Financial Suicide??

Lisa1978

Thrugelmir wrote: »

You are in considerable danger of going backwards. That's the inherent risk. The let property is more likely to lose than make you money in the short term.

I would suggest switching the mortgage on the apartment to repayment. Take a close look at your outgoings and make a concerted effort to cut back for a while. Use the money saved to overpay the mortgage. Once in a position to. Sell the apartment and move back into the house. Then build upwards from there.

Even if you start a family it'll be a while before you need to consider schools etc.

Thanks, think this seems to be the best way forward. At present, i am paying off as much debt as possible before trying to save/pay more of the mortgage. Is this the sensible thing to do? We now work 65hrs/wk so we are 'getting there' and also selling a few things on ebay.

I agree with the family thing as even if you do have a child in a yr or two theres no problem with staying in the apartment for at least another 3 or 4 years which gives us time to save, save, save. Thank you

Thrugelmir

Lisa1978 wrote: »

Thanks, think this seems to be the best way forward. At present, i am paying off as much debt as possible before trying to save/pay more of the mortgage. Is this the sensible thing to do? We now work 65hrs/wk so we are 'getting there' and also selling a few things on ebay.

Pay off the most expensive debt, i.e. that with the highest interest rate first. Though if you have fixed term loans maybe better to repay the mortgage instead.

Sounds as if you've the committment do sort yourselves out. Visit the Debt Free Wannabe for support and advice. As you are far from being alone in this situation.

Stick with it as it, in the end it will all be worth the effort. Even if currently it seems little more than a distant dream.

Henry_P_Chester

Would selling the flat and renting a house be an option?

magpiecottage

You would have received clear documents at outset and each year from the lender telling you it was interest-only.

However, the good news is that a mortgage of £125K over 30 years would, after 3 years have gone down by between £3 and £4K - so you are not massively behind and have 32 years to make it up.

The income from the let property is taxable but the interest can be deducted from the income.

You cannot deduct the interest on your own home from from your taxable income, though.

So if possible, pay off the unsecured debt (most expensive) then on your own home (which is not only more tax efficient but makes your personal position more secure).

getmore4less

Lisa1978 wrote: »

Hi all,
Your thoughts on the following wld be much appreciated :
Before i met my husband i owned a house that we now let out. The house has a mortgage of £93k, i pay £423/month and receive £450 rent/month. The value of the house has unfortunately gone down to £90-95k realistcially. Others in the area have their houses up for sale at £100k but they aren't shifting! The tennant i have is great,tehrefore i'm happy to keep the house let out.

The problem is our apartment that my husband and I own. We bought 3 years ago for £125k, deposit of £13k (by remortaging the house) and have just realised that we have been paying INTEREST ONLY. Our finanical advisor set this up, IO for 35 years, we thought it was Repayment over 25yrs, our fault for not checking i guess. Anyway, the apartment is only worth £95-105k and we own £112k so in negative equity.
We would love to move to a house with extra space/bedrooms in the next year as we wld like to start a family. I know the suggestions will be to move into my house but it's not in the kind of area i wld want to raise my children (not being snobby but i've worked hard to get to were i am now and don't want to go backwards!).

Therefore, would it be crazy for us to purchase another property and let our apartment out? I have been advised that a company will let us borrow £200k (scary!). I'm worried that if either or both properties were to be vacant, i know we cldn't afford to pay the mortgages, nor afford to fix anything that would go wrong.
What are your suggestions? I'm guessing that changing to repyament on apartment and sitting it out a few years is probably best :(

I should add, husband has no debts but i've approx £8k (reduced from £13k last year and hoping to get down to £4k by end of year).

Thanks :)

Reality check you have worked hard to get nothing!

mortgage DEBT > property values. and £8k debt on top

Kids don't care where they live for the first few years.


£112k paying £483pm is 5.2% is that fixed? when does it change and what to?

Whats the mortgage deal on the rental? consent to let?

Lisa1978

Thrugelmir wrote: »

Pay off the most expensive debt, i.e. that with the highest interest rate first. Though if you have fixed term loans maybe better to repay the mortgage instead.

Sounds as if you've the committment do sort yourselves out. Visit the Debt Free Wannabe for support and advice. As you are far from being alone in this situation.

