Buy to let mortgage possible?

FCRangers

We've had our house on the market and it's not selling and are thinking of renting it out.

We bought it for 85k in 2006 and our current mortgage is 77k. We've had it on the market at 89k and now it's on for 79k. We've got about 20k of savings (intended deposit for next house).

I don't have a problem selling it for less than we paid, but selling it for less than our mortgage to me is just throwing money away.

I've spoken to a estate agent and they think they could rent it out for between 480 - 500 a month. Our mortgage would be about 330ish.

The initial value is the problem, I'm guessing it could be anywhere between 85 - 70k which with the margins makes a big difference. I understand you need a min of 25% LTV to get a buy to let mortgage. Which is fine. My question is how do they value my flat and who does it?

DannyboyMidlands

If you use your savings to improve the LTV to 75%, how will you fund the deposit on the new place?

Thrugelmir

Is it better to keep your money in savings than repay the mortgage?

As you've not paid any capital off the mortgage balance. Then you've done little more than rent the property for the past 6 years. The days of ever increasing house prices are long gone. So little point in hanging on in the expectation of an upturn. BTL will merely expose you to even greater risks and losses. As BTL is a business not an investment. So something that needs to be thought through very carefully.

kingstreet

Why not simply ask your current lender for consent to let?

It's a lot less involved and expensive than changing to a BTL, which looks unlikely to be possible, TBH.

Typical figures for BTL proposition;-

- 75% loan to value or less
- rent must be 130% of mortgage interest at 7%.

So, 75% of your highest valuation of £85k is £63,750. You'd need to reduce your mortgage by nearly £14k to get in on loan to value. You'd then just about have enough to cover the fees for the remortgage and purchase - but no deposit!

£64k x 7% = £373 per month mortgage interest, so rental income would have to be £485 per month to make the proposition work.

Hopefully, the CTL requirements won't be quite as bad, so I suggest you speak to your current lender to establish if this is possible.

FCRangers

We're thinking of renting for 2 year in order to save another 20 - 25k for a deposit.
We've spoke to our current lender and they ask for 25% LTV.

It's either sell it worst case for 75k + fees and our mortgage at 77k, we'll have to pay about 4k of savings to get rid or spend most of our deposit on reducing the LTV to 25%, then rent it out leaving about 30 - 40 a month profit after fees. I then rent somewhere and save again, 2 years times I have two properties.

Thrugelmir

At £30 to £40 profit a month profit is it worth the bother?

More than likely you'll end up subsidising the venture.

Neither are you earning a return on the capital you have invested.

What's your current mortgage interest rate?

DannyboyMidlands

"2 years times I have two properties."

Not really. You have a small percentage of 2 properties. One of which is earning you £40 pcm if you are lucky.

Might as well just save yourself the hassle and cost of renting somewhere (surely you will spend more than the £4k on rent?) by selling now. in 2 years time you will have a larger percentage of one property.

FCRangers

Current mortgage rate is NRAM SVR 4.79 or 4.9 I think.

I got 40 - 50 from guessing, this is what I've just worked out.

Buy to Let mortgage of 75% on 62k?
Whats that a month £360?
Rent out for 500
12% management fee say of 500 -> £60

500 - 360 - 60 = £80 left

Am I a million miles away?

Thrugelmir

and all the costs of maintaining the property?

Void rental periods, tenants not paying rent, tenants trashing the property?

Replacing bathrooms and kitchens in years to come?

Typhoon2000

FCRangers wrote: »

We're thinking of renting for 2 year in order to save another 20 - 25k for a deposit.
We've spoke to our current lender and they ask for 25% LTV.

It's either sell it worst case for 75k + fees and our mortgage at 77k, we'll have to pay about 4k of savings to get rid or spend most of our deposit on reducing the LTV to 25%, then rent it out leaving about 30 - 40 a month profit after fees. I then rent somewhere and save again, 2 years times I have two properties.

Why not just rent your own house by staying there and paying Your £330 a month mortgage, I doubt you be able to rent for less. Save the extra money you would have put towards rent to save for a bigger deposit.