in search of the good life

ninky_2

i would like opinions on whether this plan is a good idea / recipe for disaster / something in between. sorry for the longish post.

current situation is this. own a 1 bed flat in london. worth approx 200k (another 1 bed is on the market for 230 in our terrace and they are mid whilst we are end but i think it is probably quite overvalued - we had valuations ranging from 215-335 in 2007 pre crash).

mortgage is 160k flexibile 0.5 above boe base rate with currently 95k in the savings pot that can be drawn down at any time with no erp. it has another 23 years to run. the mortgage and our flat are in my name only. OH currently has no mortgage elsewhere.

me and OH would really like to live somewhere a bit quieter with a garden to grow veg in a self-sufficientish way and generally potter about but would like to minimise the number of times we need to move 'up the property ladder' with the associated costs and stresses every time.

i've seen a detached bungalow (i really like bungalows) i like the look of out in the essex countryside. it's 300k. we could probably sell this place, use the 130k+ equity as deposit and get mortgage for the rest with our combined incomes. but i don't feel this is the right thing to do for the following;

a) i'm self-employed so you never know if the next contract will turn up.
b) we'd lose our current excellent mortgage deal and the flexibility of the draw down savings pot which is a real safety net for someone like me.

so i'm thinking of the following. could we draw down a large part of the savings pot and buy the bungalow on a btl deal. we would have to stay living in this flat as i don't think abbey (santander) would let us stay on the same mortgage deal and rent out. we'd then let the bungalow.

problems i see are this;

a) we tie up large part of our flexible equity in a property that could go down in value.
b) we would be buying the bungalow on the basis of it being a future home rather than choosing it as the ideal rental property.
c) interest rates on btl mortgages aren't the greatest and will the rent actually make us any money or will we just be paying the bank?
d) we're not professional landlords and i don't really like the idea of btl from a moral point of view.

good things are this;

a) we know we've bought into the market at a level we seem to be able to afford.
b) we might actually make a profit from rent on the bungalow at some stage.
c) we could swap over to living in the bungalow and renting the flat in the future so have both a home and an investment.
d) we get to keep our current good mortgage deal.

i'd really like any opinions on this. many thanks.

Owain_Moneysaver

Why Essex? You could probably get a much better deal elsewhere in the UK - or in parts of France (not far from central London by Eurostar)

ninky_2

Owain_Moneysaver wrote: »

Why Essex? You could probably get a much better deal elsewhere in the UK - or in parts of France (not far from central London by Eurostar)

commuting distance from work. my line of work is pretty london centric.

drc

Probably not relevant but my sister bought a huge plot of land with a little summer house (which has several bedrooms) and a huge garden where they grow vegetables/fruit etc for 2,500 euros :eek: just outside Berlin. It's absolutely idyllic.

I know you say your job is London-centric but as the previous responder has said, you could get a much better deal abroad for the kind of thing you are looking for.

getmore4less

Can you port the existing deal with a small top up?

you have a lne of borrowing £160k £40k equity and £95k savings so £5k short.

Earnings seem to be the risk so borrow more to preserve emergency funds

ninky_2

drc wrote: »

Probably not relevant but my sister bought a huge plot of land with a little summer house (which has several bedrooms) and a huge garden where they grow vegetables/fruit etc for 2,500 euros :eek: just outside Berlin. It's absolutely idyllic.

I know you say your job is London-centric but as the previous responder has said, you could get a much better deal abroad for the kind of thing you are looking for.

agreed and we have considered this. but it would effectively mean retiring (i'm not yet 40 and don't have any pension provision) or seriously reducing our income. or owning something that was basically a holiday place when it is a lifestyle change we want.

i already have a share in the family holiday home in montenegro but only really get there 1 or 2 weeks a year.

the foreign thing would be more suited for when we are in a better position not to work. my earning potential is much higher than my other half although as i say 'self-employed'.

i don't see us staying in the essex property into dotage. it's more of a mid-life compromise.

just to clarify the financial options. mortgage is 160k. 95k is in the draw downable savings pot (it goes up every month as i try to put as much as poss in there). i wouldn't want to withdraw the entire savings pot. our combined annual incomes are around 58k. 23k OH. 35k taxable earnings from me - although as i'm self-employed my earnings pre expenses are actually more. is a 75k deposit enough to get a btl on a 300k property?

ninky_2

getmore4less wrote: »

Can you port the existing deal with a small top up?

you have a lne of borrowing £160k £40k equity and £95k savings so £5k short.

Earnings seem to be the risk so borrow more to preserve emergency funds

i'm pretty sure it is not portable. i can't imagine abbey/santander letting us stay on the deal if they could get away with not. i've heard they are being really stingy with consent to let too. as far as i can see we've currently got the opportunity to use a pretty good borrowing deal (160k at .49 above base rate for next 23 years) to our advantage. if i can just work out how that advantage is best served.

sunshinetours

ninky wrote: »

i'm pretty sure it is not portable. i can't imagine abbey/santander letting us stay on the deal if they could get away with not. i've heard they are being really stingy with consent to let too. as far as i can see we've currently got the opportunity to use a pretty good borrowing deal (160k at .49 above base rate for next 23 years) to our advantage. if i can just work out how that advantage is best served.

I would definitely check to see if portable first by ringing them. I didn't think our 0.79 over base was portable but turns out it is although not with Santander

Some lovely parts in Essex countryside that are OK for commuting especially along the A12 corridor. Post the area if you want any opinions on that side

carefullycautious

An allotment would be cheaper?

ninky_2

i have been on the allotment waiting list since i moved to my current address in 2004.:eek: and yes i do ring them to find out how the list is progressing and they also send out letter about once a year to see who wants to be on the list still. i've moved from 33 to 12 in that time and suspect most of that has been people on the list moving away (or dying!) rather than plots becoming available.

kelda_shelton

ninky wrote: »

i'm pretty sure it is not portable. i can't imagine abbey/santander letting us stay on the deal if they could get away with not. i've heard they are being really stingy with consent to let too. as far as i can see we've currently got the opportunity to use a pretty good borrowing deal (160k at .49 above base rate for next 23 years) to our advantage. if i can just work out how that advantage is best served.

I'm with alliance and leicester /santander and I'm 0.75 above base rate - I checked just 2 weeks ago and mine is portable. Will be taking it with me (and adding to it and best rate that A&L/Santander has) when we eventually sell and can then buy elsewhere.

They also said I could port AND change to timeframe - mine currently has 13 years but I could have kept the base rate and increased the term, so i was told. As it stands I will keep my portable about at 13 years and take the rest of the mortgage out over 25yrs.

Was also told I'd pay and extra £200 p/y to allow BTL but still on the same rate.

Would assume yours is therefore portable.