buy to let advice needed

millsmum

If anyone has any advice at all, I am just trying to do some sums, but I can't get my head round it.

I have a property which is worth £225k and a mortgage of £63k

we have been discussing a buy to let, we have 2 options

option 1 buy a smaller property, use £50k savings plus £80k mortgage and have a rental income of around £550

option 2 rent out this one for £700 and then use £50K savings to buy a house for £295K ish

can I use some of the excess rental income to pay off my own mortgage so my repayments are lower? dh wants to stay and buy, I want to move and buy, but I am not really sure what the better options or pros and cons would be

please help!:eek:

anselld

Difficult to advise when the options are completely different ...
(1) You end up with £355k of property, £143k mortgage and £550pcm gross rental income.
(2) You end up with £520k of property, £308k mortgage and £700pcm gross rental income.

So the question is do you want/need a bigger house to live in?
Can you afford it now and in future?
... because you certainly cant justify it as a BTL business proposition.

If you want to BTL then best to stay put and raise the extra £80k on your residential mortgage as it will be cheeper that way.

And yes, once you have paid income tax on your rental income (less expenses inc mortgage) you can spend the rest on whatever you like!

millsmum

thank you, I didn't think of extending my mortgage to cover the rental property if I stayed put.
I am very slow at getting my head around all the options, I just want to make sure I understand how it all works before jumping in!!

getmore4less

£225k £700pm rent is gross yield of 3.7% which is a lousy business net returns will be so low you could be loosing money.

£130k £550pm rent is gross yield of 5.1% which is low but just about managable, not good long term if rates rise and lending costs more.

millsmum

have looked at this more and I have decided to stay put and buy to let. we are looking at a smaller 3 bed mid terrace, at just under £100k, £30K deposit and £70 mortgage, with a rental of £550 to £600,

I hope that sounds like a plan?