100% BuyToLet Mortgage

MortgageMamma

I cant understand why the OP would want to take such a huge financial comitment for such a small yield. the only way you could benefit from this is eventual ownership of the property and you could well experience negative equity between now and then due to currently inflated house prices. If you want to invest and make money, why not consider more conventional methods. I cannot see what you can gain from this situation in the short to medium term, apart from possibly overstretched finances and the hassle, and yes it is often hassle, of being a landlord.

meanmachine_2

MortgageMamma wrote:

I cant understand why the OP would want to take such a huge financial comitment for such a small yield. the only way you could benefit from this is eventual ownership of the property and you could well experience negative equity between now and then due to currently inflated house prices. .

Let's make this clear, the OP WILL be in negative equity, since the new build will lose value in the shorter term.

They're doing it cos they've seen it on the telly, right?

Cos everyone else is doing it. Cos the Express says prices will double in 10 years... because because because...

At least the parents aren't bothered about seeing their money again. Just as well...

MortgageMamma

yes I agree with you meanmachine. for once. I think this is a pie in the sky idea and if the OP was a client I'd be telling them so. bluntly.

poopscoop

I don't think that was the OP question.

mr_fishbulb

meanmachine wrote:

Let's make this clear, the OP WILL be in negative equity, since the new build will lose value in the shorter term.

They're doing it cos they've seen it on the telly, right?

Cos everyone else is doing it. Cos the Express says prices will double in 10 years... because because because...

At least the parents aren't bothered about seeing their money again. Just as well...

And it's people like OP (no offence) that are fueling the housing bubble. They are prepared to pay stupidly high prices for a house because they believe the value is just going to go up and up.

sashacat

I have has several buy to let mortgages and yes ,they are now quite difficult to get. You can get a mortgage where you sefl declare your income which I have done a few times ( declaring my income honestly, I have to say). However you do need 15% deposit..I have never found a way around this ,and yes you have to have a rental income (which has to be verified by two letting agents in the area, at least in all of my cases)of at least 130% of you monthly mortgage payments. Don't forget that you have to pay for things like corgi gas certificates, landlords insurance, and if it's a flat, maintainance charges. You can still make money in the buy to let market but there is over supply in many areas at present and the classic "young proffessionals" are now buying their own buy to let properties.
Just be very careful

dunstonh

poopscoop wrote:

I don't think that was the OP question.

It may not be but considering the OP hadnt considered the yield and will have no liquid reserve, its fair to say that not much research has gone into it at this stage.

The time to do buy to lets was 5/6 years ago. People doing it now are buying property above the long term average growth index which usually results in a price drop or no real movement until the long term price index has caught up.

The old stockmarket phrase "past performance is no indication of future returns" applies just as much to property as equities. Yet people are ignoring it now.

Risks here are:

1 - no emergency fund - what happens if property goes empty for a couple of months?
2 - what if you rent out to someone that refuses to pay or trashes the place?
3 - new build property - first thing is the property drops in value. Then there are other costs to consider like stamp duty/solicitor etc. Where is money for that?
4 - Rental income is low yield gross and lower than expenditure on interest only basis on mortgage, let alone on repayment basis.
5 - buying the property when the values are above long term average increase (potential risk of price drop or no movement in price for 5-10 years).
6 - exit costs could put the OP into negative equity or result in repossession if payments cannot be met and it wouldnt take much to be in that position.

poopscoop

I think they've done their own research and looked at what's good for them and what isn't. There is loads of posts about this.

If someone wanted to start their own business in something they were passionate about, would you list all the negatives?

mr_fishbulb

poopscoop wrote:

If someone wanted to start their own business in something they were passionate about, would you list all the negatives?

If it was me who wanted to start up my own business I would definitely want to be told all the negatives.

dunstonh

poopscoop wrote:

I think they've done their own research and looked at what's good for them and what isn't. There is loads of posts about this.

If someone wanted to start their own business in something they were passionate about, would you list all the negatives?

Of course I would. It's what I get paid to do.

At the end of the day the OP can totally ignore us and do what he/she likes. However, it does no harm to make sure that the areas we are commenting have been considered.

You say that you feel they have done their own research. How come there is the need to ask about lending here and how come the yield had to be explained. It could be that they know all the costs and information but under other names or they havent mentioned it yet on this thread. Personally, I see this example as a massive risk for amount of potential gain and the things at risk are not just the buy to let property but the primary residence and future lifestyle.

I think this thread is covering everything it should do in helping the OP make their own mind up. I hope bbasra takes the comments into consideration and sees them as constructive rather than negative even if it isnt what he/she wants to hear.