ideas above my station??

gardnt1

Hi, after a reality check!

Currently about to remortgage due to current deal expiring.
House value approx £220000
mortgage owing 118,000 over 17 years
earn jointly approx £50000 a year
debts of 24,000
savings 11,000


I was going to borrow extra 17000 on mortgage over same 17 years on a 4.99 fixed 15 year flexible.
This way I could clear debts and keep £7000 of the savings which are in shares to recover better!

Heres reality check!

I have been offered chance to purchase a holiday home in portugal with a £10000 income from rental. Sounds great but they want £150000. This is a good price for its location and a good investment, trouble is am I living in cloud cuckoo land thinking I could raise funds for it?

Any advice would be great. Thanks, Tim

DavidLaGuardia

Tim let's take a reality check here.. £10,000 is 6.67% of price and then after you deduct likely costs and mainteneance this is going to be reduced significantly.
Since all of the money you will have to find for the property will be financed you run the risk of paying more monthly than you ar taking, so the only wing and prayer you have is on the growth of the property value.
You might want to consolidate your exiting debts into a mortgage to save some money.
As for the amount of lease You can get around 7K profit from a £25,000-30,000 holiday chalet in the UK.

gardnt1

Thanks,

I sort of know that its probably an unrealistic and not really a wise investment. The gross return last year was actually £12000 and maintenance fees are appox £2000 a year.
Thanks for advice, any more appreciated.

Gardnt1

jago25_98

" As for the amount of lease You can get around 7K profit from a £25,000-30,000 holiday chalet in the UK."

Woah. I was considering living in Portugal (work pays for travel) and running a guesthouse for brits.

But £7k back on £25k sounds great. Where on earth do I find a deal like that?

Jonbvn

Let's put some numbers to this:

1. Most lenders will only lend at 75-85% LTV. So you would need a deposit of approx £23k. Where will this come from?
2. Most lenders require the rental income to be 120-130% of the mortgage interest payments, for fees, void periods etc. Assuming your had a 100% LTV mortgage at 6% (too low), then the interest is £9k. 120% of this exceeds £10k.

What is the outlook for property prices in Portugal. I would guess they will follow other Eurozone countries such as Spain and Ireland, which are experiencing significant price drops.

From the above, it is clear that you would be overstretching yourself significantly. Finally, other than some rainy day savings, it is best to pay off your debts with your savings.

seven-day-weekend

If Portugal is anything like Spain in this way, there are holiday homes lying empty as there is vast overcapacity.