Buy To Let - Filling a rent void
Discussion
Hola.
We are in the process of buying our second Buy To Let property. This will inevitably end up being our 'forever home' in a couple of years time when the children have moved out and our current house becomes too large. We are buying this one NOW as properties rarely come available in this hamlet (of about 20 homes)and will let it out between completion and us wanting to move in.
Here's the twist.
We need to move into it first - then rent it out for a few years - then move back in again when it's just my wife and I. The reasons are long winded, and I'm worried that by going into too much detail this post will become long and may discourage people from joining in.
I understand that it's a condition of mortgage that you don't live in your own rental property. When we come to move into it permanently we will, of course, remortgage onto a residential product. However, we need to use the address ourselves for 4 months of this year BEFORE LETTING.
In essence, what I'm asking is "what post completion checks do mortgage companies carry out"? We don't need to put ourselves on the voters roll at the new address, and will be receiving 90% of post etc to our existing property.
Can anyone advise.
Oooh - and if you want to give me a bashing on my moral compass that's fine.
We are in the process of buying our second Buy To Let property. This will inevitably end up being our 'forever home' in a couple of years time when the children have moved out and our current house becomes too large. We are buying this one NOW as properties rarely come available in this hamlet (of about 20 homes)and will let it out between completion and us wanting to move in.
Here's the twist.
We need to move into it first - then rent it out for a few years - then move back in again when it's just my wife and I. The reasons are long winded, and I'm worried that by going into too much detail this post will become long and may discourage people from joining in.
I understand that it's a condition of mortgage that you don't live in your own rental property. When we come to move into it permanently we will, of course, remortgage onto a residential product. However, we need to use the address ourselves for 4 months of this year BEFORE LETTING.
In essence, what I'm asking is "what post completion checks do mortgage companies carry out"? We don't need to put ourselves on the voters roll at the new address, and will be receiving 90% of post etc to our existing property.
Can anyone advise.
Oooh - and if you want to give me a bashing on my moral compass that's fine.
After each remortgage, house move, etc. I have never heard from the mortgage company again so I doubt they do any checks at all on who is actually living there.
I guess if they find out then they might have something to say about it but the chances of that happening are almost zero I would say.
I guess if they find out then they might have something to say about it but the chances of that happening are almost zero I would say.
This has always been my experience.
However, I read this http://www.telegraph.co.uk/finance/personalfinance... which is obviously designed to worry people, and I understand that.
The new property serves two purposes to us. 1) It's in the correct school catchment for our youngest son. 2) It'll see us out once we move into it! So we need to use it for a few months for application purposes before we rent it out.
Again, I appreciate some people will find this to be bad form, and I'm comfortable with you airing your view.
However, I read this http://www.telegraph.co.uk/finance/personalfinance... which is obviously designed to worry people, and I understand that.
The new property serves two purposes to us. 1) It's in the correct school catchment for our youngest son. 2) It'll see us out once we move into it! So we need to use it for a few months for application purposes before we rent it out.
Again, I appreciate some people will find this to be bad form, and I'm comfortable with you airing your view.
I've never seen anything in the BTL mortgage conditions that explicitly prevents you from living in your own property - only conditions on who you can rent it to, types of tenancy etc.
BTL mortgages normally have a higher rate than a residential mortgage and so the only disadvantage would be the increased payments
If you bought the property and spent the first 4 months renovating it with no tenants there would be no problem.
If you had a 4 month void whilst renting, the Mortgage company would only care that they get their money, not that you are using it as a temporary residence
If you are only living in it for a few months, and have other properties that you own, I don't see how you would fall foul of the types of checks referred to by the Telegraph
BTL mortgages normally have a higher rate than a residential mortgage and so the only disadvantage would be the increased payments
If you bought the property and spent the first 4 months renovating it with no tenants there would be no problem.
If you had a 4 month void whilst renting, the Mortgage company would only care that they get their money, not that you are using it as a temporary residence
If you are only living in it for a few months, and have other properties that you own, I don't see how you would fall foul of the types of checks referred to by the Telegraph
Edited by Burrow01 on Friday 6th March 11:53
Edited by Burrow01 on Friday 6th March 11:57
Burrow01 said:
I've never seen anything in the BTL mortgage conditions that explicitly prevents you from living in your own property - only conditions on who you can rent it to, types of tenancy etc.
BTL mortgages normally have a higher rate than a residential mortgage and so the only disadvantage would be the increased payments
If you bought the property and spent the first 4 months renovating it with no tenants there would be no problem.
If you had a 4 month void whilst renting, the Mortgage company would only care that they get their money, not that you are using it as a temporary residence
If you are only living in it for a few months, and have other properties that you own, I don't see how you would fall foul of the types of checks referred to by the Telegraph
Unfortunately Pete, most of that isn't correct.BTL mortgages normally have a higher rate than a residential mortgage and so the only disadvantage would be the increased payments
If you bought the property and spent the first 4 months renovating it with no tenants there would be no problem.
