Buy to Let Advice needed

sx7uk

I'm seriously thinking about getting a buy to let mortgage on my existing property.
As I already live at the property and have an existing mortgage, I'm wondering if there are any pitfalls around getting a buy to let on my existing property and then moving to another?
I also have the problem of having to put down a 10% deposit as buy to let only give up to 90% of the value. I can find the deposit, but this uses all my available funds.
As I'm a complete novice at this, any advice would be greatly appreciated.


Thanks

JennyP

Have you asked your current mortgage lender if they would give their permission to let your property? Some will for a small fee, but often that fee is alot less than getting a new mortgage with all the solicitors and surveyors fees that that entails. They might also do an equity release for you so that you had a deposit for your next property!

imoneyop

sx7uk wrote:

I also have the problem of having to put down a 10% deposit as buy to let only give up to 90% of the value. I can find the deposit, but this uses all my available funds.

BTL mortgages usually require a 15% deposit.

mystic_trev

sx7uk wrote:

I'm wondering if there are any pitfalls around getting a buy to let on my existing property and then moving to another?

Have you worked out how much rent you'll get? Will it cover the mortgage? What about voids? What'll happen if Property prices drop (unlikely I know as House prices only ever go up!?) If you can't keep up the mortgage payments on either Propery you could have both repossesed!

jaype

Alos, what would you do if the property needed a major repair - such as if the roof sprang a leak and you had no available funds? tenants are paying for a service that you have to provide. Otherwise you could end up on the wrong side of the environmental health or council. If they fined you on top of the rest, you'd really be in the do-do. To answer your question, the pitfall is that you can't afford to run this business ('cos that's what it is). Also, look at the current barmy market. You might be glad you missed out on two lots of negative equity if the worst happens.

brainiac44

yeah, the problem you have is that your 5 years TOO LATE !!

you can no longer sustain even an IO mortgage on the rental income as you would be buying at a peak and would have no capital gain to fall back on.

dont jump onto a sinking life raft.

brainiac44

yeah, the problem you have is that your 5 years TOO LATE !!

you can no longer sustain even an IO mortgage on the rental income as you would be buying at a peak and would have no capital gain to fall back on.

dont jump onto a sinking life raft.

fatpigeon_2

Hi sx7uk

Why do you want to BTL? Is it because you are looking for a secure investment? Maybe you could consider some other investments for the time being while you grow your funds and then go into the business with more ofa safty net?

sx7uk

Thanks for all your replies. To answer some of the questions:

The reason I'm looking at buy to let is for a long term investment. If I did BTL then I wouldn't ever plan to sell the property so a price crash wouldn't matter. (As long as there wasn't a rental price crash) Once the mortgage is paid off (maybe 25 - 30 years) It should be a solid income for me when I retire.

Rental Income would more than cover the costs as its a 3/4 bed property that I would offer as a house share for 3 people at £85 a week each = £1147.50 a month with a 90% interest only mortgage being around £170000 and costing about £850 a month or less. Doing a house share should also ensure that the house is never empty, there is always an income and it would be easier to evict anyone if the need arrises.

Major costs. I have lived in the property for 9 years ,all plumbing electrics and heating are rock solid. The roof and flat roof will need replacing sometime in the next ten years. £5000? This is a big part of me thinking about BTL as I know the property so well.

sleepymans

I would have thought £5k to replace a roof on a 3/4 bed house and a flat roof would be very cheap. I recently paid £9k for a new roof on a two-roomed lean-to extension!
If you have an IO mortgage you cannot surely use the property to fund your retirement - you are going to have to repay the loan at some stage!
With sharers renting the house there will be more wear and tear than a couple for example.
As well as the mortgage you will have to pay for insurance suitable for a BTL house (more costly) the new tenant deposit scheme, agents fees, gas and elect safety certs, routine maintenance, replacement of carpets, decorations, white goods, central heating boiler maintanance etc etc plus advertising and/or agents fees - then there is income tax on the excess of rent over expenses - if there were any!! Already the figures are looking precarious to me......?

PoorDave

Presumably you're planning to pay the IO mortgage off with the monthly proceeds from rental minus mortage interest, and that's how the mortgage will get paid off in 25-30 years (a plain IO mortgage would obviously mean you'd still owe all you borrowed after x years).

I don't go along with the idea that nobody is "allowed" to go into BTL these days, as it's "5 years too late". While this may generally be the case (i.e. you can't go and buy any old house and expect capital growth of 20% per annum plus a high yield), if each opportunity has been carefully costed, and the likely risks assessed, there's no reason not to do it.

If you are happy with the figures go for it.

Also, not all BTL mortgages require 15% deposit, and just because you have space for 3 sharers, does not mean that the house will never be empty - that's a bit optimistic.