Buy to Let on Ex-Council House
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The Financial Conduct Authority does not regulate some Buy to Let Mortgages.
Your property may be repossessed if you do not keep up with your mortgage repayments.
Buy to Let on Ex-Council House
Anthony McQuilliam is back to explain how to get a Buy to Let mortgage on an ex-council house.
Podcast approved by The Openwork Partnership on 21/05/2024.
Can you get a Buy to Let mortgage on an ex-council house?
Yes, but there are a few caveats to that. When you’re looking at buying a property that is ex- council. There are a couple of extra checks that lenders do when they’re looking at valuation.
In terms of how they assess you as a person or a company getting a mortgage, that’s still exactly the same. But depending on the area, how the property is built and especially on high-rise ex-council flats, there are a lot of extra things that the valuer looks out for.
If, for example, they’re not happy with the property or the potential resaleability in the future, they may kick the mortgage application back. The lending is based on them being able to sell the property if you ever don’t make your mortgage payments in future.
How does getting a Buy to Let mortgage on an ex-council house work?
It’s exactly the same process, in regards to speaking to your mortgage broker early on for all the affordability checks. The only real difference is the valuation. As long as they’re happy with the potential resaleability, the process is the same whether you’re buying a standard property or buying an ex-local authority one.
Do many lenders offer Buy to Let mortgages on ex-council houses? What is the criteria to do this?
As an individual going down the Buy to Let route, it’s very similar to buying a standard property. Some lenders may need a minimum basic income for a Buy to Let mortgage.
Other lenders may allow you to get a mortgage without any income at all. How they would assess the rental income and the stress test is identical. It’s just going to come down to the right lender, because some just won’t lend on ex-Council properties at all.
They all have different rules. Ex-local council flats tend to be a bit harder to get mortgage applications agreed on, because of potential resalability. If you’re buying a property where everything else is council owned or council-loaned, it may be harder to resell. That’s how lenders make their decisions.
Can I buy my council house on a Buy to Let mortgage if I have bad credit?
With regards to buying your council house directly, that depends on a couple of things. If you are looking at buying a property that was an ex-council house from somebody else, that’s fine.
They would still credit check you like everybody else. There are some specialist lenders if you’ve got bad credit where, depending on how bad it is, they can still allow you to get a Buy to Let mortgage.
But if it’s a council house now and you’ve been offered the Right to Buy scheme, most lenders won’t allow that for a Buy to Let mortgage. You need to buy directly from the council as a standard residential rather than as a Buy to Let.
How does remortgaging a Buy to Let ex-council house work?
It’s exactly the same process as a standard Buy to Let remortgage. You still speak to your mortgage broker to see which options will be best for yourself. If you’re looking for further borrowing against your portfolio, we can reassess that too.
However, let’s say for example, you had your mortgage agreed with a lender and they accepted the initial purchase transaction. You might later try to remortgage to a new lender offering you a better deal, but they’re not happy with the future resaleability. That may potentially limit your options.
That being said, the first lender accepted the property, so usually there will be a lender out there that will take the same view and allow you to remortgage.
What costs are involved with a Buy to Let mortgage on an ex-council house?
It depends how you buy them. If you’re buying in your own personal name or under a limited company, the costs can be different. The solicitors’ cost when buying under a limited company is a bit more expensive than doing it in your personal name, because there’s a few other checks and guarantees involved. So solicitor costs are usually in the region of £2,000.
You also have stamp duty costs which will be the same whether you’re buying in your own personal name or under a limited company. You’ve also got mortgage broker costs and product fees.
Product fees for limited company Buy to Let are usually a percentage of the mortgage balance you’ve applied for. They tend to be a lot more than when you buy in your own personal name. You’ve also got valuation fees to pay.
What are the pros and cons of getting a Buy to Let mortgage on an ex-council house?
The benefits are that you may be able to buy properties that are a little bit cheaper than standard property in the area. They still rent out for a very similar amount, so the yields could potentially be a bit better.
The downsides to it is when you’re looking at potentially remortgaging or reselling in the future, there could be issues.
How can a mortgage broker help here?
If you’re looking at buying a council or ex-council property, speak to a broker really early on in the process. We might be able to have conversations with local valuers or with the lenders themselves. We can check if lenders would potentially take the property on.
A lot of it is bound to the valuer’s comments when they go out and view the property. If you’ve got your heart set on buying a particular property, and you only speak directly to one bank that kicks your mortgage back, you’ve got no other options.
