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BUY TO LET MORTGAGE in multi unit house, rent 4 units and live in it aswell.

  • 08-11-2019 11:14pm
    #1
    nhoj88
    Registered Users Posts: 40 ✭


    Hi, have a few queries regarding a BTL mortgage, I am selling my house (PPR) and looking to buy a multi unit 3 story house part let with 4 tenants current income 39K and a vacant floor which i will live in.

    I will have a deposit of 250k and need a loan of 375K = 60% LTV, I am not worried about the tenants or becoming a landlord as I am aware of the tax and costs involved even with a troublesome tenant, I have lots of building experience from a previous life so not worried about maintenance, I have a PAYE 55K income. Previous mortgage and savings = 1.5K pm for 1 year

    This will become my family home in time, 2 years max, don't need to get into the reasons why I want to buy this and convert this way as it is not for the rental return so not worried about problems I may come across being a landlord as this is will be short term and become my family home, Then I will look to transfer this mortgage back to a residential mortgage.


    Now for the questions.....

    1) Can I take a BTL without another PPR??

    2) Am I in a good position to secure this loan??

    3) Can I tell the bank I wish to live in the house aswell as tenants or not?? If not I can *live* in my fathers house, will this satisfy the bank or will they even care??

    4) When I have vacant possession can I easily change to owner occupier mortgage??

    5) Which type of BTL mortgage should I take out to allow this without penalties bearing in mind I want to change it within 2 years, without penalties!!??

    6) Any other considerations I should take on securing the BTL mortgage or carrying out my plan??

    7) See any holes in my plan??
    Tagged:


Comments

  • #2
    the_syco
    Registered Users Posts: 37,295 ✭✭✭✭the_syco


    nhoj88 wrote: »
    Hi, have a few queries regarding a BTL mortgage, I am selling my house (PPR) and looking to buy a multi unit 3 story house part let with 4 tenants current income 39K and a vacant floor which i will live in.
    Banks will usually need the property to be vacant before giving you a mortgage.
    nhoj88 wrote: »
    multi unit 3 story house part let with 4 tenants current income 39K and a vacant floor which i will live in.
    AFAIK, BTL equals buying the house to rent the entire thing out.

    But, if you live in the house, and are connected to the units, would they not be licensees?

    For example; if all the units (yours included) have internal doors that open to a staircase, I think the house won't be a BTL unit, but rather a house that has units which you are letting out?

    Others may come to clarify my thinking.


  • #3
    nhoj88
    Registered Users Posts: 40 ✭nhoj88


    the_syco wrote: »
    Banks will usually need the property to be vacant before giving you a mortgage.
    This is why I need a BTL mortgage....

    the_syco wrote: »
    AFAIK, BTL equals buying the house to rent the entire thing out.
    If this is the case I will *live in my father's house until it is vacant

    the_syco wrote: »
    But, if you live in the house, and are connected to the units, would they not be licensees?
    Self contained units even if it were a granny flat to the side of a family home need to be registered under PRTB and they have tenancy rights in a rental agreement covered by current regulations. Not worried about this.

    the_syco wrote: »
    For example; if all the units (yours included) have internal doors that open to a staircase, I think the house won't be a BTL unit, but rather a house that has units which you are letting out?
    My understanding is, if house is occupied you cannot take an owner occupier mortgage and the only alternative is a BTL mortgage?

    the_syco wrote: »
    Others may come to clarify my thinking.
    Thank you for your reply


  • #4
    Wesser
    Registered Users Posts: 1,813 ✭✭✭Wesser


    How will you manage the repayments on a debt of 375 with an income of 55 when the rental .income drops off.


  • #5
    nhoj88
    Registered Users Posts: 40 ✭nhoj88


    Wesser wrote: »
    How will you manage the repayments on a debt of 375 with an income of 55 when the rental .income drops off.
    Partner has 35k PAYE income and 130k cash after selling her PPR but has a very bad credit rating, so will remortgage and put off 100k off principal and 30k into the house when it is vacant and my partner has a clean credit rating in 1 more year (she started tidying it up over a year ago so in the clear in 1 year)


  • #6
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    I vaguely recall a specific exclusion from living in a property purchased with a BTL mortgage.

    Now that could just be my fuzzy memory, or a specific bank but check with whatever lender you're looking at.


