Advice please

SPOTTEDCUP

bit of advice please

have 90k mortgage on our house up for sale 140k, me and wife earn £31200 each per annum both have a credit card each 4k and 5k balances (just cleared all other card balances)

was looking to move to a larger property, however today i noticed a house with land priced at 165k (been advised would except £140k) i could rent the land and house out seperatley

question - 1 would this be a buy to let mortgage?
2 would i be able to get a 2nd mortgage using the ltv from my house?
3 is this the wrong time to be asking the bank for this kind mortgage?


sorry if questions are simple

Thrugelmir

SPOTTEDCUP wrote: »

bit of advice please

have 90k mortgage on our house up for sale 140k, me and wife earn £31200 each per annum both have a credit card each 4k and 5k balances (just cleared all other card balances)

was looking to move to a larger property, however today i noticed a house with land priced at 165k (been advised would except £140k) i could rent the land and house out seperatley

question - 1 would this be a buy to let mortgage?
2 would i be able to get a 2nd mortgage using the ltv from my house?
3 is this the wrong time to be asking the bank for this kind mortgage?


sorry if questions are simple

1. Yes
2. You would need to remortgage your existing property in order to raise the deposit needed.
3. BTL mortgages are available but the interest rates are far higher than average residential mortgages, plus conditions will be attached such as rental income as a % of mortgage repayments. LTV's are restrictive too.

Personally I would not view now as a good time to borrow money to speculate on property investment. Clear down existing debts and build a higher capital base first.

Gorgeous_George

How much could you achieve in renting the house and land?

1. If you are buying in order to let then yes, it is a BTL mortgage (the clue is in the name).
2. As thrugelmir said but there is not likely to be sufficient equity to provide all of the deposit required for the new purchase.
3. It is never the wrong time if the numbers stack up and the risks are properly costed.

GG

SPOTTEDCUP

Spoken to bank need 25% deposit for btl mortgage (35k)

bank have told me can only borrow 12k from our house

(80% of value - outstanding mortgage = 12k)

have told us we could speak to them about a loan for the difference.

could rent house £400 / £450 per month and land £950.00 per month with immediate effect on contract.

looks like a sound investment as it should pay for its self over the 10 year mortgage.

Any advice appreciated.

Thrugelmir

SPOTTEDCUP wrote: »

looks like a sound investment as it should pay for its self over the 10 year mortgage.

Any advice appreciated.

You need to crunch the numbers properly. Allowing for increased interest costs on both mortgages in the future and the fact that net rental income is taxable.

Capital repayments for the mortgage are funded from after not pre tax income.

Gorgeous_George

If you are confident that £1,400 per month in rent can be achieved it looks like a no-brainer.

Why doesn't the would-be land renter not buy the property? How come the rent for the land is so high? Are there any extraordinary costs that have not been mentioned?

As always, if a deal looks too good to be true, it probably is - so be careful.

GG

lisyloo

As others have said you need to crunch the numbers properly.

Allow for

1) BTL and loan interest rate (higher than own home)
2) insurance (again landlord is more expensive than home)
3) repairs & maintenance (don't expect people to treat it like a home)
4) income tax
5) agency fees/solicitors fees (for contracts)
6) accountants fees
7) voids (empty periods)
8) advertising

With maintenance allow a shorter life for things like carpets.
Tenants will not treat somewhere like their own home e.g. will not take off shoes like you would at home with a new carpet.

Also as others have said, if it's a blatantly good deal, then why isn 't there lots of interest.
There might be a logical explanation (the seller might want to do property developement and not be a landlord) but you have to ask the question because if it's blatantly good then there should be a queue for it.

Also if you are mortgaged to the max and you can't find the tenant, then consider how you will fund the monthly payments.
If you were not mortgaegd to the max or had savings then you could suibsidise it yourself short term, but it looks like you are working from a basis of no working capital at all.
A couple of months without tenants and you will be in arrears.
Definietly something to think about how you would manage that situation.
Also can you manage teh max mortgage in case of sickness, accident, redundancy or death. You may need to increase existing insurance which will of course cost money.

Thrugelmir

theartfullodger wrote: »

Remember, last time the Conservatives came to power interest rates rapidly hit 17% and stayed in/around the 10's for some years....

Cheers!

Lodger

Are you part of the New Labour spin machine?

Your repetitive posting of this quote on every thread is getting boring........

Gorgeous_George

Thrugelmir wrote: »

Are you part of the New Labour spin machine?

Your repetitive posting of this quote on every thread is getting boring........

NO. It started boring.



GG

SPOTTEDCUP

The current owner has let it out for the last 15years to a company thats just packed it in.
Hes in his 80s and im told a millionaire,and just wants to sell it off.

is a loan for the deposit normal practise or a expensive way to get the mortgage?

Thrugelmir

SPOTTEDCUP wrote: »

The current owner has let it out for the last 15years to a company thats just packed it in.
Hes in his 80s and im told a millionaire,and just wants to sell it off.

is a loan for the deposit normal practise or a expensive way to get the mortgage?

A deposit is required to give the lender comfort in the eventuality that you default on the loan.