Buying a BTL with a residential mortgage

by Readers Question

8:48 AM, 13th September 2013
About 7 years ago

Buying a BTL with a residential mortgage

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Buying a BTL with a residential mortgage

I am 24 years old and have owned my own home for a little over a year now. This house is on a repayment mortgage.

I have the opportunity to purchase a second house from my father in law which already has a tenant in.

My plan was to borrow approx 30k on my current mortgage for ‘”home improvements” and then use this as the deposit on this second home.

After phoning many banks they want a 70% LTV. The house I wish to buy is approx 200k.

This therefore means I can’t get a buy to let mortgage

Am I breaking the law by trying to obtain an ordinary repayment mortgage and then letting this out to the existing tenant as I see this as my only option ?

My plan long term is to rent the house on a repayment mortgage and then the rent would cover my monthly cost. if it fell short I would simply top it up to cover my fees.

I would have the correct buy to let insurance policies but would the mortgage lender be able to find out I am renting the property out?

Any help would be greatly appreciated with someone who has been in this position and now overcome it!

Regards

Dan Buying a BTL with a residential mortgage


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Comments

Mark Alexander

8:54 AM, 13th September 2013
About 7 years ago

Hi Dan

Don't do it!

It's bad enough deciding to rent out your home without consent from your mortgage lender - see >>> http://www.property118.com/mortgage-express-are-forcing-me-to-sell-my-home-help/37778/

However, what your are considering is to obtain monies by deception, i.e. mortgage fraud.

Like any crime, there is a risk of being detected, prosecuted and imprisoned. Don't take the chance. Save up or wait until your home and your income appreciates in value to such a point that you are able to raise the necessary deposit.

In the meantime, have you considered asking your parents to agree a deferred consideration? In other words, give them the proceeds of the 70% mortgage plus the £30,000 you have with an agreement that you will pay off the balance in say 10 years time?
.

John Constant

17:34 PM, 14th September 2013
About 7 years ago

Dan, first of all, let me say that I am a mortgage broker and the company that I work for has strong links with Property118.

Mark is absolutely right when he says don't do it! especially when there is a straight forward (and legal!) way in which this can be achieved.

I don't know the level of your current mortgage, but I am working on the assumption that you have enough equity to take £30,000 out. Be up front with your current lender. Tell them exactly what you want the money for. You may be surprised by the reaction that you get.

The property that you want to buy is valued at £200,000 and you will have £30,000 as a deposit. This is therefore a 15% deposit. There is a lender (Kent Reliance) who would accept a 15% deposit for a BTL property. The rate is 4.89% for a Discounted rate or 4.99% for a 2 year fixed rate. You would need to achieve a rental figure of £886 per month in order to satisfy the lender, but payments would be £692.75pm on the Discounted rate and £706.92 on the fixed rate.

If you would like to discuss this further, call Mark with your details, and he will forward them to me.

Dan Ginesi

21:18 PM, 14th September 2013
About 7 years ago

Reply to the comment left by "John Constant" at "14/09/2013 - 17:34":

Good evening
Many thanks for taking your time to reply.

Asking my parents is a no no as I wish to go and do this on my own, just like I have with my own mortgage. They have offered help but I feel as I will always owe them back.

It's more personal achievement as well if I can go on to purchase a second house.

Fingers crossed with your help and advice it may no longer be a dream, but maybe a reality.

I have positive equity in my home. I have a meeting with the bank on Monday just to clarify what I can and can't take out of my home.

I was a little anxious as to what to tell the bank as in the current climate I thought they may see this as more of a risk . If you feel I should tell the truth then that is the route I shall go down.

Once I see the bank on Monday and clarify exactly what I need to know I shall ask mark to pass my details on and maybe progress a little further.

Many thanks for taking your time to help.

I've never been in this position before and I didn't want to go into it blind. There's obviously right ways and wrong ways to do things. With your advice hopefully I can make the right decision.

Regards
Dan


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