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  • #7
    nhoj88
    Registered Users Posts: 40 ✭nhoj88


    Graham wrote: »
    I vaguely recall a specific exclusion from living in a property purchased with a BTL mortgage.

    Now that could just be my fuzzy memory, or a specific bank but check with whatever lender you're looking at.


    Yes that's what i'm trying to work out.... I would only be staying there a couple of nights during the week anyway but could have my address else where in my fathers down the country.

    Thanks for the input


  • #8
    Fol20
    Registered Users Posts: 3,623 ✭✭✭Fol20


    1) Yes, but they will want to know your current address that you rent in or your parents family home. You may have issues with this if you mark your address in a different county as this would raise suspicion.

    2)Normally the 3.5 rule applies however if you already have experience as a ll and you have good rental cash flow. You might be in a good position. Your rental cash flow expectations will need to include the Empty floor also. One item to bear in mind is weighting to one area.normally ll that go for multiples in one area can be accepted however you would expect them to have other properties in other areas to spread out the risk of collateral. In your case if it is all in one area depending on said property - they may decline. Some may not want a pre 63 building also but that is dependant on the property.

    3)they will care and will not accept a btl if you intend to live there

    4)not sure about this as Iv never tried it

    5)variable but you will need to look into clawbacks and terms and conditions of the mortgage you sign. There might be min requirements of 3/5years.

    6) I have an idea of what you are trying to achieve but this can be declarations under false pretences - be very careful.

    7)yes

    -gear/loading all your wealth in one area under btl rules
    -your salary and the 3.5rule however this maybe disregarded based on rental yield
    -your intended idea to change to a ppr could put your cash flow in the red in the future if something major changes
    -i would try and aggressively pay down your debt before changing to a ppr.


  • #9
    nhoj88
    Registered Users Posts: 40 ✭nhoj88


    Fol20 wrote: »
    2)Normally the 3.5 rule applies however if you already have experience as a ll and you have good rental cash flow. You might be in a good position. Your rental cash flow expectations will need to include the Empty floor also. One item to bear in mind is weighting to one area.normally ll that go for multiples in one area can be accepted however you would expect them to have other properties in other areas to spread out the risk of collateral. In your case if it is all in one area depending on said property - they may decline. Some may not want a pre 63 building also but that is dependant on the property.
    No LL experience as such but did rent a self-contained unit in my previous house for 2 yrs under "rent a room" I know the differences involved and tax regulations I would be tied into not worried their as it will be as short as possible.
    Great location in Dublin 3.
    It is a Pre'63.
    Not sure if you mean I will need to declare the vacant floor as potential income? If so why?? And it would be another 20k PA (10K per unit) on top of 39K.

    Fol20 wrote: »
    6) I have an idea of what you are trying to achieve but this can be declarations under false pretences - be very careful.
    What do you think I need to be careful declaring??

    Fol20 wrote: »
    -gear/loading all your wealth in one area under btl rules
    -your salary and the 3.5rule however this maybe disregarded based on rental yield.
    I thought the CBI rules dont apply to BTL??

    Fol20 wrote: »
    -your intended idea to change to a ppr could put your cash flow in the red in the future if something major changes
    -i would try and aggressively pay down your debt before changing to a ppr.
    I have 100K to put off the capital from partner so not too worried about managing the 275K new owner occupier mortgage, and when I get down to 1 tenant I would have the possibility of using the "rent a room scheme" to keep 14K tax free coming in to keep my income topped up and supplement if needed.

    Appreciate you view


  • #10
    Wesser
    Registered Users Posts: 1,813 ✭✭✭Wesser


    How far away is your fathers house.
    I was trying to buy while living in another county before and was told i had to buy within 100km of my work place.


  • #11
    nhoj88
    Registered Users Posts: 40 ✭nhoj88


    Wesser wrote: »
    How far away is your fathers house.
    I was trying to buy while living in another county before and was told i had to buy within 100km of my work place.

    "Down the country" was an exaggeration it less then 50km away in Wicklow


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  • #12
    Fol20
    Registered Users Posts: 3,623 ✭✭✭Fol20


    nhoj88 wrote: »
    No LL experience as such but did rent a self-contained unit in my previous house for 2 yrs under "rent a room" I know the differences involved and tax regulations I would be tied into not worried their as it will be as short as possible.
    Great location in Dublin 3.
    It is a Pre'63.
    Not sure if you mean I will need to declare the vacant floor as potential income? If so why?? And it would be another 20k PA (10K per unit) on top of 39K.



