Military man needs help

burgess820

Im comming out of the RAF in the next 5 months. I have £85k outstanding on a repayment mortgage. This is for a house i'm presently renting out with a tenant aggreement til July 2008. When I come out I will have £90k lump sum avilable and £700 a month pension.

My wife wants me to buy a house to a value of between £250k-£315k.

Do we sell an endowent policy we have thats been recently priced at only £8200.
Do we keep the house that we are renting out or do we sell it.We have a good deal where we rent it out for 5years at a time to a local council, this brings in £700 a month just covers the mortgage.
Do we use the £90kas a deposit for the hose we wish to purchase, will I get a mortgage for £200k+
Im 43 years old, and comming out to real life, please help.

My RAF pension is index linked to when i'm 55, i'll be in paid employment of £30k a year and my wife is in paid employment also approx £30k a year.

peterg1965

Interesting dilemma. I am also in the forces and will be in your position in about 10 years. Are you sure your pension is index linked until 55? If you have commuted some of it to increase the lump sum it will be static until 55 then index linked from there.

It sounds as though you could certainly afford to keep your rented house and also buy another with a combination of your £90K lump sum and your £60K combined salaries and £700 month pension. I would be inclined to do just that, and take a five year fixed rate mortgage on the new house. Consider cashing in your endowment to increase your deposit slightly. You need to choose mortgage providers carefully, some will be reluctant to lend to you past your 65 birthday (am not sure how old you are). I would also call a few to guage their opinions on this proposal. Good luck.

herbiesjp

It indeed looks like you do not have to sell your let out property if you do not want to.

As long as it is self sufficient i.e. rental income pays the mortgage, a lot of lenders will "ignore" the property in the background

So then you are left with buying at a max of £315k with joint income of £60k plus your pension income of £8400 pa. YOu have £90k to put down, so that would leave you with a mortgage of £225k

So the figures do indeed work out for you.

However it will depend on your whole picture as to whethr it would be wise to do. You may want to look at it theother way around i.e. look at how much you would be comfortable with as a second monthly mortgage payment, and then see how much that would equate to in terms of mortgage amount.

Do you have any other debts in the background i.e card/loans/HP? DO you have any children? Do you have a clean credit history? As all of these would impact on the mortgage amounts/deals available to you

HTH

burgess820

Thanks for the advice. I have a 4 year old son, and no debts, not a single credit card. Mr debt free.

burgess820

peterg1965 wrote:

Interesting dilemma. I am also in the forces and will be in your position in about 10 years. Are you sure your pension is index linked until 55? If you have commuted some of it to increase the lump sum it will be static until 55 then index linked from there.

It sounds as though you could certainly afford to keep your rented house and also buy another with a combination of your £90K lump sum and your £60K combined salaries and £700 month pension. I would be inclined to do just that, and take a five year fixed rate mortgage on the new house. Consider cashing in your endowment to increase your deposit slightly. You need to choose mortgage providers carefully, some will be reluctant to lend to you past your 65 birthday (am not sure how old you are). I would also call a few to guage their opinions on this proposal. Good luck.

Thanks , yes i am aware that its index linked from when im 55, and yes i think i will have to cash in my endowment, probably to pay the 3% stamp duty on this property.

Gorgeous_George

I believe your pension is fixed until you reach 55 and then it is index-linked using the RPI (so that it is worth the same at 55 as it was when you retired). Any commutation is 'forgotten' at 55.

Have you worked out the CGT liability if you choose to sell your BTL? This may be influential in your decision.

You need to compare the value of your BTL now against the likely value in X years' time. Do you have a plan for the property?

Whatever you do, look after the missus. You can't afford for her to go her own way!



GG