raising capitol against a mortgage free house + advice

ToejaM_2

I'm currently mortgage free, purchased a house in 2007 for 129500 and had a recent valuation done at 105k.

I'm stuck travelling a stupid distance at a stupid cost to work and its actually crippling me financially.

Here is my plan of action and I would be so grateful for any advice.

In the process of taking a joint mortgage out with my girlfriend against my property with the understanding that her name does not go on the deed for the house. We are going for 60k which we will split equally and pay back the mortgage 50/50. Without her help the joint mortgage would not be possible and I tried a solo mortgage but was declined due to insufficient earnings.

This equally gives us 30k which we're going to buy cars with to the tune of 8k.

Realistically this leaves us with 22k each, we want to buy a house together and our mortgage adviser said that 25% deposit offers the best discount but I was thinking...

What if we went 10% deposit, 6k each gives us 12k which is 10% of 120k and at the current market that gives us quite a nice property between us.

That leaves us with 16k each, if we did this again but rented the property out we would be left by the end of the mortgage.. another property between us which to me makes more sense than putting a bigger deposit into just one house and we would still have 10k each for anything that goes wrong with the properties?

These are all estimated values as we havent done any house searching until the remortgage is finalised so I'm just collecting ideas.

To me it makes the most sense, by the end of 25 years I'll have my initial property repaid, I'll own a home with my girlfriend and then we'll also own a second home.

I was thinking, maybe 10 years into it, we would have paid quite a substantial amount of money back off the mortgages and we could remortgage each property again for 20k on each property and put it into more properties? Maybe extend the mortgages another 10 years as not to increase costs I'm already paying and then theoretically with three more properties at 20k each at (10% deposit), thats 600k of properties after 25 years? Plus the starting properties, we'll be touching on nearly a million?

I would have to do this correctly (duh) but in a sense that my remortgages pay themselves so by the end of the terms I'm left with fully paid off investments without having to add my own in.

Now, heres where I'll struggle with the extra properties. I'm on minimum wage but hopefully you can see I'm not stupid and that I should be able to move myself up into management of some kind (thats the dream anyway). I know my girlfriend wants to do the same thing so being on minimum wage won't always be the case, though shes on a good 300 a month more than me at the moment.

Sorry if this seems put together randomly, I'm pretty tired.. just got back from work but a 60minute drive home all I was thinking was... I must find a forum to ask advice on!

I'm 24 and my girlfriend is 21 so in 25 years neither of us will be even 50 and in 35 years neither of us will be at retirement age.

opinions4u

My radical idea would be to sell the existing property and buy a new one without the need for debt.

This equally gives us 30k which we're going to buy cars with to the tune of 8k.

Buying cars on a secured loan over an extended term also strikes me as naive. How will you pay for their replacements in 3 or 4 years time?

What if we went 10% deposit, 6k each gives us 12k which is 10% of 120k and at the current market that gives us quite a nice property between us.

You state that you are on minimum wage. How can you afford a £108k mortgage in addition to your £60k debt on the rented property? Interest rates vary, tenants disappear or don't pay and property doesn't always increase in price.

This is a massive risk to your financial wellbeing and I would steer you well away from it.

I was thinking, maybe 10 years into it, we would have paid quite a substantial amount of money back off the mortgages

Around 26% of the debt is repaid after 10 years of a 25 year mortgage where the rate is 5%.

Unless you have significant amounts of capital behind you becoming a buy-to-let landlord while maintaining a personal mortgage of £108k on two low wages is utter madness.

getmore4less

Plan will probably fall at the first hurdle, mortgage company will likely not be happy with her on the mortgage and not on the deeds.

You have no idea if these BTL will make any money or even break even.
what ar ethe gross yields expected to be?


If they won'r give you £60k that means you either have other issues or a tiny salary< £17k

With 2 let properties and another to live in you are over exposed to loss of income from either of you or the rentals.

Joint finances like this at early 20s yoou will be in a right mess when you split.

Annisele

Sorry, but I think your plan sounds like a recipe for total disaster. You're betting on house prices continuing to rise (when you already know that the value of yours fell over three years), your income continuing to rise, interest rates not getting much higher, not having a problem finding tenants etc etc.

There's no way to get other people (tenants) to pay for your property empire without taking on risk - and it doesn't sound as though you're in a position to afford that risk at the moment.

I agree that the plan to effectively secure your car loan on your house does not sound sensible.

