Renting my house and using equity to buy

new_home_owner_3

Im only talking from what i done, i had a residentioal mortgage last april, we had the house up for sale for two years and had no luck in selling anyway we decided to remortgage for 5 years fixed rate, and when i done this i asked what the implications was if we decided to rent, and they told us the same as your lender did that it would be okay.

When we remortaged we added 60,000 pounds for home improvemnts, anyway we put that money in the bank, before we began the house improvemnts and a new car anyway a house came up for sale that we liked, so i got some agents out come out and see what rent we would get, and it was nearly double the mortgage, anyway, i then contacted my lender and got consent to let.

And instead of using the 50,000 pound for house improvemnts i got another residential mortgage and used that money has my deposit.

Now you could do exactly the same and avoid high btl mortgages, even if you make 6000 pound a year it will take you years to get a deposit big enough to get a good residential mortgage deal, let a lone a good btl deal.

I think the only way you are going to do it is rent your house out save up and hope that house prices dont go up. because even if you save 6000 pounds a year, whos to say house prices wont rise by the same amount.

And to be honest at your age do you a really want to be renting a room with a load of strangers?

ecclesto

At my age! should be settled with perfect husband, kids and lovely house but not going to happen, lol. If I pay off my present house it will be mine and can rent it out to a couple I know. Hopefully find a nice house to share ie rent a room, don't have to worry about bills and have a bit of me time. If a house comes up which I want to buy, I will then look for a btl mortgage on my house, use that as a deposit on a new house, make up the rest with a residential mortgage or once tenants contract comes to an end, could then sell my present house and then move on. OR my knight in shining armour will put in an appearance, whisk me off to his mansion and I can keep the rent from my house and all problems solved. Pigs flying springs to mind but hope springs eternal EVEN at my age.

MiserlyMartin

I wouldn't do it. I could buy a house in cash but I won't do it because they are simply overvalued by 30-40% and will correct. Housing is currently a poor risky investment.

HAMISH_MCTAVISH

Worth noting that this thread has been linked to from housepricecrash, entitled "check out this muppet on MSE".

http://www.housepricecrash.co.uk/forum/index.php?showtopic=141281

So realise all the "advice" from the negative posters will be extremely biased by people with an agenda, ie, campaigners for house prices to crash again.

As for the OP, you really need to think this through more clearly.

Are you moving because you need to change location? Fancy a change? Smaller house or bigger? More expensive area or cheaper?

Whilst I have no doubt prices will rise over the next decade, and indeed the mainstream projection is for 40% in real terms, you may find you are almost as well off by renting rooms in your current house, re-investing the proceeds, and taking advantage of the tax free status of part of that rent. And you wouldn't have to mess about with paying higher rates on a BTL mortgage, and the not insignificant transaction costs such as stamp duty and EA fees.

Alternatively, you may find it's better to sell your current house, buy another to live in, and hold back some of the proceeds for a deposit on a smaller and cheaper BTL property elsewhere where the yields are better, as there are plenty of areas where you can gross better than 8%, and some where you can gross north of 10%.

But I'm sceptical that a 7 year timeframe before retirement is a good idea for getting into BTL to be honest, it should really be a longer term investment.

That may work out OK when we are in the latter half of a house price cycle where prices tend to explode, but not so well in the first half of a new price cycle, when capital gains tend to be more subdued. Which is where we are now.

Speak to your banks mortgage advisor initially to see what they can offer (should be less pressure than a mortgage broker), and speak to an IFA, and of course, take any advice on web forums with a pinch of salt.

ecclesto

Thanks for that. I am moving to transfer with work and buy a smaller house. At the present got 4 bed house with only me in it. Also moving to be closer to family. Where I am going is slightly dearer than where I am now. Not too bothered about me renting a room in a house will be company for me after 8 years on my own. When I do buy a house do not intend to have to let rooms out but you never know.

HAMISH_MCTAVISH

ecclesto wrote: »

Thanks for that. I am moving to transfer with work and buy a smaller house. At the present got 4 bed house with only me in it. Also moving to be closer to family. Where I am going is slightly dearer than where I am now. Not too bothered about me renting a room in a house will be company for me after 8 years on my own. When I do buy a house do not intend to have to let rooms out but you never know.

I have a theory in life that there is a time for speculating and accumulating wealth, and a time for being very cautious and preserving wealth.

And IMO, the cut-off point is probably around the age of 50.....

People in their 20's, 30's and 40's should take on risk and speculate to accumulate, knowing that they have time to bounce back if it goes pear shaped.

People in their 50's and 60's should usually take the opposite approach, because they don't have the earning years ahead of them to bounce back if it all ends in tears. Which it can....

If you still had a couple of decades of earning power ahead of you, I would have no hesitation in saying leveraging up would pay off. The fundamentals of supply and demand in the housing market are such that prices over the long term can only go one way, and it ain't down.

But a £650 a month yield on a £170,000 4 bed house is poor, in fact, it's very poor. I think you'd be better off selling now, buying your next house, and then if you really must get into BTL, buying a better yielding and cheaper property elsewhere.

But again, I have my doubts that getting into leveraged BTL is a smart move for anyone within 7 years of retirement.

Good luck.

firsttimetom

Thats very good advice from Hamish (and I don't usually agree with the BTL brigade as they will say anything to keep the bubble inflated).

I would imagine that house prices will be higher in ten years, but they will almost certainly go down in the meantime.

Sell up, and buy your new house with cash. There are good deals to be had if you are in a good position, and cash is king after all.

MiserlyMartin

HAMISH_MCTAVISH wrote: »

So realise all the "advice" from the negative posters will be extremely biased by people with an agenda, ie, campaigners for house prices to crash again.

As for the OP, you really need to think this through more clearly.

So these 'negative posters' with 'advice' are biased? I don't think so. Anyone who wanted a house price crash and was campaigning for it would be quite happy to sit back and watch all these people pile into property; it would encourage the crash.

But no I am not buying property because currently in the UK it is a risky investment. This is my opinion, what anyone will do is up to them. But be warned thats all I say. To me there is more risk to the downside than the up re prices. And for someone who is just about to retire they should be looking at low risk - not something like this.

Fire_Fox

Please join a landlord's association - according to Clutton (a professional landlord) there are over 100 pieces of legislation you need to comply with.

Bomber07

ecclesto wrote: »

It was the EA who mentioned Equity release, just trying to sort it all out. I know I will end up still owning my original house, renting that out, buying another with a mortgage. I only earn £17,000 a year and have been told my house will fetch between £700 and £750 rental per month. I want the rental to cover my mortgage and as I am 56 don't want a mortgage around my neck for ever!

I'm sorry, read what you just wrote there. What you want and what you find you might get are two completely different things.

If this was such a risk free sure fire way to make money/accumulate property, don't you think we all might be doing it?? No-one need work in the UK ever again with this style of investment strategy.

I despair.

FWIW, if I was you I would pay off my existing mortgage and enjoy a happy risk free retirement.