Buy second house or overpay current?

Atechnician
Atechnician Posts: 24 Forumite
First Anniversary
in Mortgages & endowments
I still have 29 years left on my first property I've had for a year which will be getting reduced when I over pay a bit and get a lower interest rate but I can now afford to pay a second mortgage and I'm thinking maybe buy to let or buy and rent current property out.

Should I over pay my spare cash or is it a good idea to get a second home? I will be able to save another deposit in less than a year and will have 800-1000 spare a month which could go towards a second place or overpay current

My current mortgage is £751 a month. I suppose it would be good if I can have multiple properties when I'm in 40s and 50s

Comments

  • flashg67
    flashg67 Posts: 3,997 Forumite
    Name Dropper First Anniversary Photogenic First Post
    If you fancy the idea of being a landlord (Do your research first though - it's not for everyone) then start as soon as you can, is my advice.

    I'k 50 with 2 BTL's and wish I'd started sooner - not really for the income, but to maximise capital growth for my later years.
  • Atechnician
    Atechnician Posts: 24 Forumite
    First Anniversary
    Yeah I have done some research on being a landlord and spoke to estate agents for Info but still plenty of research to do. The way things are I have a excellent pension plan with my company and Im looking to retire at 55 so if I could have a few properties paid for when I'm roughly at that age would be great. Is it possible to do these days?
  • justme111
    justme111 Posts: 3,508 Forumite
    First Post First Anniversary Combo Breaker I've been Money Tipped!
    Why do you want btl if you got excellent pension?
    Do you have emergency fund saved ?
    Do you know what would you buy as a rental property and why and can you really get 25%deposit in a year on it?
    Why not overpay your mortgage instead?
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Name Dropper First Anniversary First Post I've helped Parliament
    Atechnician wrote: »
    Yeah I have done some research on being a landlord and spoke to estate agents for Info but still plenty of research to do. The way things are I have a excellent pension plan with my company and Im looking to retire at 55 so if I could have a few properties paid for when I'm roughly at that age would be great. Is it possible to do these days?

    have a think about how you achieve that

    5% gross yield 25% deposit 4% mortgage rate, 2% rent inflation.

    That £100k BTL house with a £75k mortgage.

    RentPA £5,000 20% for costs/tax, net £4k or say £335pm

    £75k over 30years paying £335pm inflated 2% pa

    paid off in 23years.

    If rates go up to 5% 28 years, 5.5% 31 years
  • Atechnician
    Atechnician Posts: 24 Forumite
    First Anniversary
    I would be looking for flats at the minute ranging from 50-80k

    I can save £1k a month =12k in a year plus I get about 3.5-5k every 6 months from my shares and have a couple thousand in savings so let's say £21k saving for the year that should give me enough for a deposit for a property up to 84k so can get a deposit in a year.

    Why settle for just a pension when have the opportunity to get more?
  • justme111
    justme111 Posts: 3,508 Forumite
    First Post First Anniversary Combo Breaker I've been Money Tipped!
    So you have replied a question on deposit, what about other questions? You will be left without emergency savings if you put all your money into deposit to get it to 25% in a year , will you ?
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
  • Atechnician
    Atechnician Posts: 24 Forumite
    First Anniversary
    What would you class as sufficient emergency savings? I get my shares money every 6 months and have option of interest free credit cards ect, and I don't need to spend all
    That money was just an example
  • justme111
    justme111 Posts: 3,508 Forumite
    First Post First Anniversary Combo Breaker I've been Money Tipped!
    Ok , let's leave emergency savings aside.
    I would not do it if I were you (with caveats of not enough info provided). Because I would not feel comfortable having 29 years mortgage on my house while taking on more debt. Because I would not be happy dealing with leasehold, charges and likely high turnover more trouble than usual tenants in a flat.
    You do what you see fit.
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
  • foxy-stoat
    foxy-stoat Posts: 6,879 Forumite
    First Anniversary Name Dropper First Post
    Have you crunched the income tax numbers for the next few years, baring in mind that in 2020 you will not be able to claim any relief on interest payments?
  • SouthLondonUser
    SouthLondonUser Posts: 1,425 Forumite
    First Anniversary Name Dropper Combo Breaker First Post
    No relief? My understanding is that relief will be capped at 20%, even if your marginal tax rate is higher. And of course you have to take into account the extra 3% stamp duty when you buy.
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