I am purchasing a BuytoLet with the intention of moving in later

by Readers Question

10:23 AM, 16th September 2013
About 7 years ago

I am purchasing a BuytoLet with the intention of moving in later

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I am purchasing a BuytoLet with the intention of moving in later

I have been offered the opportunity to purchase a property currently containing tenants who are looking to stay for another 12 months.

I would like to buy the property now and then move into it myself when the tenants leave. My dilemma is do I apply for a BuytoLet mortgage or a Residential mortgage for the initial purchase?

I don’t think I can get a Residential mortgage because there are tenants in it even though I will move in in 12 months time, but if I get a BuytoLet mortgage will I be allowed to move? Even if I am allowed BuytoLet interest rates are usually higher than Residential rates.

Any suggestions gratefully received.

Jregulated buytolet



Comments

Neil Patterson

10:44 AM, 16th September 2013
About 7 years ago

A residential mortgage will be tricky to find as you rightly guess. Technically it could be possible if you are able to get consent to let form day one, but in practice a lender is likely to think you are just trying to get a Buy to Let on residential rates via the "back door" and decline the loan.

A Buy to Let mortgage would fit the use of the property now, however if you have any intention to live in the property in the future it must be treated as a regulated loan application under the FCA.

What this means is the application process is the same as a residential mortgage with a full Fact Find, product search results, KFI and Suitability Letter, but the end mortgage is a Buy to Let. The only difference is that not many lenders will consider taking on a regulated Buy to Let, but BM solutions are one of the biggest in this market that will.

The downside of a regulated Buy to Let will be possibly the rate and maximum Loan to Value (probably 75%) and then when you move in they may let you live in the property for a while but will look for you to swap to a residential rate at some point (normally after a year). Therefore you won't want a product with a long Early Repayment Charge (ERC) period in case you have to move the mortgage.

I have asked Howard to look into any possible exceptions for me and hopefully he will be able to do a little research and post a response by tomorrow.

Vanessa Warwick

15:41 PM, 16th September 2013
About 7 years ago

Be warned! Lenders are very aware of people using BTL mortgages to get into a residential situation.

We have a long thread about it on Property Tribes

http://www.propertytribes.com/btl-mortgage-instead-of-residential-t-8322.html

In your case, your situation sounds legitimate, and therefore, you should approach this as a BTL purchase, then, when the time comes, speak to the lender in an open and transparent manner, and ask for their advice. People's circumstances ARE allowed to change.

It may be that you need to re-mortgage to a residential mortgage in 12 month's time.

Bear in mind also that most BTL lenders like "vacant possession", so you will need to go with a lender who allows tenants to remain in situ.

Mark Alexander

15:49 PM, 16th September 2013
About 7 years ago

My understanding of a regulated buy to let mortgage is that there is no requirement to refinance if, at a future date, you decide to live in the property. The important issue is full disclosure of intentions on day one. That said, it may well be worth looking into remortgaging when you do move in as a better deal may be available on residential mortgage terms. In your circumstances it is very important to seek professional advice from a fully qualified and insured whole of market mortgage adviser. This is the link to the member profile for Howard Rueben >>> http://www.property118.com/member/?id=314

DO NOT use a broker/packager in this instance unless they offer insured advice.

Stephen Pears - Mortgage Consultant HD Consultants

16:14 PM, 16th September 2013
About 7 years ago

The original poster doesn't provide enough information about his current circumstances.

There are a limited number of lenders who MAY allow a regulated residential mortgage in certain circumstances with the knowledge you will not be living in it for the first 12 months. The word MAY is highlighted for a reason

A couple of examples are Armed Forces personnel and people being contracted (away) with work for 12 months.

There must be a very plausible explanation for reason a residential mortgage product is requested and the lender will probably require evidence - tour of duty notice or employment contract using my examples.

The lender will also look at the profile of the applicant in more detail than a standard application

Puzzler

17:06 PM, 16th September 2013
About 7 years ago

If he plans to remortgage he should be aware of any tie-in period to early repayment charges.

Alexis TANO

18:40 PM, 16th September 2013
About 7 years ago

Reply to the comment left by "Puzzler " at "16/09/2013 - 17:06":

Thanks for your comments everybody. Here is some further info as SP suggests further clarity is needed.

I am currently in the armed forces and have housing provided by my employer.
The house I have been offered is currently owned by a friend and he has tenants in it that will be staying for approx 12 months more. I will be moving job location in 12 months (which ties in with when the tenants are leaving).

Although I genuinely want to buy the house to live in it when the tenants leave in 12 months, I would like to buy it now for two reasons: 1- to benefit from the rental income over the next 12 months, 2-to benefit from the increase in house prices over the next 12 months.

All facts will be presented transparently but I have struggled in the past with getting mortgage advisors to understand situations outside bog standard normal BTL or residential. I have checked affordability/eligibility with a couple of residential lenders and they are genuinely happy to lend on this property as a straight residential mortgage - my point is that this is not a back door to getting a loan we cannot afford.

Lynne Davis

19:12 PM, 16th September 2013
About 7 years ago

Found this on http://www.capitalfortune.com/hm-forces/armed-forces-mortgage:

"Armed Forces Mortgage - Armed forces mortgage refers to a mortgage with bespoke conditions based on the needs of those in the armed forces. An armed forces mortgage may provide the added flexibility required by those in the army, navy and RAF when posted abroad or at a significant distance from their residential property. In particular, armed forces mortgage packages may allow the property to be let out without requiring a buy-to-let package to be secured. This can enable those in the armed forces to secure a residential mortgage on a buy-to-let property if the intention is that this will be the long term primary residence."

This site might be helpful too: http://www.af-mortgageservices.co.uk/

(I have no affiliation with either of these; just thought they looked relevant to your situation. You can also Google"military mortgages" or "armed forces mortgages" for more.)

Mark Alexander

20:14 PM, 16th September 2013
About 7 years ago

Reply to the comment left by "Lynne Davis" at "16/09/2013 - 19:12":

Good post Lynn, very helpful.

Martin Cole

1:20 AM, 17th September 2013
About 7 years ago

Wow, the UK system of BTL v residential loans needs a major overhaul. I am Australian and have a couple rentals left and had other rentals and the system is so much easier and more transparent than this, that makes the discussion mute.
Ditto the rent rules are easier and more transparent making rental ownership for the common man simpler and more accessable, meaning more rentals available for the renter, much easier to remove someone, more investments around, tenants can stay in properties being sold if they want etc etc
Overhaul and transparency, rent rules, loans, mindset, good for all
No help to the discussion though sorry, just had to add it after reading this and other articles here for a while now...
Good luck all


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