Advice and Opinions Wanted

BTman

nordberg wrote:

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....

nordberg

Robert_Sterling wrote:

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.

Great! Thanks, this is very interesting and the sort thing I'm after. If you could excuse my ignorance, would you be able to give me further info on your illustration? What are the logistics of it all?

lynzpower

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.

Likewise, with respect, this is moneySAVINGexpert, not moneyWASTINGexpert.

I speak as a moneysaver, thats all.

scorpio_princess

nordberg wrote:

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.

Ok, so you want to stay on the mythical 'property ladder' so it can basically be your pension? So why not buy one big house, stay in it for the forseeable future - you didn't disclose your age, but supposing you have another 30 years until retirement - then sell up and downgrade to a smaller/cheaper property. You would then (hopefully) have a lump sum (which I think I'm right in saying is not subject to CGT because it's your primary residence) to bank in a high interest account, which would pay you a monthly 'wage'. You won't be jumping off the ladder - you'd actually be in a far better position when it comes to buying and selling than most, because you would actually OWN the property, as opposed to the bank/BS.

Jumping on the BTL bandwagon isn't the only answer to your situation - I'm just chucking a few ideas your way. After reading some of the posts on here in the last few months, I don't think being a LL is the barrell of laughs people sometimes think it is. I wouldn't want to do it - what happens when a tenant trashes your house? Or how about if you fail to let it at all, as is happening with a lot of rental properties in my area at the moment - would you really want to be paying repayments knowing you're not getting any income from the property to pay for it? These are all questions you need to seriously ponder, as i'm sure you're already aware.

lush_walrus

nordberg wrote:

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.

Ok, I see sorry that wasnt entirely clear to me. So, in effect the actual situation you are enquiring about is whether it is possible to release the equity from your existing property to form a deposit for your new one, and therefore re-mortgage your existing property to a higher value than your existing mortgage with a Buy to Let mortgage?

Ok, so you need to find out the rental value of your property is, as this is the basis any BTL mortgage will assess lending upon. This mortgage bares no relation to your earnings, other commitments or affordability in general and will be offered purely on the viability of the rental yeald of the property against size of mortgage.

All possible and viable, but do have a proper look at your local market to see if there is a demand for rental properties, as some areas are saturated and the last thing you will want is a property sat on the rental market. Then as I say check how much you can rent the property for per month. Once you know both of those come back with the amount you wish to borrow and the rental yeald per month and someone will be able to help. Without either of those its a bit difficult to answer your question as basically, yes it is possible and pretty common since the whole BTL boom.

scorpio_princess

lynzpower wrote:

Likewise, with respect, this is moneySAVINGexpert, not moneyWASTINGexpert.

I speak as a moneysaver, thats all.

Exactly! Why pay the banks any more money than you need to?

nordberg

Just to address the moneywasting comments. Can you show me another way of investing money, other than property, that yields the same results? I know we are in the middle of a boom, but I still don't see how it can ever be considered to be wasting money???

GUMPO

You need a bit of advice from a proper IFA. There are all sorts of other things you need to take in. For example if you move in with your girlfriend and rent out your house you should transfer all the lending on to the rented house. This mortgage can be used (I think) to reduce the income tax from the rent you colllect. Also after you move out you can rent for a couple of years (help me out someone is it 5) and then sell without capital gains tax kicking in.

on the whole, with prices as they are I would rent one out if I was in your shoes.

Good luck whatever!

lynzpower

nordberg wrote:

Just to address the moneywasting comments. Can you show me another way of investing money, other than property, that yields the same results? I know we are in the middle of a boom, but I still don't see how it can ever be considered to be wasting money???

Ok, well you will know better than me what percentage of your expenditure on a new mortgage ( whatever price you are looking at) will be a) to pay the property off and b) what will be going to the bank in interest.

personally, I dont like the idea of paying banks interest. you suggest its a fact of life. However you are in a fortunate position to be able to say categorically otherwise. If I had the money to invest elsewhere as you seem to then surely every penny the bank gives you, is better than you giving to the banks?

Your argument only holds if the property consistently rises in value exponetially over the years. I dont know where abouts in the Uk you are, some parts of it are booming, some are struggling. Additionally, if you had money in bonds, or otherwise you can liquidate your assets as and when you need them, not 6 months later after the property is sold.

You say yourself your properties were bought "before the boom" do you believe that the "boom" is over? flattening off? Falling? There is a range of ideas and opinions on this ( look around there are plenty of debates on this).

Its your money, you can choose to do with it what you will of course. But paying banks for the priveldge of borrowing money when you could invest it so the banks GIVE YOU money, I personally would always prefer the latter.

Guy makes a good point, an IFA would be able to tell you where would make you a decent return, without cost to you.

nordberg

Of course it's a gamble, but then what isn't? Going on my own experience and the the experiences of those close to me, then property is still the best thing for me to put money into. That's not to say I'm going to to blindly throw money into property with the blinkered view that it will always return a huge profit. I'm also very aware that I've been particularly fortunate with my property thus far.

As I said in my original post, I will be seeking the advice of a IFA (if there is such a thing), I just thought I'd get some input from the people on here as I know there are some savvy people floating around. Any new ideas/suggestions are what I need to take to the IFA when I see him/her.