Help with buy to let idea

positivealternative

Hi my partner and I are considering the idea of renting out our property rather than sell it and our mortgage lender (Nationwide) has informed us that we can have consent to let.
This may sound crazy but I had trouble understanding the advisor from our mortgage lender but basically would like to know what we can borrow for purchasing the new property and whether the rental option is viable.
We currently have a mortgage of £60000 on a property that would sell for £115000 tomorrow. Our combined income is £47000 per annum and the rental value for our property is £595 per month.
Any assistance would be great

tinktay84

i would say you would prob be able to get a second mortgage based on you not having much by way of debt and you being able to prove income etc?

we rent a property out at £425 a month (we get 374 after fees) and our mortgage is 188 so we could get a second buy to let mortgage based on this but have been told we cant get a mortgage for us to buy a house to live in as our income isnt high enough. Have a shop round and speak to a few brokers to make sure you get as much info as possible

Thrugelmir

Do you have the deposit saved to put down on your new property?

positivealternative

Thanks for your replies. Yes I think speaking to a few brokers would be beneficial. Our plan is to roughly work out what to do 2 years from now. (Thinking that the property can be used as our pension) Obviously a lot can change in that time.
We currently do not have a deposit but can save roughly £500.00 per month by strict budgeting, so £12000 in 2 years. Not too sure if this would be enough?

jimjames

positivealternative wrote: »

We currently do not have a deposit but can save roughly £500.00 per month by strict budgeting, so £12000 in 2 years. Not too sure if this would be enough?

Probably best to look at the options in 2 years time. The market for both property and mortgages is moving pretty fast so the picture could be very different by then and any advice now would not be relevant.

dimbo61

The best thing you can do now is either save or overpay ( which ever is giving you the best return)
But have a chat with a mortgage broker.

positivealternative

Thanks to all for their advice. Just a quick one. Does anybody know of any no deposit mortgage deals for purchasing a property whilst having another on buy to let? I assume these don't exist?!!!

gallygirl

You do have a deposit - a big chunk of equity in your current home which you could access if you remortgaged. Also from a tax point of view, as you can offset interest charges on a btl against your income, it's best to have a large btl mortgage and lower one on your own home.

I'd advise speaking to a mortgage advisor asap so you can see your short & long term options. They will be able to juggle ratios & see what works best. But remember, they will see the btl as a liability when working out what they will lend as they will want to make sure you can cover both mortgages.

Good luck. Btl can work, if you have a high threshold for stress

getmore4less

gallygirl wrote: »

You do have a deposit - a big chunk of equity in your current home which you could access if you remortgaged. Also from a tax point of view, as you can offset interest charges on a btl against your income, it's best to have a large btl mortgage and lower one on your own home.

I'd advise speaking to a mortgage advisor asap so you can see your short & long term options. They will be able to juggle ratios & see what works best. But remember, they will see the btl as a liability when working out what they will lend as they will want to make sure you can cover both mortgages.

Good luck. Btl can work, if you have a high threshold for stress

The debt does not have to be on the rental property to qualify for the relief.

remortgageing to release equity(near the time) could jeperdise the consent to let and need a BTL, much more expensive.

Overpaying could also be an issue might not be able to get it back.

brit1234

positivealternative wrote: »

Thinking that the property can be used as our pension

Have you made any calculations on the annuity you would likely get and what pension. Also how that would compare to a normal pension. I believe a basic pension would give a better return.

Also is it a good idea to take equity out in a falling market which by spreading it will reduce at double the rate?

I think it may be worth sitting down with an independent financial advisor to do the comparison sums, it could stop you making a costly mistake.

positivealternative

Thanks gallygirl that has given food for thought! We assumed that we could not use the equity in our own property as the mortgage lender told us they would lend roughly 80-85% for the new property but did not mention the use of the equity in our current property. I should have tried to stress the point more I think!