Help please! Thinking of buy-to-let...

Mics_chick

sm9ai wrote:

If your happy with it then go for it.

But you would be helping out the ex-wife. Nothing wrong with that, more people should be generous.

As an investment point of view its pretty poor.

From the hassle point of view it's a fantastic investment!!!

Madjock

Most mortgage lenders would require the rental income to be anything from 115-125% of the mortgage, i.e. if the monthly mortgage payment is going to be £500, the rental income would need to be £625, and you would need a letter from a local letting agent confirming the achievable rental income.
You would also have to have specialist landlord insurance, gas checks, shorthold tenancy agreement, to name but a few requirements.

And the resale value will affect how much you can borrow for a remortgage.

matto

Can I ask who pays the mortgage currently?

Something doesn't seem quite right in your scenario. You're suggesting changing to a buy-to-let mortgage and borrowing more money yet the ex wil be paying the same amount of money as she is now.

The amount of mortgage you require would be half the property value (to buy ex's share of house) plus half the amount of outstanding mortgage (to pay off OH's half of the mortgage) plus that little bit extra.

Mics_chick

I think you might be right Matto - OH did the sums so I'll have to ask him how he's worked this out...?

tiggert

lynzpower wrote:

I believe the 6% rule is started by the banks. the issue for us as MSErs is you can get 5.odd with the money sat in the bank, you need to make sure that house is doing more for you than a bog standard bank account.

If this is the case I would think it would mean to make financial sense the yearly rental should be at least 6% of the remaining equity rather than the value of the house shouldn't it? As if you sold a house that still had a mortgage then you wouldn't have the full amount to re-invest, only the remaining equity after paying of the rest of the mortgage? Maybe need to ask doozergirl.

cheerfulcat

Mics_chick wrote:

why does anyone invest in property to let?

The obvious answer is gearing; using borrowed money to buy an asset and in the case of BTL, getting someone else to pay the money back! But in your situation it looks rather complicated.

Carter_2

Mics_chick wrote:

His ex-wife has already agreed to this as she gets what see wants most of all to stay put... She also gets a good amount of cash to invest to supplement her pension or spend on luxuries she can't currently afford. And finally the house is going to get put right/updated so it will be more comfortable for her to live in. They have a very amicable relationship and he's been fair to her all along cos that's the sort of person he is...

It seems easier because it would be an almighty battle to get her to move at all and that's after he's managed to force her to sell - if he can?

Doesnt sound to me like it's an amicable relationship from your last comments . Also it appears you will be subsidising the mortgage, based on previous poster's comments, whereas she will be paying the same for an updated house and cash in her pocket, no wonder she agrees to the idea!

I am no expert in this area but think you should look at your figures again if you will be effectively paying her to remain in the house for at least 10 years. It's not something I would be too happy about although very noble of your partner.