Buy to let mortgage advice

tojoslaffy

Friends. I have two buy to let mortgages on houses I cant sell - both which have reverted to bank standard variable rates of (1) Base rate + 3% (Birmingham midshires - £95,000) and (2) 4.79% (Northern Rock - £70,000). Due to the lack of good buy-to-let deals and very high fees I am thinking of sticking with the relatively low bank SVRs until better deals come on to the market. The downside of course is if the base rates and bank SRVs rise considerably. Any thoughts? Sit, wait and hope, or take the plunge and remortgage now? T

CloudCuckooLand

"Wait and hope" versus "Take the plunge"...

Doesn't sound much like a coherent business strategy.

It seems to be pretty widely accepted that low interest rates (for economic reasons) have had the side-effect of being positive for the housing market. Buying time for yourself, and others in worse situations, with decent SVRs and trackers.

Presumably when rates rise there is therefore a fair chance of a negative impact to the housing market. Do you really want to be clinging onto your falling assets at such a time, and having to find the fees on top ?

It also seems fairly widely accepted that there is some time before rates move by much, in which case you have a window of opportunity to get serious about selling - rather than risk following the market down, or having to sit tight for an unknown period of time.

If there is a second leg down in hpi, I don't think the Lenders will be falling over themselves to offer better BTL deals at the same time.

Although it depends on your reasons for selling/attitude to continuing in the business, etc.

tojoslaffy

Don't think my last reply went up so here it is again. CloudCuckooLand. Thanks for your post and some good comments but it appears quite negative implying that I got into the 'business' of buy to lets and am now in over my head. It is ridiculously presumptious to paint my circumstances and motivations for possession as 'like buying an ipod'. For a number of personal reasons the buy-to-lets were forced upon me and I am having to struggle to finance them in a plunging market (Northern Ireland) were nothing is selling and hasn't done for the past 4 years. Even if I wanted to I am unable to sell them at the present time or into the near future. Unlike the rest of the UK it looks like the market may have reached the bottm, 50% below the peak. Sorry if I sound annoyed, but your post did come across as very patronising and judgemental when you don't know me or my circumstances.

Thrugelmir

Stay on the variable rate and use the profit from letting the properties to repay the capital debt owed.

dimbo61

friends romans counrtymen lend me your ears
Stay on the SVR while you try to sell and overpay if you can

Thrugelmir

dimbo61 wrote: »

friends romans counrtymen lend me your ears
Stay on the SVR while you try to sell and overpay if you can

Needs to repay the debt. Selling isn't option currently.

Wh05apk

Thrugelmir wrote: »

Needs to repay the debt. Selling isn't option currently.

"Needs to repay the debt" Why?

As they are BTL mtgs, then repaying the debt is not necessarily the best option, from a tax point of view, it may be better to leave the balance o/s, the "profit" can then be accumulated to use a s deposit on a further btl if required.

As btl remortgage rates are pretty poor at the moment, you would probably do best staying on the SVR.

Gorgeous_George

Depends on the remortgage rates available to you and how much of a base rate rise that you can (or want to) handle.

Fixing at 5% over 5 years for example would bring some security and could be a good option if rates were to rise.

Do you have a residential mortgage on your own home? Could you increase borrowing on it to pay down the BTL with NR?

Why can you not sell?

GG

Thrugelmir

Wh05apk wrote: »

"Needs to repay the debt" Why?

As they are BTL mtgs, then repaying the debt is not necessarily the best option, from a tax point of view, it may be better to leave the balance o/s, the "profit" can then be accumulated to use a s deposit on a further btl if required.

As btl remortgage rates are pretty poor at the moment, you would probably do best staying on the SVR.

In more recent years. Investors have become focussed on capital growth to provide returns. With little regard to rental profit.

As the OP is presumably in considerable negative equity. Then the properties need to be generating a reasonable after tax profit in order to provide the cashflow to make inroads into the capital debt. Captial growth alone is unlikely to eradicate the debt for some years.

Interest payable is an allowable expense in any business venture. Paying tax is actually a sign of profitability.

Wh05apk

Thrugelmir wrote: »

In more recent years. Investors have become focussed on capital growth to provide returns. With little regard to rental profit.

As the OP is presumably in considerable negative equity. Then the properties need to be generating a reasonable after tax profit in order to provide the cashflow to make inroads into the capital debt. Captial growth alone is unlikely to eradicate the debt for some years.

Interest payable is an allowable expense in any business venture. Paying tax is actually a sign of profitability.

"with little regard to rental profit" all new borrowers must effectively show a rental profit to get a new mortgage, as most lenders insist on 120-130% rental cover.

The op is struggling to finance the properties, so how or why would they be interested in repaying the debt?

"Interest payable is an allowable expense in any business venture. Paying tax is actually a sign of profitability" nice quote from a basic business textbook, but can't see what you are trying to say, are you suggesting the op should aim to pay more tax by adopting less tax efficient strategies?

Thrugelmir

Wh05apk wrote: »

"with little regard to rental profit" all new borrowers must effectively show a rental profit to get a new mortgage, as most lenders insist on 120-130% rental cover.

New being the operative word. Ten years of 7.2% compound capital growth encouraged many to leverage up and disregard the basics.

Wh05apk wrote: »

"Interest payable is an allowable expense in any business venture. Paying tax is actually a sign of profitability" nice quote from a basic business textbook, but can't see what you are trying to say, are you suggesting the op should aim to pay more tax by adopting less tax efficient strategies?

Basic textbook? Common sense. Tax planning should be secondary to the primary objective of creating a profitable business.