But if you speak to a broker and a lender is not happy with the valuation, there are so many other options for you. You’ve got more bullets in the gun, and can search again if your application is declined by one lender.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
SOME BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
Approved by The Openwork Partnership on 21/05/2024.
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Buy to Let Ex Council House Part 2
Anthony continues the conversation on getting a Buy to Let mortgage on an ex council house. Episode 2 of 2.
Podcast approved by The Openwork Partnership on 7/6/2024
Why is it harder to get a mortgage on an ex-local authority property?
It’s not as straightforward as buying a standard property that’s not ex-local authority. It does limit the amount of lenders that you can look at, because they look at the future resalability of the property.
An ex-council property in a council area, or ex-local authority area, may have limited resalability options in the eyes of the lender. That is one of the biggest holdups we see when people buying a property that was previously owned by a local authority.
Can I rent out my ex-council house?
You can indeed – but it massively depends on the mortgage you’ve got. If it’s a residential mortgage, you would need to ask for something called Consent to Let. Alternatively, you would need to have bought the ex-council property with a Buy to Let mortgage.
With most residential mortgages, you cannot rent the property out unless you get Consent to Let. This is permission from your lender to rent it out, usually for 12 months. After that point, you can either ask for another Consent to Let or they force you to set it up as a Buy to Let mortgage.
What if I’m self-employed? Can I get a Buy to Let mortgage on a council house?
Yes. A lot of people get very caught up in the idea that it’s harder to get a Buy to Let mortgage if you’re self-employed – but it’s simply not the case.
If you own a residential property already and you are self-employed, the main thing lenders will look at is what the property will rent out for. Some lenders may check you’ve got a minimum income of around £25,000 while others just want to see that you do have an income outside of property.
As long as your rental income stacks up, there’s usually no problem at all.
Are there any additional considerations for ex-council houses with a Buy to Let mortgage?
It’s mainly going to come down to the specific figures on future resalability. If you’re looking at buying a property in a very built up area or that’s surrounded by local authority properties that aren’t privately owned, that could potentially impact resalability.
But as long as the lender believes there’s a good opportunity to resell that property later on, and the rental income stacks up, there should be no problem in getting a Buy to Let mortgage on this kind of property.
What if it is an ex-council flat? Is there a difference between mortgaging a house or a flat that was previously owned by a local authority?
A lot of flats, especially ex-local authority ones, can be in a high rise block. Anything over four storeys in height starts cutting out certain lenders.
For example, if it’s a 15 storey building and your property’s on the top floor, that could massively limit resalability. Some people just don’t want to live up that high, especially in an ex-local authority property. Because of that, lenders can kick these types of properties back.
One of the biggest things to look at with a local authority flat is the amount of privately owned properties nearby, compared with council owned properties.
Lenders also look at how many floors the building has – everything is based on resalability of the property. As long as they feel like they can sell the property later on down the line, there should be no issues in getting this kind of mortgage.
If you live in the council house, could you get a Buy to Let mortgage on another property?
You can buy your ex-local authority property through the Right to Buy scheme. If you’ve lived in the property for a certain amount of time, the council will give you a mega-discount, and that can be used as a deposit.
So if the council gives you an £80,000 discount, you can use that as a deposit to purchase the property. Once you’ve got that property as your own residential house, lenders are absolutely fine in lending for a Buy to Let property going forward. They don’t care what kind of property you’re living in, as long as you own it to match their criteria.
How can a mortgage broker help here? Is there anything else to add?
If you just speak directly to a particular bank or building society, they may not be open to lending on ex-local authority or ex-council properties. A mortgage broker can help, not just by looking at the kind of property you’ve got and your income, but also by looking at the entire market of lenders.
That one individual lender may potentially kick your deal back. Perhaps the valuations don’t stack up or you just don’t match their criteria. You might be disheartened that you can’t get your mortgage sorted.
But mortgage brokers have access to substantially more lenders and are experts in finding the lenders that will allow you to buy your ex-council property and rent it out.
A lot of brokers also have relationships with local surveyors – and if they are the ones going out on behalf of the bank, we can sometimes have conversations to get a definitive answer before they go and view the property. We can see whether we’re wasting time and whether they’re happy with these kinds of properties.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
SOME BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
Bolt Mortgages is a trading name of Just Mortgages Direct Limited which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.
Approved by The Openwork Partnership on 7/6/2024
Your home may be repossessed if you do not keep up with your mortgage repayments.
