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I'm in need of the TEF's finest financial advice...

I'm a first time buyer, just had an offer accepted on a house. There is currently a tenant in place, who I'm happy to let stay for the moment, with me looking to move in in perhaps 6-12 months time.

My mortgage advisor says I need to have a buy to let mortgage. Being a first time buyer, this immediately narrowed down my options to two deals. When I've asked around colleagues who have properties that they let out, they are all on normal residential mortgages. Is this mortgage fraud, as my advisor suggests, or is it above board?

Second of all... when the tax man sees £600 going into my bank account each month is he going to start chasing me for tax?

Beginning to think it might be easier to just kick the tenants out and leave it empty for a few months.

Not an expert but yes you technically need a buy-to-let mortgage and all of the other red tape with renting the place.

Yes it should be declared as taxable income on a self-assessment. Of course, if you have expenses with renting e.g. maintenance, letting agents fees etc. these can be deducted from the rental income for tax purposes.

I seriously would not buy a property with a tenant in situ. Depending on his tenancy agreement, (if it was pre 87 for example, which I guess is unlikely) you can't get them to leave even if you want them to. If you are Using as your main home then you don't need a buy to let mortgage, it's only if you are buying solely to,let out you need btl mortgage.

Dunno about the tax bit but yes it is mortgage fraud if you get a residential mortgage on a property that is let out.

Agree with all previous comments.

You will need a buy to let mortgage.  You could chance it with your mortgage company - but somewhere you will need to make a declaration that the home is your primary place of residence.  If you lie, you may come to regret it.  Thinking laterally though...you say the property is a house.  How many bedrooms?  Might it not be possible for you to 'nominally' occupy one of the rooms (ie make it your official primary residence) while also letting out rooms to the tenant.

On balance, however, I would go with Levi Lapper's advice.  This is an unnecessary complication for you.  Why take on someone else's problem?  I would ask the tenant to leave if it was me in your place.

And the tax point.  I very much doubt that the tax man would notice the £600 dropping in to your account each month.  I don't think Big Brother has got that far just yet.  But Samdy is absolutely correct in that the income is taxable and should be declared on a self assessment.

You'll be opening a can of worms if you proceed with a residential mortgage and then let it out.  Besides the fraud side you will need to have everything tested and certificated, can be quite expensive, as you will be liable for everything that goes on, you will also need insurance - it is his responsibility for contents insurance - is it worth it if you are going to move in anyway in 12 months' time?

buy my house

Thanks for the replies chaps.

The house was originally meant to be a buy to let investment with a view to move in after initial two-year buy to let mortgage deal was over. I think the excitement of finding and securing a really nice place that ticks all of my boxes within my budget is clouding my judgement! I'll keep it above board with regards to mortgage, if tenant decides to leave mid-term on my mortgage I'll re-evaluate the situation then.

Cheers!

You can get consent to let on a normal residential mortgage, but that's generally only if you live in the property and then let it out at a later date. You wouldn't get away with doing it from day 1.

Bear in mind that if you do buy it on a B2L mortgage and then move in at a later date, you'll need to remortgage to a standard residential otherwise you'll be in breach of the B2L mortgage conditions.

HMRC are clamping down on tax avoidance on rental income, so be careful and get a good accountant.

And only two mortgage deals? Is your broker whole of market? If not, you need to speak to me ;)

There are likely to be only a handful of lenders at best due to the fact he's a first time buyer. Most lenders will exclude a FTB getting a BTL in their lending criteria due to the risk of scheme manipulation, with the view it will be easier to get a BTL mortgage due to not necessarily having to provide evidence of income.

Interest rates can go up and down

In theory, yes.  In practice, however, as of now...they're not going down any time soon!

Yes, and of course you could opt for a fixed rate