100% mortgage and let current home or?

Esie

We are very luckily mortgage free at the moment. House possibly worth in region of £250,000 maybe a bit more as 2 doors away went for £275,000. 2 bed terrace and getting too small for family.

However 3 bed houses in good school catchment area are £500,000. So we are a bit stuck.

So other than using sale of current house and get mortgage for ~£250,000 if we can as husband's gross salery #£27,000 p.a.

I was wondering if it is feasible to get an 100% mortgage on a new property and use current house as part collaterol and let it to make repayments? letting value a few years back was just over £1,000 a month.

Thanks for any advice.

caraboo

this is exactly what we are considering at the moment.

will be interested to hear peoples views

Guy_Montag

Do you work? Otherwise you're considering getting a mortgage of between 9 & 18 times you husband's salary.

Fairdo_2

Haven't got the time to go through figures at the moment, but principally this type of situation is called Let To Buy.

It does sound like too much to get a mortgage on for the purchase, but you may be able to alieviate this by Remortgaging your current property on a Buy To Let basis (be careful as not all lenders like to "Remortgage" on an unencumbered property) up to a maximum level based on what rental income you are likely to receive. This should assist you in a decent sized deposit and it may put the affordability issue on your new residential purchase mortgage to a more reasonable level.

Obviously first port of call would be to see what rental income you would be likely to achieve.

maryjane01

If you think property values are still increasing, up to 3 years after you move out do not have to pay capital gains tax. So if the figures stack up, you can hang onto the property for 3 more years and enjoy the house price increase, and pay no capital gains tax. That is if prices do rise! (I live in London and think prices will still rise here over the next 3 years, other parts of the country I would not be so confident about though).

Esie

Thank you all,
I am currently on maternity leave and am going to try back at work from May for 3 days a week, after childcare It will be something like £150 net per month for me and I am going back to try it but it may not be for us so not permanent, therefore I am not taking my salary into consideration.

Forgot about capital gains, the !!!!!!s take it where they can don't they. Waht's the point in working hard. My mother on about inheritance tax as all those years of hard work by my dad, paying 90+% tax at times and then they tax it again, they tax her savings now and then bye bye 40%.

Guy_Montag

Just been doing some sums:

According to the BBC mortgage calculator:
a £250k mortgage will cost: £1550 per month (£18,600 pa)

Assuming that after all the tax credits & kiddy subsidies you get near enough your hubby's gross salary, that leaves you £8,500 pa (£710 pcm) to live off. Is that enough?

Now the alternative is you get a £500k mortgage = £3100 pcm (£37k pa)
You get hubby's salary £27k add on £12k pa rent (assuming no problems) & that leaves you with £39k. Giving you £2 pa to live on, enough to cover council tax I imagine. Hope there's a big garden for keeping chickens & growing vegetables.

machofairy

If I was in your position, I would seriously reconsider buying another property. Here's how the sums could work out...

- Existing house ... sell and buy back to let. You get £250k
- Assuming you have some savings ... You get £20k
You now have £270k deposit.
You need a mortgage of £230k for new house.

Monthly Income:
Joint income after tax: £1,800
Rental income of old house = £1000
TOTAL: £2,800

Outgoings:
Assuming 5% interest rate
Interest only mortgage payment of old house : £1000
Repayment mortgage payment of new house: £1350
TOTAL: £2350

This gives you £450 pm to live on. And this is before bills.

Essex_Maid

Remember to cost in all the expenses of moving, and Stamp Duty. Might be more cost effective to extend, out or upwards in roof. When your child is little older, and you are back at work it may then be the time to move. Enjoy your child, and do not put too much stress by mortgaging to the hilt.

bUT, if decide to do a buy to let - make sure you take out an insurance on the rental income in case you get a bad tennant, no rental income and court fees for eviction could cost you a pretty penny, and you would have trouble meeting your own mortgage. Use a reputable agent, who will do credit checks on tenant and advise you on the insurance. Find out the current rental market for your house, and how much the insurance to cover the rental would be, then you an do your maths.