If you had a 4 month void whilst renting, the Mortgage company would only care that they get their money, not that you are using it as a temporary residence
If you are only living in it for a few months, and have other properties that you own, I don't see how you would fall foul of the types of checks referred to by the Telegraph
Edited by Burrow01 on Friday 6th March 11:53
Edited by Burrow01 on Friday 6th March 11:57
One of the main pertinent pieces of BTL criteria is that at no point will you live in the property.
It's fairly straight forward;
Residential mortgages for properties you will live in.
BTL mortgages for property to be let out.
Residential mortgages are regulated contracts and are underwritten under FCA mortgage lending regulations (think MMR etc).
BTL mortgages are deemed to be investments and therefore are unregulated and are therefore not subject to the same underwriting and risk assessments as residential mortgages.
As soon as you move into a BTL property, the use has changed and therefore how it's regulated.
Yes, you could buy the property and no have a tenant for four months or be rennovating it, thats why lenders have minimum incomes these days, to ensure affordability. But moving into the property, with the intention of doing so from , contravenes the explicit T&C's of a BTL mortgage and is essentially mortgage fraud. It's exactly the same as buying a residential property using a residential mortgage with the intention to rent it out from the outset.
Lenders are wary of "Scheme manipulation" these days. We once had a BTL lender decline an application as the proposed BTL was worth more than and was a bigger property, than the applicants own property and they just took the stance of "Why would a client buy a property bigger and more expensive than their own, to rent out?" with the assumption being that the clients were buying the property on a BTL basis as they didn't have sufficient income to do so on a residential basis, and would actually move in to that property and rent out their current, smaller one, instead...
The chances are OP, that you'd never get caught, but it's a dangerous game applying for a mortgage knowing that if they found out the true intentions for the property, that they'd say no.
Edited by Sarnie on Friday 6th March 15:07
BorniteIdentity said:
This has always been my experience.
However, I read this http://www.telegraph.co.uk/finance/personalfinance... which is obviously designed to worry people, and I understand that.
The new property serves two purposes to us. 1) It's in the correct school catchment for our youngest son. 2) It'll see us out once we move into it! So we need to use it for a few months for application purposes before we rent it out.
Again, I appreciate some people will find this to be bad form, and I'm comfortable with you airing your view.
It is bad form. So long as you can live with the probability that you're going to mess up someone else's life who genuinely lives in the school catchment, then carry on. But I expect you know all that already. However, I read this http://www.telegraph.co.uk/finance/personalfinance... which is obviously designed to worry people, and I understand that.
The new property serves two purposes to us. 1) It's in the correct school catchment for our youngest son. 2) It'll see us out once we move into it! So we need to use it for a few months for application purposes before we rent it out.
Again, I appreciate some people will find this to be bad form, and I'm comfortable with you airing your view.
This sort of behaviour has caused major problems in my area, and we have people commuting their children to our local oversubscribed primary school by train, after moving back out of the catchment, leaving local children without places. And spawning a Free School project which is seeking to develop local public parkland and/or totally unsuitable residential buildings in a totally unsuitable location for a school. It's a massive problem here. It may not be such a problem where you are, but for people on the receiving end it's quite galling.
Oh, forgot to add, if the school/local education authority get a sniff of it, you may find your school place withdrawn. So be careful.
Edited by SilverSixer on Friday 6th March 14:51
SilverSixer said:
It is bad form. So long as you can live with the probability that you're going to mess up someone else's life who genuinely lives in the school catchment, then carry on. But I expect you know all that already.
This sort of behaviour has caused major problems in my area, and we have people commuting their children to our local oversubscribed primary school by train, after moving back out of the catchment, leaving local children without places. And spawning a Free School project which is seeking to develop local public parkland and/or totally unsuitable residential buildings in a totally unsuitable location for a school. It's a massive problem here. It may not be such a problem where you are, but for people on the receiving end it's quite galling.
Oh, forgot to add, if the school/local education authority get a sniff of it, you may find your school place withdrawn. So be careful.
I take on board what you're saying 100%. I sympathise with your feelings and acknowledge your right to feel that way.This sort of behaviour has caused major problems in my area, and we have people commuting their children to our local oversubscribed primary school by train, after moving back out of the catchment, leaving local children without places. And spawning a Free School project which is seeking to develop local public parkland and/or totally unsuitable residential buildings in a totally unsuitable location for a school. It's a massive problem here. It may not be such a problem where you are, but for people on the receiving end it's quite galling.
Oh, forgot to add, if the school/local education authority get a sniff of it, you may find your school place withdrawn. So be careful.
Edited by SilverSixer on Friday 6th March 14:51
SilverSixer said:
Oh, forgot to add, if the school/local education authority get a sniff of it, you may find your school place withdrawn. So be careful.
