'habitable' clause in BTL mortgage criteria

[chopper]

Fellows...

In the process of buying another property for investment purposes, it being 'in need of modernisation' with 'lots of potential'.

Of course, BTL mortgages tend to have a 'must be habitable' clause, with no real definition of 'habitable'. The house could be lived in: it has a fully working kitchen and bathroom, it has electrics (no gas though) - it is just really really old fashioned and does need a new everything - it even has original bakelite light switches in places.

Does anyone have any experience of whether mortgage companies would decide this isn't habitable (Natwest in particular) or whether I will be sent down the route of a bridging loan first and then get a proper BTL mortgage when it is actually ready to let out?

[northernladuk]

They are based on the income pays the mortgage. The place must be able to take paying tenants on. You are unlikely to get one for a house that needs improvement before you can start letting it.

Look at it from their perspective. You take a mortgage on a property that needs improvement. Turns out you need major works that is going to take months. Massive risk of you failing to pay as it's all coming out of your pocket. That's not what the mortgage was intended for.

You'll probably need a bridging loan until it's complete and then go for the BTL.

[eek]

They are based on the income pays the mortgage. The place must be able to take paying tenants on. You are unlikely to get one for a house that needs improvement before you can start letting it.

Look at it from their perspective. You take a mortgage on a property that needs improvement. Turns out you need major works that is going to take months. Massive risk of you failing to pay as it's all coming out of your pocket. That's not what the mortgage was intended for.

You'll probably need a bridging loan until it's complete and then go for the BTL.

You don't have an offset residential mortgage with enough available credit to provide the money required?

[northernladuk]

You don't have an offset residential mortgage with enough available credit to provide the money required?

Dunno if they are that flexible with BTLs.

[eek]

Dunno if they are that flexible with BTLs.

The idea is that you have enough money available against your main property to facilitate the purchase of anything of suitable interest. An offset mortgage is perfect for this as it doesn't cost any money when paid off but gives you instant access to £100,000+ if the need occurs...

[Paddy]

Fellows...

In the process of buying another property for investment purposes, it being 'in need of modernisation' with 'lots of potential'.

Of course, BTL mortgages tend to have a 'must be habitable' clause, with no real definition of 'habitable'. The house could be lived in: it has a fully working kitchen and bathroom, it has electrics (no gas though) - it is just really really old fashioned and does need a new everything - it even has original bakelite light switches in places.

Does anyone have any experience of whether mortgage companies would decide this isn't habitable (Natwest in particular) or whether I will be sent down the route of a bridging loan first and then get a proper BTL mortgage when it is actually ready to let out?

Interesting. I would go by whether council tax is payable or not. If it is uninhabitable then no council tax is payable. If the previous owner was paying council tax then it must have been deemed habitable.

[chopper]

I don't have an offset mortgage on my own house, no.

However, that sounds like an interesting way to attract the attention of HMRC when it comes to working out the cost of the interest and the appropriate tax deductions? (Genuine question - what do you do here?)

In fact - something I hadn't thought about (and I could ask my accountant, but he's probably not around tonight). Entirely theoretical since I'm not going to do this... Lets say you borrow the money to buy the house from your own contracting Limited Company, and the company charges you 3.25% interest on that (so not a BIK then). Is that interest a deductible expense, or would that cause eyebrows aloft?

[AtW]

Buy it using your Amex Centurion Card.

HTH

MF

[chopper]

Interesting. I would go by whether council tax is payable or not. If it is uninhabitable then no council tax is payable. If the previous owner was paying council tax then it must have been deemed habitable.

I saw one definition of habitable as being:
"A habitable property is considered to be one that has a weatherproof roof and walls, plumbing, and other basic features that would allow a person to live in it at the time of purchase." (not from Natwest though).

Which it is. And indeed council tax would be payable (the owner has gone into care and needs to sell to pay for his care, so it is livable in - just not very nice right now).

The Natwest eligibility says "The property you wish to purchase, or remortgage to us, must be habitable" - other providers specifically say 'readily lettable'.

[northernladyuk]

Wait until Brexit and the definition of what is habitable will change in your favour.