Advice please for first time buyer

slipthru

My partner and i are looking to buy a 2 bedroom flat for £125000 With a mortgage of £112500, the monthly repayments will be around £450 interest only for 2 years and we will look to save around £100 each a month to cover repaying the actual loan.

We are looking to rent it out for around £500 a month for the first 2 - 5 years as we live in london and are not ready to leave our life here.

Does this seem like a good idea or should we continue saving for a few more years?

silvercar

it is difficult to get a btl mortgage without owning your own property. I think there are only one or two lenders that will consider it.

normally on a btl mortgage you need at least 15% deposit, though you may get away with 10% somewhere.

lenders usually require the rental to exceed the mortgage payments by 25%.

unfortunately you are pushing the boundary on all 3 restriction i've mentioned, so I don't think it is going to be easy to secore the mortgage you want.

talksalot81

Most of the information I have read has led me to believe that now is probably one of the worst times to be getting into BTL...

A_Nice_Englishman

Starting a property rental business is like starting up any other business. You need a business plan.

Do void periods, bad debts, repairs, redecoration, legal fees,insurance, agents fees, costs of evicting bad tenants, rises in interest rates to, say, 8% and possible falls in property values figure in your business plan?

Are you familiar with the 50 Acts of Parliament and 70 sets of regulations which may apply? Did you know you can be held responsible for the anti-social behaviour of your tenants?


Then you need to look at the taxation side. Any profit you make will be taxed at your highest rate of income tax and if you make a profit when you sell you will have to pay Capital Gains Tax. though there may be reliefs.

Cara79

slipthru wrote:

the monthly repayments will be around £450 interest only

We are looking to rent it out for around £500 a month

So you're making £50 "profit" per month. You'll have all the legislation to contend with of being landlords, you'll be required to do all the maintenance.

Can you honestly say it is worth it? I mean, there is speculation about what house prices will do. Interest rates seem to be on the up as well.

I would really think about this, save hard now and then look at buying your first home when you're going to live in it.

Good luck

roswell

Dont forget you need to account for repair costs, legal costs to evict tenants that dont want to leave or pay rent, damages to the property, replacing items due to wear and tear etc .. will £50 a month cover this ?

yanchuga

I think you should save some money

kenshaz

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