Best way to finance letting of partners property

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    Best way to finance letting of partners property

    Hi all,

    Its my first time, so please be gentle!

    My partner and I both have our own properties, my partner is going to move in with me and we shall let her house out. The question is which is the best way to finance this?

    We are both on repayment mortgages, my partner has served the fixed interest rate and is now happily repaying at a low variable rate. After contacting the lender regarding changing to B2L, they don't offer these mortgages, so it will mean moving lender (HSBC current lender I think). The current repayment is around £580 pcm, with a rental value of £650 pcm. She has just over 25% equity in the property. (approx £120k remaining of a £160k value). Both properties are in our respective individual names at present.

    Is it best to ask the current lender if we can have a tenant in and continue as is, or move to interest only (slightly decreasing mortgage to ~£400 but with higher interest rate and set-up fees etc.) What are the pros and cons of each route, and what's the score with capital gains etc.?

    Many thanks for any advice, all will be gratefully received.

    Cheers.

    #2
    Yes, Absolutely talk to your lender and by the way HSBC does do Buy To Let Finance.

    I would take advice from a Buy To Let Specialist Mortgage broker, search Google for "Bespoke Finance". Get some basic remortgage quotes without going to application, from their you know what options you have to go back to your lender.

    You may get better rates than what you are on now. The Mortgage Works in my opinion are offering the best products recently.

    Comment


      #3
      Cheapest way always will be stay with the existing lender but get their consent to let (they will probably load up the rate and charge a fee but you will cut out the valuation and legal fees), I would suggest the lender is told that this will be a short term arrangement (it could be if you both fall out) and expect to readdress this in say 12 mths.

      I doubt if they will switch to interest only so it could well be that the rent only just covers mortgage at a higher rate but if your partner has a background income they may wear it.

      If you move (or have to because the lender says no - don't chance it by the way, they will find out if your post isn't going there any more and you changed your insurance, which you will need to do), expect any new lender to need to revalue and you will pick up arrangement fees and of course the legals to cover the lender change.

      Interest only is OK if you can get it but more and more lenders are asking for details of a definitive repayment vehicle, just selling it at the end of the term is not always enough nowadays.

      CGT only applies if the property never reverts back to your partner's personal residence but a good tax specialist will point you in the right direction there over the longer term.

      A lot of TMW's deals at this LTV (75%) are fixed rate products and carry a hefty fee of 3.5% - so do bear all the fees in mind when doing your comparisons. Another point is TMW limit first time landlords to 65% LTV only.
      CFA

      Comment


        #4
        Hi YesAdam

        Originally posted by YesAdam View Post
        search Google for "Bespoke Finance".
        If this is your company or you know the owners you might want to suggest they spell check their homepage.

        Regards
        CFA

        Comment


          #5
          As per cfaproperty with the following comments;

          Originally posted by cfaproperty View Post
          CGT only applies if the property never reverts back to your partner's personal residence but a good tax specialist will point you in the right direction there over the longer term.

          A lot of TMW's deals at this LTV (75%) are fixed rate products and carry a hefty fee of 3.5% - so do bear all the fees in mind when doing your comparisons. Another point is TMW limit first time landlords to 65% LTV only.
          Re CGT;
          http://www.direct.gov.uk/en/MoneyTax...ome/DG_4020890


          Even if you no longer live in your property, you can still qualify for the full amount of Private Residence Relief, provided that:

          #the property has been your main home from the time that you bought it
          #it has otherwise fully qualified for Private Residence Relief (for example, you have not used part of the property exclusively for business purposes)
          #you sell it within three years of moving out or it no longer being your main home


          Even after 3 years there are PPR benefits. Ask on the tax questions board if thinking of keeping it that long.

          Re TMW;
          A lot of the deals have free valuation and/or free legals which should be taken into account when comparing. + a £150 up front booking fee.
          Contact me at boletusBTLbroker@Yahot.com *









          Only joking cpa ! There's no such address.

          Comment

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