Buy To Let and fixed rate advice please!

Davecortes

I moved in with my girlfriend about a year ago and re-mortgaged my flat to raise some much needed funds, I went on a buy-to-let mortgage, at 5.9% I thought was a fairly good deal (at the time). With the drop in House prices, my BTL is around the 100% mark. Now, in 3 years time, when my fixed term runs out, will I be able to get another BTL mortgage or will I then go on to the higher rate with my current lender as no-one is lending 100% mortgages anymore. I am slightly worried about this as I may no longer be able to afford the monthly payments. I admit I probably didn't get the best advice and maybe when into the deal a little hastily. But I am fairly young (28) and inexperienced and am looking at learning the hard way. It's in a good commuter area and a nice apartment so hopefully getting tenants wont be a problem (hasn't been thus far). But I'm struggling as it is.

On a seperate note, my partner re-mortgaged after coming to the end of her fixed term, timing was probably the worst in history as it was just before the drop in interest rates, she is now on a 6.9% 3 year fixed rate with Halifax, who now, 4 months later, are offering a 2.99%. Despair!! And basically struggling rather worryingly.

Any help and advice would be much appreciated.

silvercar

Why are you struggling if you have rental income to help pay the mortgage?

Your right, no-one is lending 100% LTV on BTLs, so you would go onto whatever deal your current lender can offer you.

Your partner has the benefit of knowing that her rate won't go up. Believe me a 6.9% rate is not the worst in history by a long way.

Why is she struggling? If you have move in are you helping with the bills?

I'm missing something her because before you moved in with the girlfriend you between you had two properties to run. Now you have the benefit of rental income to help pay one mortgage and only the utility costs etc of one property, so why the struggle?

Davecortes

Because of me moving in she now has had a drastic cut in working tax credits (£90/week to just £10) and also council tax allowance. She has a 6 year old child. Me moving in has increased food, plus all utilities. We have basically halved all outgoings, but it is still less than she was receiving previously and expenses have increased.

With regards to my flat, the rent is about £20 short of the mortgage, plus I have a maintenance monthly fee to pay, plus insurance... But I'm managing ok with that for now, it's my fixed rate expiring that concerns me.

Davecortes

As previosuly stated, when I moved in with her I re-mortgaged my flat which increased my monthly payments by around £150 per month.

dimbo61

Worry about the BTL mortgage in 3 years time and if you can overpay on the mortgage.
stop worrying about what the banks are offering right now and stop reading the crap on some websites
You can bet the 2.99% deal is only short term and only given to lenders with good LTV.
Most new trackers are BOE rate ( currently 1.5% ) PLUS 2.49/2.99%
Most fixed rate 3/5 year deals are 4.75/4.99% so you fixed at the wrong time
How much equity have you both got in your homes ?
You are near 100% LTV or even negative equity and your girlfriends home ?
Just overpay what you can afford each month and get on with life.

Davecortes

I have about 5% equity in my flat, if that, it was valued at £108k about 7 months ago and the mortgage is for £94k and my partner has around 30% equity in her house.

It's hard not to read some of the crap as it's being shoved down your throat on a daily basis!

I'm pretty much at my limit at the moment so overpaying in my current financial situation is not an option really. But certainly something that would be a priority should some extra funds become available.

I'm trying to look to the future as I've spent most life working on impulse and it usually doesn't get me anywhere!

Thank you for your prompt replies.

Gorgeous_George

You will be able to stay on your current deal. You will not be forced to move to a new product. Indeed, you probably wouldn't be allowed to do so.

Do you know what rate your BTL mortgage reverts to at the end of the fixed term? Is it an SVR or does it track the base rate?

BM Solutions, for example seem to track base rate (current products are generally at +3% so just 4.5% overall) when the fix ends.

You need to keep your tenants at all costs but also, you need to get the highest rent possible. Keep an eye on the market and make sure you are close to the top but be prepared to drop a little to keep good tenants. It will be a bit of a balancing act. Rents should rise by 10% over three years so it may seem easier by the time you get to renewal.

Don't forget to complete your tax return. Losses can be carried forward to set against future rental income.

Be prepared for unexpected bills. Repairs can often wait in your own home but tenants deserve and expect more. You might just want to keep a credit card clear but better to have a fighting fund set aside for emergencies.

You should also consider selling the BTL property. If it isn't covering the interest on a mortgage, it is costing you money that you can ill afford. Selling now may be the best time to sell in your lifetime. If you don't sell now, you may never be able to afford to sell.

GG

Davecortes

Thanks GG, I'm not completely sure what it will revert to, I will give them a call in the morning, it's with Bristol and West who are owned by the Bank of Ireland.

I don't want to sell the property, if I can struggle it out for a few years it may bear some fruits in the future, also, for other reasons, selling is not option unfortunately.

I understand that things can go wrong with properties and have allowed for problems, as you say, when it's your own home things can wait but not when I am renting it out, I've had some electrical problems recently which were dealt with immediately, and provisions are in place for any future problems.

What's your take on house prices over the next 3 years? The property is in Leeds so don't suppose it's had as much effect as in the capital, but are we at rock bottom yet? or is there still some way to go? When can we realistically see prices start to increase again?

Thanks for the advice on the tenants and the tax return, I haven't had any problems so far, fingers crossed, and hopefully shoudln't in the future due to it's location and condition, but I suppose you can never be too sure.

Gorgeous_George

I've tried to find out what a typical B&W BTL mortgage would revert to but without success This may be the key to your future sanity. Please let us know when you find out. A lot of people will be in the same boat.

I think prices will continue to fall and will never recover. For example, my home was 'worth' 10x my salary last year and I don't think it will be so valuable ever again. Nearer 6x would make sense.

So, I don't think we are at rock bottom and prices may not start to rise for a few years at least. If I had to put a date on it I'd go for Spring 2015. I might be feeling a little pesimistic today

I hope things work out for you. If all else fails, look after your tenants. You cannot afford a lengthy void.

GG

Gorgeous_George

This site from 2004 suggests that a 5.9% deal reverted to BofE base rate + 3.19%.

No idea what base rates will be in 3 years' time but that would be 4.69% today. This means that your repayments would drop by £18 per month (if base rate is still 1.5%).

GG

silvercar

With regards to my flat, the rent is about £20 short of the mortgage, plus I have a maintenance monthly fee to pay, plus insurance... But I'm managing ok with that for now, it's my fixed rate expiring that concerns me.

This flat is costing you money. Why keep it? Sell it while you can. If prices drop further you won't be able to repay the mortgage and will be unable to sell.