Stick with it as it, in the end it will all be worth the effort. Even if currently it seems little more than a distant dream.

Thank again Thruglemir for your input, appreciate it . My loan is 8.5%, with only £1700 left, due to run out in 10months .

Lisa1978

magpiecottage wrote: »

You would have received clear documents at outset and each year from the lender telling you it was interest-only.

However, the good news is that a mortgage of £125K over 30 years would, after 3 years have gone down by between £3 and £4K - so you are not massively behind and have 32 years to make it up.

The income from the let property is taxable but the interest can be deducted from the income.

You cannot deduct the interest on your own home from from your taxable income, though.

So if possible, pay off the unsecured debt (most expensive) then on your own home (which is not only more tax efficient but makes your personal position more secure).

Unfortunately the yearly statements had been going to my other house and my tennant had binned same. I only realised this when i rang my mortgage providers to ask for a statement of account.
As you say, we are't far behind and i know that we will be able to catch up soon. We have signed the documents today to change to repayment.

Please explain what you mean by the income from the let property is taxable? As i am not making a profit and i haven't been submitting accounts, should i be? Thanks

Lisa1978

getmore4less wrote: »

Reality check you have worked hard to get nothing!

mortgage DEBT > property values. and £8k debt on top

Kids don't care where they live for the first few years.


£112k paying £483pm is 5.2% is that fixed? when does it change and what to?

Whats the mortgage deal on the rental? consent to let?

Thanks for replying, however i don't appreciate your 'reality check, you have worked hard to get nothing'... i have got something, i've got 2 sets of letters after my name (not boasting!), got a great job which pays well, travelled the world, had a fantastic wedding last year, but unfortunately yes i have lived beyond my means while i was younger by enjoying myself too much, but now i am settled down and older I am determined to do all i can to resolve same and that is why i've joined this forum, for advice, not for a putdown.

My rate is 4.99% with A&L. I contacted them yesterday and because of the LTV they won't change same. Instead my only option is to stay on same rate, change to repayment for an additional £100/month, which we are doing.

PaulLuke

Hi Lisa,

(1) Have you got consent to let/a buy to let mortgage on the property you are letting out?
(2) When MagpieCottage says the rental income is taxable she means that letting a house out is viewed as a business by HMRC, irrespective of whether or not you make any profit and hence you should be filling out a tax return reporting the income to them. From your rental income you are allowed to deduct the interest element of any mortgage on the let property, agents fee, insurance and other miscellanous costs associated with renting out the property. Any positive balance left after deducting allowable expenses is then subject to tax as part of your annual income.
Also I'm not clear whether the morgage on your rented property is IO or repayment. If IO then all the mortgage payment could be deducted from your rental income. If repayment then only the interest element (which you should be able to derive from your mortgage statements) would be deductable, potentially leaving you making a profit from the rental property and hence having to pay some extra tax!

Lisa1978

PaulLuke wrote: »

Hi Lisa,

(1) Have you got consent to let/a buy to let mortgage on the property you are letting out?
(2) When MagpieCottage says the rental income is taxable she means that letting a house out is viewed as a business by HMRC, irrespective of whether or not you make any profit and hence you should be filling out a tax return reporting the income to them. From your rental income you are allowed to deduct the interest element of any mortgage on the let property, agents fee, insurance and other miscellanous costs associated with renting out the property. Any positive balance left after deducting allowable expenses is then subject to tax as part of your annual income.
Also I'm not clear whether the morgage on your rented property is IO or repayment. If IO then all the mortgage payment could be deducted from your rental income. If repayment then only the interest element (which you should be able to derive from your mortgage statements) would be deductable, potentially leaving you making a profit from the rental property and hence having to pay some extra tax!

Hi Paul, thanks Yes to nr1 and i have also informed the Inland Revenue of same. However, i charge £450/month, i pay out £430 to mortgage provider and i also pay the rates of £45/month so really i make a loss of 25/month. Because of that, i haven't been completing tax returns the last 2 years. Should i be and also would i actually be saving money on tax because of the loss? The mortgage is part and part, i beleive approx £25k of it is IO, the rest repayment but wld need to check statements. Thanks again