Do we have to get a buy-to-let mortgage if we want to rent out an existing property?

Posted on 1 September 2007

Katie

My partner and I live in a flat which he has a mortgage on. We are planning to buy a house and rent the London flat. Do we have to get a buy to let mortgage on the flat? I've heard that the interest rates are higher than standard mortgages.

To complicate matters, I am thinking of going part time in a month or so which would affect the amount a lender would give me, so can I take on my partner's mortgage on the current flat now or does he have to be named on it too? The plan was for him to then buy the second property so we have one in each of our names, is this the best solution? Any advice would be gratefully received.

Emma

 

In respect of letting the London flat, yes, you theoretically do have to have a BTL mortgage on this one.  This way, the mortgage is paid for by the rent, which frees up your earned incomes to buy a residential property elsewhere.  The interest rates for BTL are not particularly higher these days.  The arrangement fees are often a little higher, but you can arrange to add it to the loan if that makes life easier.  See my letter from 23rd July.

The main cost will be the Early Repayment Charges if you are still within the time that you can be penalised with them, I would consider these strongly before making any changes.

Acting now should help you in terms of your full time income, as a lender underwrites on your situation today.  However, this gives an unrealistic impression of your income ongoing, and they may ask you if you expect your income to change.  If you take on your partner's mortgage now, it counts as you buying it. You will be subject to all normal stamp duty and solicitor's costs and if he ever wants it back, the same will apply.  If you want you can be added to the mortgage, this can often count as buying half, and if this half is under the threshold of £125,000 you may be exempt from stamp duty.  I can't see that there is much benefit to doing either of these at the moment though.

You might as well just buy the new one in joint names, as soon as possible, and worry about adding you to the old one (if your partner is happy with that) when he is due to remortgage.

Katie

Category: Buy-to-let, Lower mortgage payments, Special circumstances

 

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