This could be your problem. The LAs are getting very hot if it's massively oversubscribed on people living outside the area. If you were to genuinely move for a few years you'll be okay, but if you're planning on keeping your current home and just 'moving' into the rental for 4 months to get a place it wont take too long to work out that you dont live there when your kid starts school. The council have enough data - Council tax returns, electoral register, HMRC address' etc, to work out that something isnt right. For example what happens when you kid has a letter sent home, surely it'll go to an address you dont live at?
BoRED S2upid said:
We're doing a refurbishment on our house it's going to take a few months... Any problems with us moving into the BTL?
But thats not what the OP is doing?He's deliberately and actively circumventing lending criteria.
What he needs is a second residential mortgage, but his income would need to be able to support both properties.
Coincidentally, there has been a LOT of issues with my local school recently where a lot of people who's kids were granted places are being accused by a LOT of disgruntled parents who's kids never got a place, of lying about their current address and stating they live with family members in the catchment area. One family have apparently been renting a property for the last year........but the neighbours have reported it empty for the whole time......
The LA is more likely to find out than the bank and could remove your child from the school. If it is an oversubscribed area (I assume it is) 'real' local parents may get a whiff of what you are doing and report it. It happened in our local school and the child lost their place, after joining the school. The circumstances may be different and you could argue you were living there at the time but it could cause problems.
Sarnie said:
Residential mortgages for properties you will live in.
BTL mortgages for property to be let out.
Residential mortgages are regulated contracts and are underwritten under FCA mortgage lending regulations (think MMR etc).
BTL mortgages are deemed to be investments and therefore are unregulated and are therefore not subject to the same underwriting and risk assessments as residential mortgages.
As soon as you move into a BTL property, the use has changed and therefore how it's regulated.
All of which, whilst "correct", is a lot of nonsense typical of the daft over-regulation of modern society. Remember, the banking sector is extensively "regulated" but we've seen scandal after scandal, fraud after fraud and still the taxpayer is bailing them out. BTL mortgages for property to be let out.
Residential mortgages are regulated contracts and are underwritten under FCA mortgage lending regulations (think MMR etc).
BTL mortgages are deemed to be investments and therefore are unregulated and are therefore not subject to the same underwriting and risk assessments as residential mortgages.
As soon as you move into a BTL property, the use has changed and therefore how it's regulated.
Get mortgage; don't default. What's not to like?
Claudia Skies said:
All of which, whilst "correct", is a lot of nonsense typical of the daft over-regulation of modern society. Remember, the banking sector is extensively "regulated" but we've seen scandal after scandal, fraud after fraud and still the taxpayer is bailing them out.
Get mortgage; don't default. What's not to like?
Fraud?Get mortgage; don't default. What's not to like?
Claudia Skies said:
All of which, whilst "correct", is a lot of nonsense typical of the daft over-regulation of modern society. Remember, the banking sector is extensively "regulated" but we've seen scandal after scandal, fraud after fraud and still the taxpayer is bailing them out.
Get mortgage; don't default. What's not to like?
So, you dont like the fact the taxpayer is bailing out banks? Fair enough.Get mortgage; don't default. What's not to like?
And you dont like the rules which were put in place to stop banks taking too many risks? Doesnt make too much sense, considering point 1, but I'll stay with you for now.
And then you encourage people to break the rules which prevent banks from taking too many risks who then need bailing out by the taxpayer which was exactly what you said you didnt like in point 1? Okay, now im completely lost. Dont you see that in order for point 1 to be achieved, people have to play by the rules raised in point 2?
Sarnie said:
Fraud?
Take for example the government's "rent-a-room" scheme promoted through HMRC with tax relief on small rental incomes. Renting out part of your property is almost certainly a breach of the mortgage conditions yet we never hear of people being prosecuted for it.Another example would be "change of mind" where a property is bought as a home to live in, circumstances change and the property ends up being rented out. I've never heard of a prosecution for that.
What the Fraud act 2006 says is essentially that, "for an offence to have occurred you must have acted dishonestly AND with the intent of making a gain for yourself or anyone else, or inflicting a loss (or a risk of loss) on anyone else."
Example of fraud:
- BTL rate 6% for mortgage
- Residential rate 3% for mortgage
- Dishonestly obtain residential mortgage for BTL to save 3% and with no intention of living there
- = fraud. Go to jail.
Condi said:
And you dont like the rules which were put in place to stop banks taking too many risks?
It's the banks who break the rules causing substantial loss and damage to the economy, not their customers."Banks have set aside £22.2bn for the PPI scandal – enough to pay for the 2012 Olympics twice over. PPI is Britain's biggest mis-selling scandal. The amount set aside is almost double the £11.8bn bill for misleading pension sales, and dwarfs the £2.7bn for mortgage endowments."
Claudia Skies said:
Condi said:
And you dont like the rules which were put in place to stop banks taking too many risks?
It's the banks who break the rules causing substantial loss and damage to the economy, not their customers.Gassing Station | Finance | Top of Page | What's New | My Stuff