Repayment or Interest Only Mortgage?? Tracker or Fixed!! Need some advice please??!!

Robbie07

Hi all,

Myself and my brother are looking to purchase my grandmother's house. The house is valued at £80,000, and she has signed the house over to my father so he can sell it. She is looking to give my brother and I, £10,000 each from the sale so that can be used as the deposit.
So basically we will be putting down 25%, with the mortgage being for £60,000. We are going to rent the property out asap, as we already have somebody ready to move in. Therefore it will be a 'buy to let mortgage'.
The question's are 1) Do we go for a fixed or tracker mortgage? As we are unsure what is the best option with current financial situation in the UK.
2)Do we go for an Interest Only or Repayment Mortgage?

We are both homeowners but this is the first time we have done anything like this, I hope I have made some sense and any feedback would be greatly appreciated.

Thank You for taking the time to read my post,

Rob

somethingcorporate

Where is your grandmother going to live?

Have you done any research into deprivation of capital? It could be a problem in the near future if your Grandmother goes on to claim any benefits or requires a place in a care home.

Given the equity in the house it depends on your risk profile - I'd go fixed because I err on the side of caution (and trackers are starting to look more and more unfavourable). B2L mortgages often come with massive fees so do your sums.

Best advice is to go and see a good whole of market broker and see what they suggest.

Robbie07

Thanks for your advice. The house was signed over to my father years ago and my Nan moved into a bungalow about 6 months ago, because of health issues. The house has been on the market since then with very little interest for it. Her new home is through some affordable housing project.

getmore4less

whats it going to rent for?

Robbie07

It will rent for approx £425 - 450

Robbie07

*per month

getmore4less

Say £450, thats a gross yield of 6.75%

lets say 10% costs and 10% for long term void coverage and maintanence

£360 net yield at 5.4%

£60k btl mortgage @5% thats £250pm leaving £110 less 20% tax £88.

BTL mortgage fees are what these days £1k so a few months to start making any money on this.

£88pm on the £20k investment is 5.28% which is OK.

Still better than sitting empty and not selling but there is work as a landlord.

Robbie07

Thank you for your advice, it has been very helpful