New at this-Must I have a buy to let mortgage etc

[Sand]

Hi

I have recently inherited 50% of a property and will buy out the other 50% in which I will be letting out, this is all new to me so over the coming weeks I may need advice.

My first question is, do I have to have a buy to let mortgage to do this as the rates are not great for this type of mortgage.

Also should I get a agent to do this for me?, My main concern is if a tenant does not pay, therefore I beleive this would be covered by special insurance, with regards to what an agent can do, I feel I could also do this, i.e advertise, get references, draw up an agreement, collect monies, or am I being naive about all of this.

Any advice very much appreciated

Thanks

[Melboy]

If you have a primary residence with a mortgage against it already then Yes you have to have a BTL mortgage for any further purchase of property for rental purposes. ( or cash!)

If you have a second property and you do not intend to live there as your primary residence but will rent it out and need to raise mortgage money against that property...then yes also.... you need a BTL mortgage.

No way around it.....many have tried and failed. Don't forget any Porkies told on application forms etc. will invalidate your insurance and in worse cases mortgage companies can and do FORCE you to sell for telling Porkies and you may well lose money on the forced sale.

Mel.

[Richlist]

No you don't have to have a buy to let mortgage. You can:-

1. Pay cash.

2. Remortgage your existing home & spend the money on buying the BTL.

3. You could take out a flexible mortgage on your existing home that would give you access to any equity in the property.

Here is my check list: Do come back if you have any further questions.......

1. Get References.....bank, employer and previous landlord.

2. Take out rent guarantee insurance.....it’s not expensive.

3. Get a home owning guarantor. Carry out reference checks on the guarantor. Give the guarantor a copy of the AST. Make sure the guarantor document is drawn up as a deed.

4. Don't let to people with pets or children......the risk of them giving you problems are big.

5. Don’t let to anyone under 18 (minors). Draw up your own limits….I prefer nobody under 25.

6. Don't let to smokers........you won't get rid of the smell.

7. Don’t do Company lets.

8. Don’t let to anyone on Housing Benefits.

8a. If you do choose to let to applicants on Housing Benefit CHECK that your mortgage & freeholder (if your property is leasehold) allows it.

9. Don't let to anyone who isn't working full time.

10. Inspect properties every 3 months.

11. Only let initially on a 6 month AST.....that way you can both part company after 6 months if you don't get on.

12. Use a reputable Lettings Agent OR one who has been recommended OR do it yourself (only if you know what to do).

13. Meet your tenants personally. Make sure you ask all the right questions and gauge whether they are right for you.

14. Protect the deposit in one of the official schemes.

14a. If you have a dispute with your tenant(s) over deductions from the deposit remember…..you can either go through the DPS adjudication process OR take the tenant to the Small Claims Court for recovery of your losses where you may have a better chance of success.

15. Issue a section 21 notice as soon as the deposit has been protected.

16. Make sure there is a detailed inventory & schedule of condition……signed by both parties.

17. Remember its a business....so avoid emotion & being overly sympathetic to your tenants.

18. Read as much as you can about renting & letting i.e. educate yourself.

19. Don’t let to anyone who doesn’t speak or understand English.

20. Don’t forget that you will need an Energy Performance Certificate (EPC)…….before you market the property.

21. Don’t forget to get an annual Gas Certificate.

22. You are responsible for ensuring anything electrical in the property is safe so consider getting the electrics checked professionally….and any appliances you provide.

23. Try to avoid having your property classified as an HMO……meeting regulations is expensive and time consuming.

24. Make sure all adults living at the property are on the AST & any other documents.

25. Minimize your income tax liability by claiming all the expenses you are entitled to…..most people don’t and therefore pay more tax than they should.

26. If one of the owners is a higher rate tax payer consider splitting the beneficial income other than 50:50 to take advantage of the lower tax payer rate.

27. Keep all capital expenditure receipts/ invoices to minimize CGT liability on disposal.

[Melboy]

With reference to your suggestion No. 2 Richlist I think you will find in today's mortgage money market (assuming there is equity in the property available) the mortgage company or Bank will want to know what the money is being used for and as the that money will be going through a solicitor handling the purchase then the mortgage company will want to know all of the facts and risks they are taking in lending money out for a BTL.

All the companies are tightening up on how the money is being used now which is why the housing market in most areas is dead as 1st time buyers can't get the funds without putting down a large deposit.

Mel.

[Grampa]

That maybe so with some companies. I have a reserve account mortgage and can write a chq's for up to 100k no questions asked. i have used it a number of times the last being to buy a lease on a flat. It wasn't questioned by my bank or the solicitors.

I think it just depends on the bank, type of account and standing with your bank.

[Richlist]

I have used option 3 on a few occasions in the past. My flexible mortgage (currently with just £5K owing ) has a £200K + drawdown facility.......all at 3.75%. No arrangement fees, no questions and no hassle. Vendor & vendors solicitor don't raise any issues because as far as they are concerned you are a cash buyer.

[Grampa]

I can beat that my rate is 1.45%

[Carryon Regardless]

I was lucky enough to refinance when the banks were competing like hell.

I've complete flexibility on mine (offset style) at 0.98%.

Till April this year I was paying £4.46pm for a £57,750 mortgage, now it's up to £111.59 pm what a bitch I can only get £386 in rent..

All this was when surveys and legals were free and surveyors didn't really survey.

Self cert made getting mortgages a breeze, and lets face it without low interest rates many, many more would have gone under by now.

I see banks are again starting to promote their mortgage products, a sign that their attitude is relaxing.

The interest rates aren't fantastic bearing in mind the base rate, otherwise not bad. The charges are what effectively boosts the rate and makes the deal more profitable for them.

They are also going to be cautious in their lending.

On saying that I'm aware of someone who, in partnership, without good secure foundation (either of them), are still able to raise mortgages for BTL buys.

The possibilities are there, just not cheap any more, so the purchase has to be attractive.

I wonder how many are going to struggle as the interest rates climb.

I would expect a base rate of 3.5 - 4% within 18 months, in fact I am surprised we have been so lucky for so long.

[Sand]

Thank you for all your replies, this has given me lots to think about, I am going to approach some mortgage lenders now and see what they have to offer, however on doing some research, there are a lot of restrictions nowadays on BTL, but in my favour I am only looking at a loan of 50%, and I also have 50% equity in my own property so hopefully the doors will open for me.