Second opinion

mp80

Hi!

Me and my partner are looking at buying our second home... moving up from a tiny terrace to a more appropriate 3-bed detached, built 2004 and in superb condition inside and out.

The property we are interested was on the market for 200 just last year and I've made an offer for 145 which is accepted as the people need to sell quickly (seems like a good price!)

Income combined between myself and partner is 61k which gives us a rough take home of 3400 a month combined, and I have about 47k in savings. Intend to put down 25 on the deposit and get tracker mortgage (which is already approved in principle)

Have a car loan for 264/mo as only other lending aside from current mortgage of 235/mo. I use an AMEX card but pay off balance every month.

I would like to keep my current house and eventually let it out as I will almost certainly make money on it (similar rents 375 pcm in the area)

We have calculated we will have approx 1300 after bills left each month assuming the worst case (i.e I don't let out the property we're in now for whatever reason)

I would just like an opinion based on the facts above that we are making a decision that people would consider would be affordable and within means. I would be left with approx 22k savings left, and have other future income sources (single inheritance of about 250k worth of assets.. cash and property, sounds a bit mercenary but it has to be considered!)


Ta
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holly_hobby

Sounds as though you have thought it out quite well with regards your residential circs, and I assume that your AIP is based upon you retaining mge no 1 or the lender being aware of it.

Only you will know if £1300 after bills & worse case scenerio, is sufficient for your normal household expenditure, for myself it would be ok, for others it would be a fortune, and for some not enough ...)

With regards to renting your "old" property being eventually let out - be careful as your standard b&cs will be invalidated for extended periods of unoccupancy (30 days plus), which will also put you in breach of your mge t&cs (which require valid blds insurance as a condition of the mge), any standard up keep & general repairs will obv need to come out of your available £1300 whilst its unlet too. And you must consider the risks associated with an unoccupied property.

There are specialist policies for unoccupied properties which you can google for providers.

When, or if, you do decide to retain your old home and let it out, you may seek to obtain a "consent to let" from your current lender, or if they refuse or you simply don't like the terms they impose, remortgage to a "buy to let" mortgage. (there are some current fee free (basic legals & survey) deals about).

Advise effecting landlord b&cs, effecting any tenancy on an assured shorthold tenancy agreement (AST), and consider employing the svcs of a letting agt to manage the let from top to toe. (inc refs, deposits, invantory lists, site visits etc ..)

You shall also have to nominate a main residence for CGT purposes to HMRC within 2 yrs of your change of address. (any election can later be amended if circumstances change i.e you move back to your original property as your main residence)

If you sell property no1 within 3 yrs of your vacation, there will be no CGT to pay on its disposal, after that term, there will be a CGT charge (less available allowances) - which may still equate to nil to pay.

Just some general points to consider

Good luck with the purchase and house move

Hope this helps

Hollly

mp80

Thanks very much for the extremely comprehensive and informative reply.

From 2009 to 2011 I was away from the country completely but one of us returned within 30 days each month to ensure validity of the property insurance. As we'll literally be moving a couple of miles away it'll be a lot easier to deal with!

I'd definitely go through a lettings agent to but I am thinking it may be prudent to dispose of it and market it extremely competitively to avoid all the hassle. Similar properties in the same road in worse condition are on market for 84 which I think is absolutely scandalous, I'd realistically be expecting 10k-15k less (but I'd still be up by 20k or so at the worst case so no worries, can't get greedy in these times and my spare time these days is worth more than making a few hundred quid a month).

With respect to council tax, etc. would I still be liable for the full balance? Assuming we're not living there and the property is empty pending a sale, or could I apply for an exemption / reduced rate?

Thanks!

mp80

Also the mortgage offer was made on #1 prop being kept, which is good!

getmore4less

If you can get £375pm and think it will sell for around £70k thats gross yield of 6.4% which is fine if you can keep the mortgage rate low on £70k's worth of lending.

What rates are your savings getting?

Might be worth looking at higher deposit to get lower rate.

When does the car loan finish? what's the plan for saving for the next one?

Why not pay off the car loan what rate is that.

