Second Time Buyer Rules

theboss.com

Hi Folks,

Just a quick one, i bought an apartment as a First Time Buyer a few years ago and am thinking buying a different house now to live in now as I have outgrown the apartment. I plan to buy it using a Second Time Buyer Mortgage, however I want to retain my first property and rent it fully out. Is this possible? Im not scheduled to pay off my mortgage on this for a few years yet, would the bank automatically switch this First Time Buyer Mortgage over to a Buy-To-Let rate with it not being my prime residence anymore? Also is there a rule in place that you have to sell your First Time Buyer Home in order to get a Second Time Buyer Home or is the only way you can keep the First Time Buyer Home is by changing the First Time Buyer Home over to the Buy To Let rate?

Thanks!

bilbot79

I reckon you will switch your 'Principal Private Residence's to the new place and have a new mortgage on it. Then take out a new mortgage ok the apartment at buy to let rates

Baby01032012

Yep apartment will move to but to let rate. You buy house with another mortgage if you can afford another and pay 20% deposit. Fair play if your income x 3.5 is greater than 2 mortgages.

Why wouldn’t you sell though. House prices at highest unlikely you have negative equity, very uncertain future. No return on apartment. I mean all rent eaten up with but to let mortgage plus you paying 52/54% tax on whatever you make from that property....can’t be worth it?

theboss.com

Thanks, yes suspected this regarding the apartment changing to Buy To Let.

Yes have the deposit in place, unsure about the income cap rules regarding a second time buyer mortgage, can you only be lent the 3.5 times salary rate as a maximum for the 2 mortgages combined? Ive approx 30% of the first time buyer 3.5 time mortgage payed off and would be looking for a full 3.5 time second time mortgage off them again. So for example, this would leave me with a 70% 3.5 first time buyer mortgage (which would be switched over to Buy To Let) and a 100% 3.5 second time buyer mortgage to pay off.

I see where your coming from, but I would make only approx 5% profit on selling so dont think its worth it, the rental yield will probably be approx 6% from the apartment but its better than the money just sitting in the bank. I know I could use that money to pay of the majority of the second home also, but I dont see the point if I can still get the low variable interest rate and have the rent ticking over covering the Buy To Let mortgage in the meantime. I know house prices could also fall, but cant see it happening significantly if at all for at least 5 years. Or do you have any better suggestions regarding what to do with the money if I sold the apartment?

Caranica

You won't get a 100% mortgage, as a second property you would need a 20% deposit. Also renting is no walk in the park. Sell the apartment if you want to move

Baby01032012

theboss.com wrote: »

Thanks, yes suspected this regarding the apartment changing to Buy To Let.

Yes have the deposit in place, unsure about the income cap rules regarding a second time buyer mortgage, can you only be lent the 3.5 times salary rate as a maximum for the 2 mortgages combined? Ive approx 30% of the first time buyer 3.5 time mortgage payed off and would be looking for a full 3.5 time second time mortgage off them again. So for example, this would leave me with a 70% 3.5 first time buyer mortgage (which would be switched over to Buy To Let) and a 100% 3.5 second time buyer mortgage to pay off.

I see where your coming from, but I would make only approx 5% profit on selling so dont think its worth it, the rental yield will probably be approx 6% from the apartment but its better than the money just sitting in the bank. I know I could use that money to pay of the majority of the second home also, but I dont see the point if I can still get the low variable interest rate and have the rent ticking over covering the Buy To Let mortgage in the meantime. I know house prices could also fall, but cant see it happening significantly if at all for at least 5 years. Or do you have any better suggestions regarding what to do with the money if I sold the apartment?

Madness...the return i guess is 6% gross...but after repairs, rtb, 52% income tax, mortgage capital repayment you wont see half that...its very little to show for a lot of stress managing the property, dealing with tenants requests...plus the value is likely to drop once the covid recession kicks in so any rental return will be wiped out by capital depreciaton.

I'm saying that as a landlord.

theboss.com

Caranica wrote: »

You won't get a 100% mortgage, as a second property you would need a 20% deposit. Also renting is no walk in the park. Sell the apartment if you want to move

Baby01032012 wrote: »

Madness...the return i guess is 6% gross...but after repairs, rtb, 52% income tax, mortgage capital repayment you wont see half that...its very little to show for a lot of stress managing the property, dealing with tenants requests...plus the value is likely to drop once the covid recession kicks in so any rental return will be wiped out by capital depreciaton.

I'm saying that as a landlord.

No that return is Net, im trying to see this as a possible investment opportunity too and I dont think there is any better options out there despite the hassle, this is the only option that allows for such a high leverage also on low interest rates. Im already at full tax free pension input, putting into an investment plan is also subject to the higher tax brackets and how guaranteed are you that it will play out better? Youd probaly need a return of +20% per year to beat the leverage of an additional mortgage.
I know I could just sell the apartment and there wouldnt be a need for second time buyer mortgage then, but if I do that this opportunity wont be available again, I would need a bigger deposit for a new Buy To Let in the future if I wanted to go down that avenue again. On Covid, I wouldnt think it will affect house prices that much with demand still falling short year on year.

theboss.com

Baby01032012 wrote: »

Madness...the return i guess is 6% gross...but after repairs, rtb, 52% income tax, mortgage capital repayment you wont see half that...its very little to show for a lot of stress managing the property, dealing with tenants requests...plus the value is likely to drop once the covid recession kicks in so any rental return will be wiped out by capital depreciaton.

I'm saying that as a landlord.

Looked into this further and your absolutely right with those numbers, complete waste of time for the hassle involved. Where is the likes of yourself investing in now with returns on renting basically gone out the window?