Buy to Let v First Time Buyer Mortgage

Discussion in 'Finance, Property, Law' started by Jimima_Shark, Oct 8, 2007.

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  1. Does anyone have any top tips for purchasing a flat with a FTB mortgage and then at some point changing it to a Letting Mortgage and make it cost effective?

  2. I think the Buy to Let bubble is bursting. Of course if you happen to be lucky enough to own a property in London or in a University town it might not be so bad, but I have seen lots of former Buy To Let properties coming on the market as the mortgage rates increased and people arent renting properties with too high rents

    But Of course I could be wrong. It has been known. (that was my get out of jail clause incase you took me at your word and lost thousands of pounds based on my advice, but of course if you took advise from this site, people might argue you got exactly what you paid for. Buy Cheap, Get Cheap) :wink:
  3. Would suggest you talk to an IFA about it or Mortgage Advisor as not sure what the implications could be if half way through your mortgage period you wanted to swop from buy to live to a buy to let.

    Go for short term fixed FTB then convert when its due for renewal if you can
  4. that's not the shared opinion of moneyweek or the sunday times finance section, although opinions are firmly divided.

    One of the problems of BTL recently has been the availibility of cheap money which has encouraged amateur landlords in, who have then overstreched themselves - there is also now a glut of the wrong sorts of property, ie, city centre 2 bed flats.

    additionally, some areas are doing very well, others are a total disaster, eg, the swanky new luxury flats in cardiff bay...repossessions there are at a record high as people overstretched themselves and there was too much supply.

    If you're serving you can't go wrong with BTL as you'll always have a roof provided by the queen.

    My advice, don't be a property snob, look at 'rougher areas', you'll always have a healthy demand. Be aware of student accon, its heavily regulated and only occupied 3/4 of the year although can provide good yields (eg annual rental income/purchase price * 100, you should aim for min of 6%)

    Secondly, go for a FTB mortgage, you'll get a better deal, Lloyds / C&G are very good and understand the nuances of service personnel. (Avoid Portman, they will not alllow you to convert you mortgage into a BTL - this was covered in an article in the sunday times about 3 weeks ago.)
  5. Thanks goon_bde,

    I'm assuming that the two companies you mention there, Lloyds and C&G, do not charge extra/change your mortgage rate once you start letting out the property?


  6. If you just want to let for a year or so whilst overseas or whatever there will be no real need to change to a Buy to Let scheme as the conditions you let out your family home under are different to those you let out commercially. Many lenders used to allow letting for a few years without any change in terms or interest, others wanted a small uplift in interest to cover a percieved higher risk.

    If you are planning to live in the place for a bit you certainly don't want to start out on a buy to let.
  7. Jimima

    we had a BTL property for about 6 years until about a year ago. I personally am pleased we managed to sell it as BTL here in Birmingham are suddenly very hard to let.

    Theproperty was a 2 bed flat in the heart of Birmingham and had always been rented by yuppie types, or whatever they call them now. It is this market that is now looking for houses it seems

  8. The Normal fee to transfer the mortgage status is around £100 to £150 pounds.

    The good thing about using a first time buyer mortgage is the lower or discounted interest options.

    The key sum you have to work out in order to make it profitable is rent versus mortgage payments; in most areas you can only achieve this with an interest only mortgage option. Each individual and their goals are different and so if you don’t mind topping up your rental income every month in order to fulfil the repayment mortgage option, then do that, the benefit being in 25 years you own a house at what is ultimately a discounted rate (because someone else has been paying the interest)

    Normally for a “buy to let” mortgage the provider will only lend you a convoluted multiple of your rental income (rather than a multiple of your household income as per any normal user mortgage).
  9. The real problem is as ever punters were being conned into buying properties to let when the market was not in their favour. Buy at the proper price and with a sensible business plan and it is as good a money spinner as it always was. Too many of the buy to let horror stories turn out to be people who bought property at a premium on the promise of high rentals and planned to get 100% occupancy. The trouble is that the best tenants are relatively short term and take time to find so you have to allow for that in the plan. Remeber some one who wants to stay for ever will not be easy to get rent rises out of, will know all the ways to stop you getting cash and will be bl**dy difficult to get out when you want to sell resulting in lost cash for you. The best tennants are those either on company secondments, or homecoming expats renting till they can find something to buy
  10. I took out a first time buyer mortgage with Nationwide and stated on the application form that there was a possibility of wanting to let out the property in the future due to postings etc. 6 months after taking out the mortgage I rang the customer services team who completed a form over the telephone and a week later I received written consent to let with no change to my current interest rate or conditions.

  11. Why on earth would you aim for 6% yield on a BTL when you can get >6.7% with a risk-free building society (Northern Rock excepted, perhaps....)? The chances of capital growth are now slim so your capital is at risk. And gearing works on the way down just as well as it works on the way up!! :twisted:

    There was a programme earlier in the week that highlighted a lot of fraud in the mortage market, and those frauds are being exposed by the downturn.

    This is not the time to be exposing yourself to property, IMHO, unless you are buying to live in the house!

  12. The real problem with buy to let is not the concept rather the application. Too many people have either been conned or have conned themselves into buying the wrong properties at the wrong prices in the wrong areas, result lost cash. Buy to let has been a good business model for many years and still is if you work it out properly, remember property treated as a long term investment has always been good, as has operating in the rental market if you do your sums properly. Remember the buy to let that is giving you 6% today is likely to still be giving you 6% in a few years time when retail interest rates are onkly giving you 4% and in 10 years capital growth may well equall income over that period. As many people are finding out trying to make money short term in property is a high risk business, but long term the risk is far lower
  13. Jimima

    I can strongly recommend RBS

    Bought my flat 2 years ago on 5 year fixed.

    Let it 6 months ago and they made me no charges whatsoever
  14. Lloyds TSB and Cheltenham & Gloucester are one and the same so I don't think there should be much difference between the twos offers, as Barclays and Woolwich are one and the same.