Keep a smaller pot of savings to cover loss of income and rebuild savings/overpay.

mp80

Car loan is finishing in 3.5 yrs, bought a new car in March, I put in 50% cash and 50% is on HP, rate is 9.9%. Could pay off completely (balance of about 10k) but would leave savings pretty much depleted beyond the level I am comfortable with. One thing I can do with the HP is pay off a proportion of the balance and reduce the payments or reduce the term.

I know 6 months after tax salary is the recommended which for me would be about 14k but I would like to have more available as it's what I have become used to over the past years, despite it not earning great rates (2.7%)

Unless I can be convinced otherwise

Thrugelmir

Not very MSE. To pay over 9% on your debt and earn 2.75% on your savings.

Are you prepared for running a business i.e. letting a property. As reward requires risk.

Why not sell your existing property , clear your debts and enjoy a comfortable life style with no worries........:beer:

mp80

Well I am a company director, and I run a business that makes a profit every year, so I guess I do know something...

Life isn't all about savings interest, it's about being comfortable in yourself and your circumstances. Wiping out all my savings to pay debts just to get an extra 60 quid a month in interest isn't particularly sensible either in my book.

holly_hobby

mp80 wrote: »

With respect to council tax, etc. would I still be liable for the full balance? Assuming we're not living there and the property is empty pending a sale, or could I apply for an exemption / reduced rate?

Thanks!

Sorry for delay in reply ...

Re - Council Tax Query

You will receive 100% exemption for 6 mths if the property is empty i.e unoccupied.

To qualify for total exemption - the property has to be unfurnished (entirely or substantially), and has to be vacant for the whole of the 6 mth period. (nb - although occupation upto 6 wks during the period will not breach the terms of exemption).

If the property remains furnished you will only be entitled to a 50% discount on the standard CT charge, which is chargeable from the date of your vacation until such time as the property is sold or becomes let/occupied.

If after the initial 6 month period, an unfurnished property (which enjoyed full exemption during the initial period) remains unsold/unoccupied/unlet, you will then be liable for 50% of the relevant charge on the property. (regardless of its level of furnishings).

I've tried to give you as much info as poss, but if you want further clarification your local authority council tax line should be pleased to provide you with advice and guidance, and issue you with all relevent docs for completion & submission in support of any exemption claim.

Hope this helps ...

Holly

mp80

Thanks once again, very useful and will save about £100 a month in council tax in the short term!

One final question, regarding a house of 7 yrs age, is it worth getting a full structural survey or would a mid-range homebuyers report suffice? I got a homebuyers on this one from Colleys and it was quite comprehensive, what does a full SS give in addition?

getmore4less

mp80 wrote: »

Car loan is finishing in 3.5 yrs, bought a new car in March, I put in 50% cash and 50% is on HP, rate is 9.9%. Could pay off completely (balance of about 10k) but would leave savings pretty much depleted beyond the level I am comfortable with. One thing I can do with the HP is pay off a proportion of the balance and reduce the payments or reduce the term.

I know 6 months after tax salary is the recommended which for me would be about 14k but I would like to have more available as it's what I have become used to over the past years, despite it not earning great rates (2.7%)

Unless I can be convinced otherwise

Running a £20k+ car with debt at 10% is something to review.

6-12 months expenses not net salary.

debts just add to the amount needed

You will rebuild savings fairly quickly.

Life isn't all about savings interest, it's about being comfortable in yourself and your circumstances. Wiping out all my savings to pay debts just to get an extra 60 quid a month in interest isn't particularly sensible either in my book

It's not about a bit of extra interest it's getting the ballance right and having a plan that sets a sensible level of savings to match risk.

This is cover for loss of income and likely time to replace it(that's where the 6-12 month expenses comes from)

With 2 incomes(from different employers) the risk of total loss is much lower.

Paying off that £10k debt reduces the income needs by £264pm or for 12months expense cover, over £3k and increaced savings rate replaces the rest in just over 2 years rather than the 3.5 year loan.


Another option is to look at the max you can borrow on the house and use that to pay off some(all) of the car loan.