Do you think I am right?

alwaysworried_2

Hi,

OH came home the other night to say he wants to buy another property. We already have a mortgage bought property in July 2005 for £250,000, put down £100000 mortgage, had first 2 years as interest only, and last summer changed to repayment. I dont know the actual interest rate we are paying because OH deals with this.

When we bought the house, there was a very large outbuilding that came with it, OH has his metal business, and uses the outbuilding for this. He charges his company £1200 rent every month, so, this technically pays for out mortgage every month, and we have some money left over.

We have £100,000 savings, and OH wants to put some of this towards buying another property which is currently on the market for a fixed price at £370,000.

I really dont want him to do this, as I think its a bad time at the moment. he thinks he will be able to rent out the house we are currently in at the moment, still rent the outbuilding to his business (which by the way is right next to the house), and we can go and live in the new house.

We have had nothing but arguments about this all week. Ive said I doubt he would get a mortgage for it, but, he thinks he will.

Am i right to be hesitant or do you think I should go along with him.

Tracy

lincroft1710

Unless his metal business is turning scrap iron into gold ingots, you've a right to be hesitant. £270K mortgage is hardly chicken feed!

hethmar

Cor, charging your own company £1200 a month for an outbuilding - dont think our accountant would stomach that!

PasturesNew

Of the £1200 you receive each month in rent on the workshop, you're losing about £240 of that in income tax probably.... did he invent this way of doing things, or did his accountant suggest/approve it as a legitimate amount.

If you want "ammunition" to your cause, does the workshop have planning permission to be a commercial workshop? Any new tenant might raise this as an issue and flag it up to the authorities as a nuisance and it might get the workshop shut down. If the workshop shuts down he has the moving costs and the cost of renting another - AND - you lose the £1200/month income from the workshop.

What is he making in there? Who is he supplying with what? How "safe" is that industry? Is his business likely to be unaffected by the downturn as it affects his customers... will they stop buying from him?

Mathematically it just doesn't make sense though. It'd be better/safer to pay £100k off your existing mortgage as soon as is possible.

Remember the old saying: A bird in the hand is better than two birds in the bush.

poppysarah

Is there permission to run a business from the outbuilding? You might not mind, but tenants might and might put a kybosh on it.

You'd be safer paying off your mortgage where you are surely? You're right imo about it being a difficult time in the housing market.

hethmar

It sounds to me that you have a domineering husband - do you not see the outgoings for the mortgage at all?

alwaysworried_2

his accountant told him it would be okay to charge his company rent, he does this by basically paying it to himself through his wages, again the accountant told him to do this.

His business has already been affected by the downturn, and he has even said himself that this year will be tough. it has already affected his customers, he isnt getting as much work as before.

I call it an outbuilding. I suppose I should call it a shop. It is actually classed as a commercial building, and it does have its own address if you know what i mean, so, everything is above board that way.

I really dont want him to do this, but, he is convinced he will get a mortgage no probs.

poppysarah

An interesting and not so transparent way to see the rent. It should imo be paid separately and invoiced for.

alwaysworried_2

hethmar wrote: »

It sounds to me that you have a domineering husband - do you not see the outgoings for the mortgage at all?

I know we pay just over £1000 a month for the mortgage, and I think the interest rate was 6.somthing% .

PasturesNew

If your husband gets it wrong and you don't get a tenant and/or his business takes a dive, you could end up living in a house you never wanted while the one you wanted sits empty and the business closed ... and no income, but two HUUUGE mortgages.

From there it's just a few very short months before you lose the lot and end up owing money on top.

From a position of having everything to having nothing but a big debt, you run the risk of losing not only your home, but your business and every chance maybe ever again of getting back to the position you're in today.

As your husband sounds like he wears the trousers, this might lead to arguments and a break up. Then divorce.

So, in just a year's time you could be sat alone in a bedsit, divorced.

Anyway, that's my doom and gloom hat fully fitted.

What I see is HUGE debt - and no stable way of guaranteeing to bring in the cash to support the new idea. Now is a time for consolidation of your position, not for further speculation, especially as your current house might already be worth less than you paid for it.

hethmar

Do you have any friends or relatives that he may listen to? If he is anything like my OH he will think Im just worrying too much again (and I see from your board name, you may be the same type). If there is a (probably preferably) male rellie or mate who you could talk to in confidence and then he could put forward the possible complications, may be your OH would see sense.