Why don't you just sell your current house, either buy or rent one nearer work (without taking on more debt), and then wait until your income goes up and your financial position improves?

ToejaM_2

opinions4u wrote: »

Buying cars on a secured loan over an extended term also strikes me as naive. How will you pay for their replacements in 3 or 4 years time?

We need cars at the moment, how will I pay for a car in the here and now without any kind of financial loan? If I go on finance then I end up paying more over the term of that finance.

You state that you are on minimum wage. How can you afford a £108k mortgage in addition to your £60k debt on the rented property? Interest rates vary, tenants disappear or don't pay and property doesn't always increase in price.

You're right I can never garentee this but thats what deposits are for though it is a game of luck for this one, I'd have to get some decent people into the properties.

This is a massive risk to your financial wellbeing and I would steer you well away from it.

Around 26% of the debt is repaid after 10 years of a 25 year mortgage where the rate is 5%.

Unless you have significant amounts of capital behind you becoming a buy-to-let landlord while maintaining a personal mortgage of £108k on two low wages is utter madness.

getmore4less wrote: »

Plan will probably fall at the first hurdle, mortgage company will likely not be happy with her on the mortgage and not on the deeds.

They didnt have a problem with it

You have no idea if these BTL will make any money or even break even.
what ar ethe gross yields expected to be?

I've no idea, its just an idea at the moment which evidently needs alot of fine tuning!

Joint finances like this at early 20s yoou will be in a right mess when you split.

When? Do you know something I dont? :-)

Annisele wrote: »

Why don't you just sell your current house, either buy or rent one nearer work (without taking on more debt), and then wait until your income goes up and your financial position improves?

Would take a 25k loss and its just not worth it at the moment

I just want to do the best I can with the money I have. Leaving it in a house where I don't want to live anymore just seems like a waste at my age

getmore4less

ToejaM wrote: »

I just want to do the best I can with the money I have. Leaving it in a house where I don't want to live anymore just seems like a waste at my age

But you will be leaving some of it in a house and have no idea if this will be a good investment or even break even

So far your investment stratagy(1 house) you say has lost you £25k in what, 3 years.

Now you think having 3 houses is a good idea:T

NEEDS a lot more thought.

I think you need to review your though processes

You had a great kickstart in life at 21, mortgage and rent free in your own place.

I think that is a fairly save risk free investment for the rest of your life

Don't blow it now.

ToejaM_2

On that logic I should wait longer and houses will be cheaper, they won't always be down and the past shows us that houses generally increase in value. I know that the house I'm in now was bought for less than 30k originally!

I don't want to miss an opportunity to miss the market at a low when I have the capability to buy.

My boss has a property and said to me he has a company that deals with the letting (obv an estate agent) but garentee it will be let out or they will cover the money, also I can't remember if its the same company but they deal with any and all repairs and all he does is pay a premium every month.

You are right, it is a risk but if we do it according to what I said we are still left with 10k each to cover any costs or missed months. I think perhaps the problem is not having the money to cover the missed months which.. eventually I will get back, even if it does take years through a debt company..

Annisele

ToejaM wrote: »

I think perhaps the problem is not having the money to cover the missed months which.. eventually I will get back, even if it does take years through a debt company..

I don't think that's your only problem...but I'm not quite following why you think you will get back the "missed months". If your property is empty because you can't find tenants, who is the debt company going to chase? And if your (ex)tenants haven't got any money, you can chase them as much as you like but you won't get anywhere. Deposits don't always cover the missing rent/the damage tenants can do - have a browse round the forum if you don't believe me.

Companies that guarantee rents don't do it for love; you'd end up with quite a bit less than the market rate if you went down that route - and you still have all the legal responsibilities being a landlord entails.

You also said that if you buy a car on finance, then you end up paying more over the term of the finance than you would over the term of the mortgage - are you absolutely sure about that?

If you're determined to do it, get an agency to value your existing property for rental purposes and then see what sort of yield they say you'd realistically get. Before you have figures all you can do is speculate as to whether it's a good idea. (Even without figures I speculate that it's a dozy idea, but then it sounds as though my risk tolerance is very very different to yours!)

geoffky

property prices in Japan have been falling for the last ten or more years.....what tells you it can not happen here? and where are the wage rises going to come from to pay higher house prices?

today the housing minister said "houses should be for living in and not for investment purposes if you want to invest get shares but not houses......this man will be in his job for a few years and i think he does not like btl as a pension plan....i wonder what he plans? BEWARE..