortgage will I need?
Answer
That sounds wonderful – good for you! As you plan to spend some of your time living there, you really need a residential mortgage where your lender grants permission for you to let out the property periodically, using sites such as Airbnb.
Some lenders will be more than okay with this, and others will not, so you would be best to speak to a whole-of-market mortgage broker who will be able to advise you of all the options available to you. I wish you the best of luck!
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