I really need your help

Emmy

Hi,
I really want to buy the house next door to me. Our house that we live in has a mortgage of £500, however, we pay an extra £500 a month off of it (we do this because we don't actually spend any of my full time wage, the rest (700) sits in the account) Thing is I suspect I wouldn't get a mortgage for the 138k that I need as they will calculate I cannot pay it....but obviously I would as I have 1.2k a month to spend just on a mortgage....I hope I am making this clear!!

So what do you think the best way of buying this house is? a buy to let mortgage ? as we will want to rent it out...... or any other ideas welcome. I am going to see the halifax tomorrow but hoped you guys might have some bright ideas

AndrewSmith

If you are going to rent it out then a buy to let mortgage is the way to go.

You will need a 15% deposit at least for a buy to let mortgage and the rental income you expect to receive (which the lender reserves the right to have verified by letting agents) will have to be in the order of 125-135% of the mortgage payment. You do have to be in gainful employment (employed or self employed) and will sometimes need to be earning above a certain threshold. However in most cases the mortgage borrowing will be based on the rental income achievable for the property.

Remember that the rental income could potentially incur an income tax liability, and also when you sell the property, as it's not your main residence you could have a liability to Capital Gains Tax (dependant on the increase in value etc. Take advice on CGT from an accountant). It's not all doom and gloom though because you are able to offset the mortgage and reasonable running costs of the property (including letting agent fees) against any income tax liability. Also take advice from an accountant regarding 'Independant Taxation' which is where if you are buying with another person, you utilise both of your low rate tax bands to the max.

Hope this helps

Andy

Emmy

We are only wanting to rent it out for say 5 years as then we hope to knock through....yes it's a semi !!!!
Sad thing is, we don't have the 15% required. We have always said "if next door came on the market we would buy it" you know pie in the sky sort of thing as they were settled then low and behold I came home from work on Monday and there it was 'for sale' so there must be a way that we can do this ....plenty do!!!! just not sure of the protocaol. Maybe a loan for the 15% ????

bingo_2

If you decided to apply to Natwest for a 95% mortgage to buy the one next door, on the basis that you are going to live in it, and rent out your own (current one), and the rent achievable on your own house covers the mortgage payments per month, they are likely to agree it.
I know someone who does this regularly to get buy to lets at 95%.
He lives in them for a while thenm decides to move on, rent out, and get another 95% mortgage to buy a house for him to live in (until he gets fed up with it and moves on again, leaving a trail of 95% mortgaged "buy to lets" in his wake)
I wouldn't do it, but in a scenario where I am only buying the one next door and then move in and rent my own out, I would br well tempted.
Of course, I may the decide to move bcak in again 6 moths later , or whatever .

Woby_Tide

maybe try Nationwide also, their affordability criteria may work, as long as you take documents/statements in showing your financial situation and what currently happens it should at least lend credibiltiy to your discussion and what you can afford etc.

HGLTsuperstar

Not sure, need to get this checked, but if CGT is an issue, can you not have one property as your main residence, and OH have the other?
As for the deposit etc, how well do you get on with the neighbours and how quickly do they want to move. You have no chain etc, so perhaps there's room for negotiating on the price, so they "pay your deposit"

herbiesjp

HGLTsuperstar wrote:

Not sure, need to get this checked, but if CGT is an issue, can you not have one property as your main residence, and OH have the other?

As long as you both live separately