First Time Buy to Let investment advice

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    First Time Buy to Let investment advice

    Dear All,

    I am looking to purchase my first property as Buy to Let. I have never owned a property before and is in full time employment. I am writing to seek advice on the following matters:

    1) Do I have to pay the additional 3% stamp duty for Buy to Let?

    2) In the future I would like to change from Buy to Let to a standard residential mortgage so that I can live there as my home. Is there any restriction on changing to a residential mortgage?

    3) As I am in full time employment and if I manage to get a Buy to Let does Income Tax and NI take into account of both my salary and rental income or does rental income tax calculated separately?

    4) During rent void period I will have to show that I can afford to pay the mortgage. I will live with my parents hence I do not pay any rent and only fixed loan I have is the Student Loan. I will have enough to cover the mortgage but would like to know how the affordability test is carried of if there is any?

    Any advice is much appreciated.

    Thank you

    AJ

    #2
    without meaning to offend, I suggest you read through the posts already made on the forum - just reading them will give you some ideas and will provide the answers youre looking for

    Comment


      #3
      1 - Not if you don't own any other property. The additional stamp duty is payable on any property (effectively) after one.

      2 - That's not automatic and may be difficult. Residential mortgage lending criteria are currently more strict than BTL (although the BTL criteria are moving closer to the residential set). It's possible, but not automatic.

      3 - Usually you have to complete a self-assessment tax return each year to account for your rental income (and expenses). In some cases, HMRC agrees to collect this tax through your salary (as it means they get their money sooner).

      4 - You will have to show you can afford the mortgage, full stop. The affordability criteria are different for each lender, but will basically require proof over a period of time that you could make the mortgage payments.

      You need to build a proper business plan and talk to an accountant.

      Asking these questions is a sensible start, but you should be asking, fundamentally, why this business and why now?

      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        You can visit your local branch of Nationwide BS and Halifax Bank ( Lloyds Bank ) and ask for a brochure on criteria for applicants for BTL and residential mortgages.

        Comment


          #5
          In the event that you applied to move into the BtL property as your primary residence, the lender will either give a categoric No or permit the switch but assess the loan on an Homeownership basis , I.e Full affordability assessment, and lastly allow you to stay on a BtL rate but place a restriction barring you from making any subsequent applications for other BtL properties and exclude any further borrowings on the property until it either has reverted to a BtL , for which evidence will need to be provided, or indeed sold.

          you state that you have never owned property then as already advised the purchase would not attract the SDLT premium.

          it is important to note that not all lenders extend BtL loans to indivuals who are not homeowners, advice on what is available can be provided a broker.

          when aBtL loan is assessed lenders already take a view on your overall affordability, some will require a minimum proveable income of £25k plus , others have no minimum income but will check out your financial commitments in order to be satisfied that you could afford the mortgage and associated outgoings as and when voids might occur.

          Comment


            #6
            Thank you jpkeates and the information provided answers all the points. I am looking to BTL because this is the only way I can get on the property ladder due to the restriction on residential mortgage and ever increasing property price. I am able to borrow more on BTL and when I have enough equity I will try and change it into a residential mortgage in the future.

            Comment


              #7
              Thank you loanarranger for the helpful information.

              Comment


                #8
                Originally posted by Ajj View Post
                I am looking to BTL because this is the only way I can get on the property ladder due to the restriction on residential mortgage and ever increasing property price. I am able to borrow more on BTL and when I have enough equity I will try and change it into a residential mortgage in the future.
                Completely separate a business property and your home.
                This is true for people letting a property they used to live in as well as the (rarer) case you plan.

                It's impossible for you to be objective about a property you will select on the basis you want to live in it.
                Tenants won't treat the property with the love and care you will want (they might, but it's far from certain) and it's impossible to be rational about it.

                And, that "conversion" is likely to be really tricky.
                I'd plan and expect to have to set up a completely separate residential mortgage and pay off the BTL.
                It can be done (like most things), but it's far from a sure thing.
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                Comment


                  #9
                  Thank you jpkeates. I do understand what you are saying hence need to do more research and planning.

                  Comment

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