Should I (and could I) get a mortgage?

montymouse

Ok, due to an inheritance, this is my situation:

I own a small flat in Leeds valued at 70k, and also have just bought my housing assoc maisonette in small town near Leeds valued at 60k, which I will not be able to sell for 5 years. I additionally have 80k capital.

The small flat in Leeds I have been using as a pied a terre while studying for my Master's, and the maisonette is where I live with my partner.

Problem is this: the maisonette is way too small for us, and we want to get a bigger place in the small town. Glitch: I am ill (not seriously) and have to take time out from Masters, so prolly will not be able to complete till next year. I do earn a small amount of money from copywriting.

Question is: should we buy a bigger place which will cost around 120 - 140k, putting down say 60k deposit and getting a loan of around 60 - 80k? We can then rent out the maisonette.

I'm not sure about renting out the Leeds place as I will still need it for studying and the uni, but it may be feasible to do a short let.

Additionally, in this small town, prices are dropping like a lead balloon, more so probably than the rest of Yorkshire.

I am not mad about the idea of gettng a place that needs a lot of work doing, as I have seen other ppl take on projects that then go on forever.

Grateful for any thoughts or ideas.

Helen1971

In your position I'd let out the Leeds flat and commute in (you don't say which small town your maisonette is in, but the transport links in west Yorkshire are pretty good), grit your teeth and stay put in the maisonette for now and save the rental income. Then when you finish your masters and are back in full time work, you can raise a mortgage and buy something bigger, and rent out the maisonette as you suggest.

I'd be reluctant to buy now because (1) prices have further to fall, as you're already seeing and (2) it's madness to take on a big loan when you're ill and not in full time work.

Good luck.

montymouse

Hi Helen

Thanks for getting back to me so quickly, and thanks for the advice.

Thing is, I live 15 miles from Leeds, and I commuted for almost three years, costing about 3h per day! The whole purpose of the Leeds flat is to avoid this, plus it gives me a quiet study place - two birds, one stone. So the Leeds flat always being available to me (apart from potential short lets) is a non-negotiable.

It's really the maisonette in the sticks that we can do without.

Totally agree with you that it looks like house prices are set to fall further. I started ogling property in earnest last summer, and there was hardly anything less than 100k, however now there are pretty reasonable brick-built 3 bed semis for 100k and under (with glitches), and for a glitch-free house you are talking at least 120-140k, that has the no of rooms that we would love to have, (3 beds, 2 receps).

I guess you are right that taking on a big loan when I am not in ft work is madness - I was wondering about the rent from the maisonette to pay it off, but this may not be reliable.

Helen1971

Short term pain, long term gain! Really hope things work out well for you.

montymouse

Thanks, Helen.

I can't wait to see how far house prices really do drop.

Kynthia

My tenant hasn't paid rent this year. What would you do in that scenario? Also you would have to pay tax on the rent, pay for repairs and a gas safety certificate, pay fees for finding a tenant, etc. What would you do if interest rates went up on your mortgage, or if a glut of rental properties meant you couldn't find a tenant?

Without sufficient income you'd be more than crazy to commit yourself to a massive debt.

montymouse

Thanks, Kynthia! It did go through my mind that there was always the awful possibility of getting a tenant who ended up not paying rent.

Not to mention problem tenants in other ways.

I probably ought to shelve my plans of getting a bigger place until the Master's is out of the way.

motherofstudents

Can you not live in the Leeds flat and rent out the maisonette ? Check out the tenants properly and you can get insurance to cover the rent, legal costs etc. Then you would have the rental income to save towards a better house.

Good luck with the Masters.

montymouse

Thanks for your Good Luck wishes, motherofstudents. I hope I'll get there in the end ....

Unfortunately the Leeds flat is also too small for self, partner and cat, though fine for me on my own as a pied a terre.

Basically partner and I need a place with 3 bedrooms and 2 receptions. This is because we would like to have a study room each and a spare bedroom. Obviously other permutations would work too, like a place with one reception but also 3 bedrooms and an attic. A utility room and a big garden would be good too! (Then lets not forget an enormous kitchen, a roof terrace, outhouse as workshop, home cinema, badminton court, gym, indoor swimming pool ... )