Buy to Let Mortgage Question

phil7445

Just a quick question. Is it possible to get a buy to let mortgage for 100% of the property cost?

Looking at the companies in the links in the mortgage area on here, it seems not. :-(

dunstonh

There wouldnt be much point in going 100%. Its hard enough to get the rent to cover the mortgage at 85% let alone 100%. You would be paying someone to live in your house.

There are ways of squeezing more, such as borrowing on your current property but you are pushing the risk up the scale and reducing the profitability of what you are doing making it an unrealistic prospect.

phil7445

Oh I see. I guess if it was a long term thing and the value of the property was to go up significantly then it would be worth doing?

Rick62

And I guess if it was a long term thing and the value of the property was to go down significantly then it would not be worth doing?

phil7445

Ok, there have been crashes but generally speaking property goes up not down!

Mr_helpful

Yes it is possible you just have to buy it BMV ie 85 to 90% of market value, buy it on a bridging loan and do an immediate remortgage at true value. I have done several though you are very lomited on the mortgage companies that will do this
There are other ways as well

dunstonh

Generally property goes up but those that bought at the peak before the last crash took nearly 10 years to get out of negative equity.

Plus, unlike a stockmarket investment, you are borrowing money against the asset. So, you have no yield (income) like you would with shares as the income you get on the rent is going towards the mortgage. This leaves you reliant on the property value itself.

When you come to sell up, any gains you make will be chargeable to capital gains tax which could see you paying 40% tax on the amount of the gain.

5-7 years ago, BTLs were on to a winner. Now, unless you have the ability and knowledge, the potential for gain for the level of risk you are taking is not good.

After all, you are potentially putting your whole lifestyle at risk if it goes wrong. You could lose the let property, you could lose your primary residence. You could lose everything. So, whilst there is potential for gains, there is potential for loss. Is the potential risk worth the potential gain?

Whilst you think about that, take a look at this graph and look at the stage you would be buying:
http://www.housepricecrash.co.uk/graphs-average-house-price.php

Mr_helpful

housepricecrash has been predicting a crash for ages now. I guess if they keep doing it for long enough they might get lucky just like old Bob Beckman in the 80's when he predicted the crash after numerous warnings eventualy proved himself right.
However with current demand outstripping supply plus plenty of people coming from abroad. a crash seems unlikely, more likely a flattening off of growth.
I dont know where stocks and shares come in to the argument as they require you have the money to buy them in the first place and are more volatile in property. I agree 7 yrs ago was a better time to buy but the person who started the thread probably wasnt in a situation to buy then. The buy to let is unlikely to cost him everything as he could just walk away from it if worst came to the worst.
The right time to buy is when you decide you want to and if thats now so be it. The person just has to understand what risk is involved
I own several props and all are paying for themselves and all bar one are in profit. The one that isnt has a subsidence claim ongoing so i have not counted it as I dont know its current value but the rent more than pays the mortgage.

phil7445

It was just an idea and maybe it is not something I should do. Thanks for your advice.

You see I saw an advert of a company that builds property, guarantees rental income of 6% for a period of time (they approach Blue Chip companies to rent to). Sounds like a good deal but.... once the guarantee period is up you and countless others need to make sure you can still carry on renting it out. Or if you want to sell it, so might countless others.

If you know which company I am talking about it is probably best not to mention it as advertising is not allowed on here!

sarkin

the key to investing is buy low sell high. After 10 years of HPI how much higher do you think it can go.

sarkin

Just remember if you get involved with guaranteed rental income, when the deal finishes everyone in the block could be looking for tennants. Also new builds go down in value after completion so you could be in negetive equity with no tennant chasing the market.