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Two year mortgage plan - pitfalls in my logic please?
riverboat2001
Posts: 476 Forumite
Just looking for comments, advice or thoughts on our situation needed.
Sorry for long post, but always thinks it better to give as much info as possible.
Long Story short.
I own a flat in central London.
Mum lives in it.
Propert is worth about 350k and i owe 48k on a mortgage and remortgage.
they have been going a while and were both repayment morgages and currently have stupid low interest rates in force. (Currently paying £330 per month)
We live in Mums property, but it is now not really suitable for us, but we are in no way being forced out, so could wait things out if needed.
We own a large (25ft) motorhome, two cars and three motorbikes, we also have two dogs. So our house requirements are very specific.
We have found something that ticks a lot of our boxes.(amongst other things it has rear access to the garden with plenty of parking space too subject to a renewable licence form the local authority - will check this out in another post!)
It needs updating, but that will have to wait until the flat is sold.
It is empty due to probate, the Estate Agent says they are open to offers but the two they have had so far were too low.
It is quite old fashioned but it's certainly liveable in, given a slap of paint.
The property we are looking at is 250k and Mum is lending us 25k as a deposit, i'm thinking of offering the sellers 235k.
Once i move out of Mum's place then she will move out of mine and i will sell it. This could be literally a matter of months, but she may not be ready to move out completly for two years. This is her descision, and i'm happy with that.
Basically i want to keep my repayments as low as possible for those two years, with a view to paying off my new mortgage when my place is sold. I like most people are scared stiff of commiting to huge chunks of money going out of my accounts.
I was after an interest only mortgage, but couldn't find anything available with my 10% deposit.
I contacted a mortgage broker recommended on these forums, and he has found a mortgage that i hope will suit us. It's an interest PLUS 15% repayment deal.
This puts my monthly payment at about £1318 permonth fixed at 6.49% for two years.
OR
£1194 on a two year tracker mortgage at 5.79%
Between us we earn 72k per year, so it seems managable, but we will have to try and work out a budget to be sure.
Personally i'm inclined to play it safe and go for the fixed option so i know what my reayments will be for those two years.
Mum and i have a clear undestanding that should our circumstances change, ie redundancy/illness huge rate rises on the morgages on the flat, then it will (the flat) go on the market to be sold to cover these payments. Then all morgages and Mum will be paid off.
We have a safety buffer of £4000 in an isa too, also worst case scenario we could sell the motorhome.
Jobwise i think we are both safe for two years, but after that it's very uncertain, so this really is a two year plan!
The problem for us is that if we pass up this property, then we may wait a long time for another one with such fantastic parking and access comes along.
Lastly capital gains tax because of a second property is rearing it's very ugly head.
Sorry for long post, but always thinks it better to give as much info as possible.
Long Story short.
I own a flat in central London.
Mum lives in it.
Propert is worth about 350k and i owe 48k on a mortgage and remortgage.
they have been going a while and were both repayment morgages and currently have stupid low interest rates in force. (Currently paying £330 per month)
We live in Mums property, but it is now not really suitable for us, but we are in no way being forced out, so could wait things out if needed.
We own a large (25ft) motorhome, two cars and three motorbikes, we also have two dogs. So our house requirements are very specific.
We have found something that ticks a lot of our boxes.(amongst other things it has rear access to the garden with plenty of parking space too subject to a renewable licence form the local authority - will check this out in another post!)
It needs updating, but that will have to wait until the flat is sold.
It is empty due to probate, the Estate Agent says they are open to offers but the two they have had so far were too low.
It is quite old fashioned but it's certainly liveable in, given a slap of paint.
The property we are looking at is 250k and Mum is lending us 25k as a deposit, i'm thinking of offering the sellers 235k.
Once i move out of Mum's place then she will move out of mine and i will sell it. This could be literally a matter of months, but she may not be ready to move out completly for two years. This is her descision, and i'm happy with that.
Basically i want to keep my repayments as low as possible for those two years, with a view to paying off my new mortgage when my place is sold. I like most people are scared stiff of commiting to huge chunks of money going out of my accounts.
I was after an interest only mortgage, but couldn't find anything available with my 10% deposit.
I contacted a mortgage broker recommended on these forums, and he has found a mortgage that i hope will suit us. It's an interest PLUS 15% repayment deal.
This puts my monthly payment at about £1318 permonth fixed at 6.49% for two years.
OR
£1194 on a two year tracker mortgage at 5.79%
Between us we earn 72k per year, so it seems managable, but we will have to try and work out a budget to be sure.
Personally i'm inclined to play it safe and go for the fixed option so i know what my reayments will be for those two years.
Mum and i have a clear undestanding that should our circumstances change, ie redundancy/illness huge rate rises on the morgages on the flat, then it will (the flat) go on the market to be sold to cover these payments. Then all morgages and Mum will be paid off.
We have a safety buffer of £4000 in an isa too, also worst case scenario we could sell the motorhome.
Jobwise i think we are both safe for two years, but after that it's very uncertain, so this really is a two year plan!
The problem for us is that if we pass up this property, then we may wait a long time for another one with such fantastic parking and access comes along.
Lastly capital gains tax because of a second property is rearing it's very ugly head.
Was a 40 a day smoker for 20 years.
Decided to give up, and haven't had a fag for 12 years.
Halfway through losing six stone.
Looking forward to early retirement.
Decided to give up, and haven't had a fag for 12 years.
Halfway through losing six stone.
Looking forward to early retirement.
0
Comments
-
Last point first, if the "we" you talk about are married it may be worth transferring half to your spouse to reduce CGT. Have you ever lived in the Londond property as your main home since you had a financial interest in it?
I would want to buy as it sounds ideal, but I think the £4k safety net is small.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
Last point first, if the "we" you talk about are married it may be worth transferring half to your spouse to reduce CGT. Have you ever lived in the Londond property as your main home since you had a financial interest in it?
I would want to buy as it sounds ideal, but I think the £4k safety net is small.
No we are not married, yes we did live there for about 3 years after we bought it. But i don't have any old paperwork going back that far to actually prove it.Was a 40 a day smoker for 20 years.
Decided to give up, and haven't had a fag for 12 years.
Halfway through losing six stone.
Looking forward to early retirement.0 -
Does my two year plan seem safe?Was a 40 a day smoker for 20 years.
Decided to give up, and haven't had a fag for 12 years.
Halfway through losing six stone.
Looking forward to early retirement.0
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