Advice and Opinions Wanted

nordberg

Hi,

I'm about to get myself into an interesting situation. Basically it's like this:

My girlfriend and I would like to move in together. We are both home owners. I have been in my home 6 years now and she has been in hers 5 years. We are both in a good position as we bought before things went mad around here. As an example, I paid £44K for my house and I had it valued last summer at £120K. My girlfriends has gone up relatively the same, although hers is worth nearer £200K.

Our initial thoughts were for us both to sell up and go 50/50 on a new property. However, I am curious about other options. For instance, I could keep my house and let it. I am confident (and have been reliably informed) my house would let easily earn me somewhere in the region of £450 p/mth. My mortgage repayments at present are only £250 p/mth so I have the potential to do well out of it. What I am unsure about is things like re-mortgaging with a buy-to-let mortgage etc. Is there a way I could release some of the equity in my house to put toward the deposit on a new property? As I see it, if I keep my house and my girlfriend sells hers, I will have somewhere in the region of £5K to put towards the deposit and she will have around £100K!! So I need a way to release the equity from my house. Here are the figures:

Amount owed on my proprety: £33K
Current value of my property: £120K
Monthly repayments: £250

I could afford to put in another £200 per month on my repayments.

As you can probably tell, I'm a bit inexperienced in this kind of thing and so welcome any advice from people who know more than me. I plan on getting some professional advice soon, but would like to get some input from people on here beforehand.

Cheers,
Matt

Robert_Sterling

Do not complicate matters by becoming a landlord.

lynzpower

Id just sell one of the houses.

Then put the profit into the other one and live mortgage free for the rest of your days.

nordberg

I don't want to be mortgage free, I want to continue to climb the property ladder. Eg - I still want to be paying at least £250 (up to £450) per month into a property every month.

lynzpower

nordberg wrote:

I don't want to be mortgage free, I want to continue to climb the property ladder. Eg - I still want to be paying at least £250 (up to £450) per month into a property every month.

why on earth would you want to not be mortgage free?

nordberg

lynzpower wrote:

why on earth would you want to not be mortgage free?

With respect, if you can't understand what I'm trying to do, then you're probably not best qualified to answer my original post.

scorpio_princess

nordberg wrote:

With respect, if you can't understand what I'm trying to do, then you're probably not best qualified to answer my original post.

So explain some more what you are trying to do - I kind of got a bit lost too! I'd take mortgage free any day, because for every repayment on a mortgage, 2 thirds of it are boosting the bank's coffers!

lush_walrus

I think the answer to your question lies with you! Its a give and take situation really and will partly depend on what sort of property you are going to be buying and how much you are stretching yourself to buy it.

Firstly, you need to discuss the situation with your GF, is she happy to provide a larger deposit than you, as presumably your current property will stay in your name and the new one in shared ownership?

Secondly, you need to assess how much of the money from your current property you will require for your new one and how much you can leave where it is and still be able to afford what you are wanting to buy with your GF.

Thirdly, dependant on the above two answers you need to check the rental yeald on your current property, can it rent for enough money to cover your mortgage, potential repairs during the contract and a couple of months each year without rent (just incase).

nordberg

OK. Firstly, I want to keep putting money into property as I don't have any other investments. I do not have a pension and I don't plan on getting one. I'd rather put money into property to be frank. I am comfortable with putting up to £450 into a mortgage every month regardless of anything else.... I don't want to fall off the property ladder. I hear what you're saying about the banks getting 2/3 of my money, but that's life and there's not an awful lot we can do about that.

lushwalrus, in answer to your questions. My girlfriend is happy to put in more than me, but I'm not! Ideally, I want to, as near as is possible, match what she puts in. This is why I am asking about releasing equity from my house to put towards a new property.

Robert_Sterling

You are thinking of two significant things at the same time.
1. Moving in with you girl friend.
2. Becoming a landlord

Perhaps your girlfriend might like to be the one who is a landlord.
Perhaps you would both be the owner of the house which is let out.
This might be better in the long run in respect of Capital Gains Tax.

You appear to have £87,000 equity in your house.
If you just sold it the £87,000 would produce income at an assumed rate of 5.5% of £4350 before basic rate tax or £3480 after tax at 20%

You might be best off by buying ONE more expensive house jointly with your girlfriend. You would then get the Capital Gain on that house free.
Whereas on two separate houses one of which is not your main home ( i.e. It is let ) you do have to pay the Capital Gains Tax in some circumstances.

Robert_Sterling

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