30K In Bank Pay Mortgage or Buy BTL

jimmyc_2009

Hi all i have around 30K in my bank at the moment i currently own a house with is worth 125K and i owe 125K on it now im not struggling to pay the mortgage on it as me and the other half have good wages and also have a good friend living at the property aswell.So i was think of using that 30K for a BTL mortgage on a property instead of taking 30k of my existing mortgage. Where i alot of propertys are rental and there are alot of polish,romanians and other foreigners here that will rent rooms in houses, another friend of mine does BTL'ing and rents rooms and makes good money and has foreigners ready to move into propertys.Just not sure to jump on the btl bandwagon.

Thrugelmir

jimmyc_2009 wrote: »

Hi all i have around 30K in my bank at the moment i currently own a house with is worth 125K and i owe 125K on it now im not struggling to pay the mortgage on it as me and the other half have good wages and also have a good friend living at the property aswell.

Is your current mortgage interest only?

jimmyc_2009

yea current mortgage is interest only

jimmyc_2009

forgot to say also im only 24 so i have 40+ years to pay back mortgages etc

Thrugelmir

First step should be to start repaying your existing mortgage. Probably provide a good return on your money. As I assume your interest rate on your mortgage is far higher than you are earning at the bank.

Although you have "40 years " to repay the mortgage a lot can happen in a working lifetime.

Personally I would build some equity, and security first, before gambling all on a business venture.

ViolaLass

jimmyc_2009 wrote: »

forgot to say also im only 24 so i have 40+ years to pay back mortgages etc

Will you be able to cope when interest rates go up?

Personally, don't do it. Pay off some of the mortgage, which will mean you'll have access to better deals when you come to re-mortgaging. A lot can happen in 40 years, including losing your job or repayments going too high for you to manage.

jimmyc_2009

i understand what your saying but with alot of repossions around here and good returns on rental propertys im always garunteed an income i was going to buy the BTL house on interest only then the returns i get back pay it into my existing property.

Thrugelmir

jimmyc_2009 wrote: »

i understand what your saying but with alot of repossions around here and good returns on rental propertys im always garunteed an income i was going to buy the BTL house on interest only then the returns i get back pay it into my existing property.

If you've crunched the numbers, factored in all the potential risks and it works for you. Then its your decision.

I would never risk what I could not afford to lose.

ExperiMentor

jimmyc_2009 wrote: »

house with is worth 125K and i owe 125K on it

What interest rate are you paying? If this was anywhere near a 100% mortgage when you took it out, you can probably make a huge saving in outgoings by remortgaging so that you only borrow £95k on a £125k property =76%, though better still if you can find another £1250 and get below 75% (even better below 70%). You'll need an accurate valuation to check the arithmetic first.

Note that making an overpayment will not achieve this - lender will happily leave you on the higher rate.

You need to note that Buy-to-Let charges and interest rates are higher and need for high % deposit is greater. You are right that returns can be good at present, but there is considerable risk and you should secure your own home against interest rate rises first.