Q I’m a first-time buyer and I’d like to buy a flat. I’m pretty sure I will let it at some point (I am considering returning to university for a year, going travelling, returning home to save money etc), but long term I’ll live in the flat the majority of the time.
Do I need to get a buy-to-let mortgage, and is that even possible as a first-time buyer? One bank I spoke to said I could get a regular mortgage and then apply to rent once I had lived there for a time, but I prefer to set everything upfront with no risk. I have to be upfront about renting and not living in the flat, right? Also, what happens if I lose my job and how will that affect my mortgage?
I am also considering buying a houseboat, but is it easy to get a first-time buyers’ mortgage or buy-to-let on a houseboat? And can I rent out a houseboat? MM
A To answer your questions about the houseboat idea first: yes, you could buy a boat and rent it out, but no, it is not possible to get a residential or buy-to-let mortgage for a houseboat, because lenders won’t lend on property which can’t be registered at the Land Registry, which applies to houseboats.
You can get special marine mortgages, but to qualify for a loan you are likely to need a deposit of at least 20% of the lender’s valuation of the boat – and you’ll have to show you can afford the repayments on a loan with a maximum term of 15 years and an interest rate than can be twice that of a normal residential mortgage.
Also, a houseboat may not be as cheap as you think, as you have to factor in other costs such as paying for a residential mooring (for which there are long waiting lists), a boating licence and compulsory insurance.
If you decide to buy a flat, then yes you do have to be upfront about your plans when applying for a mortgage. And yes, first-time buyers can get buy-to-let mortgages, although fewer than half of buy-to-let lenders will consider applications from first-time buyers.
The advantage of taking out a regular mortgage and then converting it to a buy-to let – or getting a consent to let – is that on buying the flat you are likely to need a smaller deposit and the mortgage interest rate should be lower. However, getting consent to let property may involve paying a fee or an increase in the interest rate you have to pay.
Whichever type of mortgage you go for, if you let the property losing your job shouldn’t affect your mortgage, provided your rental income covers the mortgage repayments. However, if you are living in the flat and lose your only source of income and fail to pay the mortgage, your home could be repossessed, which means you would lose the flat.