Buy 2 Let : Is this a good deal?

sukimann

I had just been quoted for a BTL mortgage from gmac. The deal is 11% deposit, and fixed for 3 years at 5.54% interest only. Is this a good deal for high LTV? Any advice would be most appeciated.

silvercar

11% deposit is very good, normally BTL mortgages have at least 15%. 5.54% is slightly on the high side. I would check the redemption penalties, make sure they don't stretch befond the 3 years.

Do they require a certain rental to payments ratio?

eilz

If you have an existing mortgage (replayments) what is the maximum amount you can get for a BTL mortgage, say e.g. your current mortgage is £150k and your total house income was about £50k, what more could I borrow as an example. Ideally a repayment option rather than interest only.

herbiesjp

It would depend on the rental incoem the house is generating not necessarily your own personal income

eilz

herbiesjp wrote:

It would depend on the rental incoem the house is generating not necessarily your own personal income

But how would you know how much the house is generating before buying it. I take it you can make a guess, is that what the banks do?

herbiesjp

eilz wrote:

But how would you know how much the house is generating before buying it. I take it you can make a guess, is that what the banks do?

Er no - they don't guess

They get a surveyor to give a rebtal assessment. Soem will ask a letting agent for verification of rental income.

Maybe you could contact some local agents and see what figures they can give you.

Pobby

I would be VERY careful regarding any btl ``investment``.Firstly you need to calculate the assumed yield.That is rental income less your costs.Costs being the mortgage,vancant periods{that`s to say any period when it`s not being let,repairs,insurance and refurbs.Imho interests rates are going to be on the way up and that would add hugely to your costs.

Again,imho property has become another over valued bubble and history shows that markets ALWAYS corrects itself.

I am in the posistion of being able to buy a couple of btls and I would require a very small mortgage but right now that is the last thing I intend to do.I`m happy to just let my money make a bit of interest and I will move into btl when the market looks a lot better.

dunstonh

Again,imho property has become another over valued bubble and history shows that markets ALWAYS corrects itself.

People really underestimate the risk they are taking by going down the buy to let route with additional borrowing. It is a high risk transaction and many are going to get the fingers burst. It's amazing how many do not realise what risk they are taking and the consequences of what can happen if there was a property crash or interest rates were to rise.

There are a number of individual events that could create a cascade of events and drop property prices by around 30%. Whether those events will happen as a cascade is a different matter. However, it looks increasingly likely.... increasing interest rates, increased requirements and liability on the landlord, inland revenue catching up with those not paying the right tax, increased tax burden likely, recent significant increase in interest only mortgages....

Pobby

Dunstonh.I was very interested to see that you are of my opinion regarding a fall in property prices.People don`t seem to understand that property is a long term commitment.It`s almost become a fever in some quarters regarding btl.I know people who have eye watering amounts of debt tied up in real estate and fingers crossed,the wind blowing in the right direction they may,in the future,see some return on it.

One problem it seems to me,is that folks have some strange idea that interest rates will remain low for the life time of their mortgage{s}.When I reply that pre the late 90`s,interest rates averages were around 8 to 9%.An interesting article I read regarding the U.S suggests that the recent low rates have done little more than distort their economy.

Another fallacy often flouted is ``They{the government I assume}won`t let it happen.If global rates are on the way up we have to follow suit.

I don`t thinj it will be one event that causes the crash but a whole series as the debt unravels.