Buy to let - renting out on normal mortgage

[KacperJed]

I've been looking into buy to let investments. If you take out a mortgage on a flat or house in the UK with a small deposit, live in it for a few years, can you then decide to rent it out and move elsewhere without changing the mortgage agreement?

Does anyone know if the bank would want to change the terms and would demand a higher deposit? (Since a buy-to-let mortgage usually has a ~50% deposit). It's also worth noting that I currently have no other mortgages.

Any advice or insight is hugely appreciated!

 

[Newchodge]

You must inform the mortgage suppler, under the terms of your mortgage. They will put the interest rate up. Or refuse permission.

 

[DontAsk]

I've been looking into buy to let investments. If you take out a mortgage on a flat or house in the UK with a small deposit, live in it for a few years, can you then decide to rent it out and move elsewhere without changing the mortgage agreement?

No. Banks are cracking down in this kind of thing according to an article I saw the other day.

 

[Dolphin-Design]

I have just done this with Natwest. It was a 5 year fixed rate until 2018 and all they asked for was £100 to change the terms of the mortgage. no interest rate increase.

As far as the buying of the second house bit just beware of the latest changes to stamp duty - you pay much more on a second property.

 

[NewGardenStyle]

Entirely dependent on who your mortgage lender is and what their policies / T&C's are. Which of course are subject to change at anytime, eg the crackdown mentioned above.

I too have done this for a simple administration fee and no increases in interest / payments. Though if I were to remortgage it would have to be to a BTL mortgage if the property is still let out.

 

[Mr D]

The lender can refuse to allow it under current mortgage. Have seen where an old lady had to remortgage on BTL in order for it to go ahead.

 

[KacperJed]

You must inform the mortgage suppler, under the terms of your mortgage. They will put the interest rate up. Or refuse permission.

No. Banks are cracking down in this kind of thing according to an article I saw the other day.

I have just done this with Natwest. It was a 5 year fixed rate until 2018 and all they asked for was £100 to change the terms of the mortgage. no interest rate increase.

As far as the buying of the second house bit just beware of the latest changes to stamp duty - you pay much more on a second property.

Entirely dependent on who your mortgage lender is and what their policies / T&C's are. Which of course are subject to change at anytime, eg the crackdown mentioned above.

I too have done this for a simple administration fee and no increases in interest / payments. Though if I were to remortgage it would have to be to a BTL mortgage if the property is still let out.

The lender can refuse to allow it under current mortgage. Have seen where an old lady had to remortgage on BTL in order for it to go ahead.

Thank you for all of the advice. The actual intention isn't to bypass the system, but rather that after a few years of owning my own property, I believe I'll be able to afford another and I'll want to rent out one of the properties that I initially took out onto a mortgage intended for myself.

Since the conditions vary, I will probably shop around for a mortgage advisor in order to review terms offered by available banks.

Once again, thank you for all your advice!

 

[Alan]

With interest rates poised to go up, property market pretty high and maybe about to adjust downwards, and Labour waiting in the wings ready to pounce on evil landlords and fix rents in a 1970's style that made private landlords in the 70's dump portfolios as fast as they could, is it a good time to consider BTL.

 

[Root 66 Woodshop]

I'd definitely wait to see what happens... extremely nasty what is potentially going to happen to Private Landlords...

If anything consider joining somewhere like National Landlords Association (when you decide upon what you're doing) loads of help from those guys, an excellent tool for you with the advice they can give to you.

 

[garyk]

Yes you need a let to buy mortgage not BTL and this is perfectly acceptable.

With interest rates poised to go up

I thought BoE's Carney said only yesterday that they wouldn't?

is it a good time to consider BTL.

There's never a *good* time to undertake any investment that carries some risk, you just have to weigh it up and decide accordingly. But yes the whole evil landlords thing is an issue, regardless if Labour have their way or not, the Tories have been introducing schemes that hit private landlords.

