Buy to let newbie

kiehugh

Afternoon all,

I bought my flat approx. 3 years ago and I am now at the stage where the fixed rate of my mortage is coming to an end with Santander. As of October 2012, assuming that things stay the same, then my rate will come down from 5.4% to apprxo 4.2
Afternoon all,

I bought my flat approx. 3 years ago and I am now at the stage where thefixed rate of my mortgage is coming to an end with Santander. As of October2012, assuming that things stay the same, then my rate will come down from 5.4%to approx. 4.2%. I am getting married in April, so it is likely that we will belooking to move at around this time next year. I have the costing’s worked out,is it worth remortaging when I am looking to move in just under a years time,if things stay the same then there I cannot see changing mortgage at this stagesaving me money in the short term. The only benefit that I may has is that Inow would have 27-33% LTV for remortgaging. I am still waiting for my mortgageadvisor coming back to me.

The second point is my real question. When I bought my flat (as arepossession) I always planned to remortgage at some point in the future, letit out and take some of the equity to buy a house and use other savings. Thisis ideally still my plan however I really need some advice on buy to let.

My goal is a long term one, in that I would be looking that in 25-30 I wouldhave an additional asset for my retirement, best case scenario is that in thenext ten years property prices shoot up, I sell up and retire by the time thatI am forty.

My main questions stem from the mortgage, I have been doing some basicresearch and a number of sites are saying that mortgages would offer a maximumof 60-70% LTV. I totally understand whatother requirements that lenders may want including high income but how dopeople get around this? There are peoplewith a huge portfolio of property’s, especially in student towns, how do theyraise the 30-40% deposit needed to acquire a buy to let mortgage? Looking at the maths it is more than possiblethat in a years time I would have enough money behind me to rent my flat andpurchase somewhere else. However itwould take me years to save up again to get another deposit.

I may be missing something somewhere, however how do landlords get mortgageafter mortgage or is that just a sign of the good old days?

Lapinette

Hi there,

I'm no expert on the subject but i do have 4 BTL flats and although we don't earn huge amounts the banks have lended us the money as long as the rent covers the mortgage payments. I think the most important thing is to try as much as possible to buy below market value and lock in your cash when you buy rather than when you sell.
You could possibly try and combine your deposit with someone else who is keen to invest in return for a percentage.
I must admit i got lucky on one flat which sold in 2007 for a top price and that hugely helped my buy my next flat. I guess it's a snowball effect. I definately see it as a long term project though. Hope fully one day i will be able to live financially from my properties and maybe buy somemore although slow and steady wins the race.

Good luck with the next stages of your property empire!

Lapinette

Thrugelmir

kiehugh wrote: »

When I bought my flat (as arepossession) I always planned to remortgage at some point in the future, letit out and take some of the equity to buy a house and use other savings. Thisis ideally still my plan however I really need some advice on buy to let.

Banks will expect you to provide the deposit/funding from your own resources. Releasing equity is no longer the easy option it was.

Thrugelmir

kiehugh wrote: »

I may be missing something somewhere, however how do landlords get mortgageafter mortgage or is that just a sign of the good old days?

Releasing equity was the game in town. Leveraging with debt in an upward moving market is highly profitable. When the music stops however. The empire is like a house build of cards and comes crashing down. As there's no solid foundations.

kingstreet

Putting it simply, you can't do everything at once.

You have just enough equity (assuming your valuation is accurate!!!) to remortgage to a buy to let product, should you feel it advantageous to do so.

I'm not sure that is currently the case. Remortgaging to a lender with a flexible policy on future consent to let might be a better idea.

To make a BTL proposition work, you need;-

- to borrow NO MORE THAN 75% of the property value
- the rental income to be 130% of the monthly interest calculated at 7%pa
- to be an existing homeowner
- possibly to have a min personal income of £35k for some lenders.

You then have to study the costs, tax implications and requirements & responsibilities of becoming a landlord.

When all that stacks up, you then need a deposit and money for fees for the property you'll buy to live in.

Here's a cost example for a BTL;-

£150,000 property, 25% deposit leaves £112,500 mortgage. Interest on mortgage, assuming 7%pa is £656 per month and rental income needs to be 130% of that, or £852 per month.

Use this method to see if the plan "stacks-up" before you plan any further.

G_M

kiehugh wrote: »

I may be missing something somewhere, however how do landlords get mortgageafter mortgage or is that just a sign of the good old days?

Buy property for £100K and get £75K mortgage.

On year later, property is worth £150K, so increase mortgage to £112K and use money released (+ a bit) buy new property mortage free for £100K

One year later property 2 (no mortgage) now worth £150K, so take out mortgage for £112K and buy property 3 (mortgage free).

and so on.

Fine as long as property prices are zooming upwards. But now they aren't....