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Why Can't You Get A Regular Mortgage For A Btl?

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Just reading in between the lines of the thread on 'Mortgage company knocked on my door' and made me think....

I'm pretty sure my landlord lives in his BTL's initially as his own house for a couple of months, then moves out into the next one.. and so on... from this I guess that he's got lots of 'regular' mortgages rather than a BTL mortage...

As I'm not a expert in this area.. Is this something he shouldn't do?.. and what are the consequences??

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Just reading in between the lines of the thread on 'Mortgage company knocked on my door' and made me think....

I'm pretty sure my landlord lives in his BTL's initially as his own house for a couple of months, then moves out into the next one.. and so on... from this I guess that he's got lots of 'regular' mortgages rather than a BTL mortage...

As I'm not a expert in this area.. Is this something he shouldn't do?.. and what are the consequences??

I think the answer is in the question what differentiates a BTL mortgage compared to a conventional mortgage ?

Suspect it's a tax implication.

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BTL has a different level of risk, and has a different Interest Rate

I recevieved a letter this morning from my LandLords mortgage company, to the Tennants requesting we get intouch with them.

Apparently the LL never set up the property at a BTL and they now want to speak to him. Otherwise they'll look to preposses the vacant flat!!!

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I had something similar in the early 90s (forgive the naivety of what follows I was just 21).

Staying in absolute dive of a farmhouse - but rent cheap (£30/week - half price during the summer) and the landlord lax at collecting it (some people in the house owed 6 months back rent). Phone call one day asking to speak to landlord and like a fool I said he didn't live there. Letter arrives a few days later asking us to leave from Building Society.

Cue landlord scurrying around in most amusing manner trying to make the place look like a family might actually live there (it was inhabited by LSD dropping dropouts, grass smoking climbing students and me at the time) prior to inspection. How we marvelled at the new lino and decorating. We were told to disappear for the day - and somehow the Building Society bod was satisfied.

In my experience most landlords have somekind of dodge going - my current one's son was supposed to be moving in but never actually did. The letters addressed to the son from the debt collectors arrive fairly regularly though.

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Just reading in between the lines of the thread on 'Mortgage company knocked on my door' and made me think....

I'm pretty sure my landlord lives in his BTL's initially as his own house for a couple of months, then moves out into the next one.. and so on... from this I guess that he's got lots of 'regular' mortgages rather than a BTL mortage...

As I'm not a expert in this area.. Is this something he shouldn't do?.. and what are the consequences??

He will be liable to pay income tax on any profits he makes from your rent.

When he comes to sell the properties he may pay less tax because the tax man will take into consideration the time he lived in the properties.

They will probably see it the way you have and not give him much of a tax relief.

As for him having a regular mortgage, he may well have, but he would still need to aks for his lenders permission to rent the property.

If they find out they would charge him a higher rate (they'll choose the highest possible) and backdate to when he let the property out.

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He will be liable to pay income tax on any profits he makes from your rent.

When he comes to sell the properties he may pay less tax because the tax man will take into consideration the time he lived in the properties.

They will probably see it the way you have and not give him much of a tax relief.

As for him having a regular mortgage, he may well have, but he would still need to aks for his lenders permission to rent the property.

If they find out they would charge him a higher rate (they'll choose the highest possible) and backdate to when he let the property out.

I suspect that the house I live in now doesn't have a mortgage as it was bought in 1967 and was a family home.

But should I have to move, how do you make sure that a prospective landlord has a proper BTL mortgage rather than a regular one. Or, how do you find out how stretched they are? The obvious answer is to ask them or their agents. But in the real world, how do people think such a question would be received by a prospective landlord?

Billy Shears

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I suspect that the house I live in now doesn't have a mortgage as it was bought in 1967 and was a family home.

But should I have to move, how do you make sure that a prospective landlord has a proper BTL mortgage rather than a regular one. Or, how do you find out how stretched they are? The obvious answer is to ask them or their agents. But in the real world, how do people think such a question would be received by a prospective landlord?

Billy Shears

It will be difficult. I am a landlord myself and everything to do with my btl property is delivered directly to my house.

I suppose if your LL had letters frequently being to your rented property it would suggest he is pretending to live there himself.

There would be no point raising such a question with the LL but the letting agent may be able to pass on your concerns.

Edited by enworb

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Until recently a BTL mortgage required a minimum deposit of 25% and reasonable proof that you could rent the property out for at least 20% more than the cost of the mortgage repayments... though I believe those rules have been relaxed recently to coax more air into the bubble.

You're not supposed to take out a regular mortgage for a BTL, but maybe the taking out of a regular mortgage on a place to live in, and then moving out and letting it, is something of a grey area.

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But should I have to move, how do you make sure that a prospective landlord has a proper BTL mortgage rather than a regular one. Or, how do you find out how stretched they are?

