Residential/Buy to Let mortgages

[enaid]

Can someone please explain the differences between the two please.
Also if one or either has any pit falls.
Thanks Enaid x

[Paule]

Re: Residential/Buy to Let mortgages

A 'buy to let' is when you intend renting out the property to tenants rather than living in it yourself.

[enaid]

Re: Residential/Buy to Let mortgages

A 'buy to let' is when you intend renting out the property to tenants rather than living in it yourself.

Pk I know that much, I need to know the difference if any, in the two kinds of mortgages that you can have on properties you are intending to rent out. Thanks anyway Enaid x

[Amy]

Re: Residential/Buy to Let mortgages

Buy-to-let mortgage lenders base their decisions on whether or not to approve the loan on the likely rental income from the property ie. will the monthly rent cover the existing mortgage.

As opposed to decisions on a residential mortgage, which are based on income.

Buy-to-let mortgages can also attract a much higher interest rate than a residential mortgage, that said, some lenders will allow you to stay on your current mortgage deal for as long as that lasts.

Another point to consider is that if the mortgage is changed to a buy-to-let mortgage will any penalties be incurred for redeeming the existing mortgage.

[enaid]

Re: Residential/Buy to Let mortgages

Thanks Amy, I understand that now. No, my mortgage deal is up in July this year so I need to get the ball rolling on a new deal anyway. From what I understand on what I have read so far you can have an interest only mortgage on a residential deal. Also something about Capital Gains Tax when you sell the property , but that only comes into play after I think 5 years maybe 3.

[Amy]

Re: Residential/Buy to Let mortgages

You normally have to pay Capital Gains Tax when you sell a property which is not your private residence, but you don't have to pay Capital Gains Tax on a property you have lived in, if you sell it within three years of moving out.

If you sell after 3 years of moving out, it gets a little more complicated as you will have to pay Capital Gains Tax, but you will also then qualify for Letting Relief.

When I looked into all this for my brother the Letting Relief was £40,000 on the gain and the gain is the amount you sell it for, minus what it was worth when you started renting it out.

[argentarius]

Re: Residential/Buy to Let mortgages

... less any selling costs (estate agents, legal fees, etc.), less the cost of any capital improvements you made to the property whilst it was let, ...