 

[KacperJed]

I spoke with a bank manager at HSBC today. He said that as long as there's some sort of appropriate gap (eg. 3 or 4 years rather than 1 or 2 months), then it would only result in change of terms which may result in some administration charges and a possible change in interest, but no fines or roadblocks (based on current terms).

 

[Mr D]

Just remember the bank can choose to change terms. As can government.

 

[Alan]

I thought BoE's Carney said only yesterday that they wouldn't?

And Haldane suggests rates should rise soon ...

But yes the whole evil landlords thing is an issue, regardless if Labour have their way or not, the Tories have been introducing schemes that hit private landlords.

Unfortunately political interventions into markets often have undesirable effects. The way I see it is many nice middle class baby boomers have invested in property as part of their pension and are renting out properties to people that would be in social housing ( if there were any available ).

A sudden change in legislation will make these nice middle class landlords go - s*d that I'll get my cash out now. The councils will be inundated with homeless evicted tenants with no where to put them. Prices of small flats and houses will crash a bit, and these will be grabbed by the truly evil landlords that don't play by the rules.

 

[Mr D]

The recent change in taxation has already affected landlords.
Government does stuff, so people change how they make money, so government notices its income isn't what it could be and alters things so as to chase the money, causing people to change...

 

[Newchodge]

And Haldane suggests rates should rise soon ...



Unfortunately political interventions into markets often have undesirable effects. The way I see it is many nice middle class baby boomers have invested in property as part of their pension and are renting out properties to people that would be in social housing ( if there were any available ).

A sudden change in legislation will make these nice middle class landlords go - s*d that I'll get my cash out now. The councils will be inundated with homeless evicted tenants with no where to put them. Prices of small flats and houses will crash a bit, and these will be grabbed by the truly evil landlords that don't play by the rules.

A landlord getting their cash out does not affect the amount of housing available. A house (except in parts of London) only has value as a home. If landlords take their cash out, they have to sell the house. Either someone else buys it and lives in it (freeing up another property for someone to live in) or they buy it to let it out, the property is still available for occupation.

I personally see no difference between those nice middle class landlords and the truly evil landlords. They all expect to make a profit from the need of people to have somewhere to live.

 

[Mr D]

Yes, and without those landlords there would be plenty unable to live in that area.

Ever thought that most businesses are set up to take advantage of what people want?
If I sell you some food am I taking advantage of the fact you need food? Or are you taking advantage of the fact that I have purchased in bulk and taken risks so you do not have to?

My brother is currently renting an apartment in the middle east - he cannot afford the around £200k to buy the property even if they let him, nor does he want to own property in an area while only on a 2 year contract. He takes advantage of the fact the landlord needs to rent out the property, he gets a place to live that is much cheaper than buying. Then next year he hands the keys back, gets deposit back and moves elsewhere, a few thousand miles away. To rent again...

People have needs and wants, businesses (including landlords) want to meet those needs and wants.
In return for a medium of exchange.
For whatever reason people accept a common currency as a medium of exchange. Often each getting something out of the transaction.

 

[garyk]

Unfortunately political interventions into markets often have undesirable effects. The way I see it is many nice middle class baby boomers have invested in property as part of their pension and are renting out properties to people that would be in social housing ( if there were any available ).

Bang on, for the wife and I BTLs *are* our pension. Although wouldn't call myself middle class, just worked hard and saved and ploughed money into property.

The recent change in taxation has already affected landlords.
Government does stuff, so people change how they make money, so government notices its income isn't what it could be and alters things so as to chase the money, causing people to change...

It has indeed. Trouble is the government is short sighted. With the introduction of stamp duty on buy to let properties many prospective landlords have just gone stuff that and not bought any!

Likewise when they decided that all contractors working in the public sector would now automatically fall within IR35 what happened? Mass exodus of contractors, we are talking tens of thousands of skilled resource.

 

[wevet]

It does not matter how long you have had a standard residential mortgage you will almost certainly be in breach of your contract if you let it out. I have not ever understood why they have this issue other than if they repossess there is a third party occupier and it maybe difficult to get them out.