I believe that the information you can buy from the Land Registry includes details of current charges on the property, i.e. mortgage. I guess you could make assumptions based on the date the property was bought, the selling price, the mortgage (or re-mortgage) charge and whether the lender is a BTL specialist one.

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I suspect that the house I live in now doesn't have a mortgage as it was bought in 1967 and was a family home.

Billy Shears

Are you sure about this?

If your LL is a 40% taxpayer and has a mortgage on another property it may well be good for tax reasons to xfer the mortgage back onto the rented place. (i.e. MEW the rental to generate cash to reduce his main residence mortgage)

i.e. Rental worth £200k. MEW out £100k to reduce main residence mortgage by £100k.

Rent on Rental = £10k pa

IO mortgage = £5.5k pa?

Before, he would have got taxed on the full amount of rent (£10k pa) (less maintenance and wear and tear)

Since remortgaging, the tax bill is less. i.e. only 40% of (£4.5k less maintenance and wear and tear) gets taxed.

This is because he gets tax relief on the rent used to pay off the interest on his IO mortgage.

As long as you keep paying the rent he effectively gets a reduced borrowing rate for buying both properties.

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It will be difficult. I am a landlord myself and everything to do with my btl property is delivered directly to my house.

I suppose if your LL had letters frequently being to your rented property it would suggest he is pretending to live there himself.

There would be no point raising such a question with the LL but the letting agent may be able to pass on your concerns.

I was thinking of the situation if I ended up looking for another place to live. If I was interested in a property but had no idea what situation the landlord was in. There have been conversations on this board before about how landlords do credit checks on prospective tenants but the tenants don't get the chance to check out their prospective landlords.

Are you sure about this?

If your LL is a 40% taxpayer and has a mortgage on another property it may well be good for tax reasons to xfer the mortgage back onto the rented place. (i.e. MEW the rental to generate cash to reduce his main residence mortgage)

I believe that my landlord lives with his son. I would also expect that he is retired at his age. Clearly it's possible that there is a mortgage on this property, but I suspect that there isn't. Unless his son bought in the last three or four years, unlikely since we are not the first tenants here, the house he bought was probably fairly cheap.

I believe that the information you can buy from the Land Registry includes details of current charges on the property, i.e. mortgage. I guess you could make assumptions based on the date the property was bought, the selling price, the mortgage (or re-mortgage) charge and whether the lender is a BTL specialist one.

That sounds interesting. Do you have to have good reason for finding this information? I thought that the info from the land registry is not expensive, and it might be interesting to buy some from the LR just to see what it looks like.

Billy Shears

Edited by BillyShears

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I believe that my landlord lives with his son. I would also expect that he is retired at his age. Clearly it's possible that there is a mortgage on this property, but I suspect that there isn't. Unless his son bought in the last three or four years, unlikely since we are not the first tenants here, the house he bought was probably fairly cheap.

Billy Shears

Alternatively, (assuming he still pays tax) he may have MEWed the (owned outright) rental to fund something.

If the rent is £10kpa then £2kpa would go to the I Revenue (£4k if he pays at the high rate).

So he would net £8k pa.

If he wanted £70k for something (car, boat etc) then it would make sense to MEW the rental rather than his own place.

It could cost £4500pa in interest to borrow £70k.

If he did it with MEW on the rental he could save on monthly repayments because of the tax relief.

he could have already done this years before you moved in...

NB: I think there is a limit on how much relief he can claim if he MEWS a property that is already paid for...

Edited by Without_a_Paddle

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Alternatively, (assuming he still pays tax) he may have MEWed the (owned outright) rental to fund something.

If the rent is £10kpa then £2kpa would go to the I Revenue (£4k if he pays at the high rate).

Rent is £5700pa.

If he wanted £70k for something (car, boat etc) then it would make sense to MEW the rental rather than his own place.

It could cost £4500pa in interest to borrow £70k.

If he did it with MEW on the rental he could save on monthly repayments because of the tax relief.

he could have already done this years before you moved in...

What you say is possible, but I doubt it. He doesn't drive around in his new 4x4, he walks.

Billy Shears

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I have a property that is let that was previously my principle residence.

I also had a fixed rate mortgage, when I wanted to let the property I just telephoned the BS and they agreed to keep it on the same interest rate, on the same fixed rate deal, but did charge me a one off payment of 600quid.

So it can be done, again I have all communications from the BS sent to my new property as I have nothing to hide.

These days, you no longer have to duck and dive when letting, the rates available for BTL are sometimes even better than the normal household mortgages in the high street.

The trick is to use a good broker, as the rates change daily and they know where to go for a good deal and also have very good negotiating skills, and so they should its their job!!.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
      • up 2.5%
      • up 5%



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