    What do you think I need to be careful declaring??



    I thought the CBI rules dont apply to BTL??



    I have 100K to put off the capital from partner so not too worried about managing the 275K new owner occupier mortgage, and when I get down to 1 tenant I would have the possibility of using the "rent a room scheme" to keep 14K tax free coming in to keep my income topped up and supplement if needed.

    Appreciate you view

    Not being a ll,not having your own PPR while applying for this will go against you. Especially when the amount you are looking for is more than a standard loan and above the 3.5x rule.

    Look around in each bank as pre 63 deeds might be more messy and some may/may not accept these depending on certain conditions. You can make more money on pre63 buildings where im based but people that get these are more cash buyers than looking for mortgages. In your case you dont have a experience and your own PPR so i have my doubts they will accept this.


    If you declare one floor as your intention to turn into a PPR, it will then turn into a standard residential mortgage vs a btl. They will be more likely to decline then as a result.

    The CBI rules do not apply for BTL however it looks like you are trying to loosly get around the CBI rules by doing the above which might be noticed when it goes to under writing.

    Are these other floors independent? Even if you are living in the property, you may not be able to classify as rent a room depending on situation. If your partner invests 100k, you also need to bear in mind that they will need to be added to the deeds etc. Have you discussed this with your partner.

    In your case, i would recommend talking to a broker instead of going direct with a bank as your not a simple applicant trying to get a BTL.

    Your applying for a pre 63 building when you dont have your own PPR and your parents are not in the same area to use that route(Edit: just noticed you said <50km so might be possible). I suspect they will decline it but using a broker might be able to get you over the finish line.


  • #13
    nhoj88
    Registered Users Posts: 40 ✭nhoj88


    Fol20 wrote: »
    Not being a ll,not having your own PPR while applying for this will go against you. Especially when the amount you are looking for is more than a standard loan and above the 3.5x rule.

    Look around in each bank as pre 63 deeds might be more messy and some may/may not accept these depending on certain conditions. You can make more money on pre63 buildings where im based but people that get these are more cash buyers than looking for mortgages. In your case you dont have a experience and your own PPR so i have my doubts they will accept this.


    If you declare one floor as your intention to turn into a PPR, it will then turn into a standard residential mortgage vs a btl. They will be more likely to decline then as a result.

    The CBI rules do not apply for BTL however it looks like you are trying to loosly get around the CBI rules by doing the above which might be noticed when it goes to under writing.

    Are these other floors independent? Even if you are living in the property, you may not be able to classify as rent a room depending on situation. If your partner invests 100k, you also need to bear in mind that they will need to be added to the deeds etc. Have you discussed this with your partner.

    In your case, i would recommend talking to a broker instead of going direct with a bank as your not a simple applicant trying to get a BTL.

    Your applying for a pre 63 building when you dont have your own PPR and your parents are not in the same area to use that route(Edit: just noticed you said <50km so might be possible). I suspect they will decline it but using a broker might be able to get you over the finish line.

    Yes partner knows, we would write up an agreement with a solicitor instead of adding to deeds then when it comes to changing to owner occupier mortgage she would be added to deeds.

    Another question does this mean I would have to pay stamp duty again as property deeds would be altered in future??

    The problem is her bad credit rating if not we could both apply together with a much lower LTV%, and be within the CBI rules of 3.5 x income for 620K my problem is I cannot use her 130K:

    1) Without her applying for mortgage aswell - Bad credit rating will not allow us take big mortgage

    2) Without being subject to CAT @ 33% as a gift

    I agree it may look like i am trying to avoid/work around CBI rules but in fact i believe there is good value houses being sold for below market rate with tenants in situ because of LL getting out of the market therefore I need a BTL mortgage either way to be able to purchase this type of property as I would not have vacant possession.....

    I will not claim to want to have part of this as my PPR I will just call it an investment property and when vacant then change mortgage to PPR owner occupier in mean time I will declare to live in my fathers.

    Thanks for your input Fol20 exactly the info im looking for


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