Is it possible to take out a second residential mortgage, then change it to a buy to let after a few months to avoid the 25% deposit?
Yes you can have a second residential mortgage under your name. I would be very careful when dealing with this.
Based on what you are saying: You are hoping to buy a second property on a residential basis and hope to convert it to Buy to Let mortgage in 6months time. This is very risky for a number of reasons:
1. You will need to ensure you can afford to service both properties you own.
2. Most of whole of market lenders require a remortgage client to be resident in property for a minimum of 12months before remortgaging (assuming you will remortgage to a new lender when converting to BTL )
3. The Buy to Let lending criteria does not seem like it will change in 6months so you may find yourself tied to 2 mortgage agreements.
4. Your new purchase may drop in price and leave you in negative equity.
I have mortgage lenders on my whole of market mortgage panel that will lend to 85% LTV buy to let clients.
I hope this answer helps somewhat. Please only use this information for illustrative purposes only. To get accurate financial advice please contact me via http://www.xcapade.co.uk
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| 08.30.11 @ 00:13
The key thing to bear in mind here is that a lender that might be willing to grant an initial mortgage to you for this property might not be an active lender in the BTL market and would either decline consent to let or might impose the early redemption penalty on your mortgage and charge a higher rate.
it is far more straightforward to choose the right type of deal from the outset.
as it has been mentioned above, there are certain lenders that will lend higher loan to value but this type of lending (even on pure residential) poses a greater risk to the lender and the rate will be higher.
don't forget that you are looking at this purchase as an investment, is it really that unfair that a lender should wish to make an additional profit from a higher rate when the risk will be greater (home owners tend to be more careful on their own home and repaying the mortgage when compared to renters that wouldnt necessarily have the same thoughts of care to the property or paying the rent on time!). | 09.16.11 @ 13:07
I agree with most of what has been said, but I also realise that your intentions might well be honourable. I have recently advised a client in your exact position - they wanted to buy a second property for their son to live in, but at some point in the future would then rent the property out. They were not sure whether this would happen in 6 months time or 6 years time, so we had to be sure that any lender we recommended would have no issue with this scenario.
Fortunately there are some lenders that understand how people's situations change, and, as such will accomodate such requests. We were able to place the mortgage (a residential mortgage) with a high street lender, with the option to let the property at some future date without incurring a penalty (although the lender would impose a "weighting" on the interest rate).
I hope this helps.
All the best
PKS - "Property Knowledge Solutions" | 09.26.11 @ 17:13