Buy To Let - What Cash Do I Need?

samjocky

Hi,

I currently have a mortage with B+W on my home and I rent it out as I have moved in with my boyfriend in his house. The mortgage is for £127K and the value is £210K.

I am thinking of buying another property under a BTL scheme, what cash do I need upfront to do this? Estimated property price of another one will be £130K approx. Can I remortgage my current home to pay for the deposit, fees etc etc?

One thing to note is that I am currently under a fixed rate deal which ends Jan 09 - if I redeem it then I am liable for a 3% penalty. Will this apply if I just ask for more funds but stay with the same company?

Any advice on the above would be really handy - it will either put me off totally or put me on the BTL ladder well and truly!

Thanks

zipwen1

think you would prob need about 19000 for the deposit on a BTL mortgage. you could remortgage your existing house for this.
you would have to pay the early mortgage repayment penalty if you paid the mortgage off but if you remortgaged the property you don't usually have to pay the penalty

mark_casey

talk to B&W about an increase in the mortgage as you may get it very close rate and deal as the first one ( I did with Birming midshire) so worth a try. aslo you should be looking at a 20% deposit just for safety as an 85% mortgage is quite common. you can get good fixed buy to let rates from Bradford &Bingly , Cheshire BS and also Nottingham BS. just a little reaserch will bring loads of info
also check the bbc mortgage calculator and multiply the intrest on,y figur by 125% to see if the rent matches as not many lender will touch you if its much lower.
As an aside forget making money on rent as that is rubbish small change instead look at equity to make you most just remortgage every 5 or so years and the gain is tax free if you never sell ( and gordon brown doesnt close this up)
hope this gives some food for thought

pioneer

mark_casey wrote:

As an aside forget making money on rent as that is rubbish small change instead look at equity to make you most just remortgage every 5 or so years and the gain is tax free if you never sell ( and gordon brown doesnt close this up)
hope this gives some food for thought

Keep on doing it, eventually you'll hit critical mass; markets correct, banks/courts close in and buy your assets for 50p in the pound looks like a recipe for Bankruptcy to me ? I'd rather wait for blood on the curbs " any asset", I always was one for BOGOFs.

Nice slant though; if only it were sustainable.

AndrewSmith

samjocky wrote:

Hi,

I currently have a mortage with B+W on my home and I rent it out as I have moved in with my boyfriend in his house. The mortgage is for £127K and the value is £210K.

I am thinking of buying another property under a BTL scheme, what cash do I need upfront to do this? Estimated property price of another one will be £130K approx. Can I remortgage my current home to pay for the deposit, fees etc etc?

Yes you can, subject to normal underwriting and the conditions of your current mortgage.

For a buy to let it is recommended to have at least 15% deposit to put in plus enough to cover fees.

One thing to note is that I am currently under a fixed rate deal which ends Jan 09 - if I redeem it then I am liable for a 3% penalty. Will this apply if I just ask for more funds but stay with the same company?

Depends on the terms and conditions of your current mortgage. Most will allow the extra cash to be taken as a further advance at a rate commensurate of it's current product portfolio however some mortgage products will allow the later drawdown of funds in some cases. A quick phone call to your lender should clarify this.

Any advice on the above would be really handy - it will either put me off totally or put me on the BTL ladder well and truly!

Thanks

Just be cautious. BTL is not the cash cow it is made out to be and with rising interest rates you are potentially exposing yourself to the danger of the rent not covering the mortgage and fees etc.

Check and research the rental market in your selected area thoroughly. Speak to local agents and check sites such as https://www.rightmove.co.uk to see how long properties are generally waiting around before they are let.

Dont forget that you have to pay the BTL mortgage whether you have tennants or not.

Andy

mark_casey

if you have done as i suggest with due dilligence you will be able to sustain but if the market crashes( as everyone who missed the boat hope) then you cant take any gains out , you just wait it will recover as it allways has
as an aside if all you who think their is going to be a house price crash and keep harping on about it WHY are you not telling everyone who wants a buy to let to just buy gold ( it goes up when everything else goes down and vice versa)
I do not want to discredit anyones advise but please dont just say"bad idea"
give a better idea instead
I hope no one just acts on any advice i give as you need to do your own research and if it concludes then good luck to you

mark_casey

oh yes one thing Pioneer didnt mention
If it does hit critical mass and you have to sell for 50p In the £1
Its not really your money as you have taken out all you ever put in
and all you have to do is make sure you get the rent to cover the mortgage
and we all know rents never go down

Gold price is rising as is most metals
House prices in Usa are going very very badly
and credit in this country is not as bad as first thought

Make your own assuptions but do Please Please check for yourself as its your money and only you know the best way to look after it

clutton_2

""remortgage every 5 or so years and the gain is tax free if you never sell""

the only problem about that, is that if you do need to sell - where are you going to get your Capital Gains Cash from if you have already "mortgaged out" all the gain.

i do remortgage from time to time, but, always leave a hefty wedge of equity in.

pioneer

mark_casey wrote:

oh yes one thing Pioneer didnt mention
If it does hit critical mass and you have to sell for 50p In the £1
Its not really your money as you have taken out all you ever put in
and all you have to do is make sure you get the rent to cover the mortgage
and we all know rents never go down

Gold price is rising as is most metals
House prices in Usa are going very very badly
and credit in this country is not as bad as first thought

Make your own assuptions but do Please Please check for yourself as its your money and only you know the best way to look after it

No, but it is your debt ie; 100s of thousands of pounds and the Banks work slightly different in a falling market its called "tightening of money supply" and they want it back ASAP. You will need all your equity to buy yourself out and cut your losses. How many years does it take to negate all of your hard work in collecting agro rent when the market is falling at 20%pa. You tell yourself "they are only shaking the tree"; but down she goes, people stop buying for a while cos its cheaper next month. I guesstimate a 20 year down/up to trend this time in fact most will be brown bread before the masses start talking property bubbles again, but great for the children of today who might remember those gallent young people who got suckkered into the great Tulproperty bubble of the noughties and bought at the top of the cycle.

The nature of the market changes again in the middle of a crash; buying can look attractive to the smart money and those leveraged to hilt get gobbled up. As for Rent yields; they can drop and are dropping, take a look a some of the other threads and oversupply/competition issues. The Guy buying YOUR 200K properties for 50K can rent alot cheaper than YOU, thats how it works, yields can be a funny thing :rotfl:

Personally I'm buying shares in all the auction houses and the banks they win both ways and as for gold thats for sissys. :rotfl:

brasso

Personally I wouldn't taking out a BTL at the moment. If you have spare cash for a BTL, either overpay your current mortgage to get that down, or invest it in some decent equities or funds. BTL mania is ruining this nation by forcing up property prices.

(I'm already a homeowner so am not bitter, but I would be if I was a priced out FTB).