First Time Buyer Mortgage with intention to let out.

Senior_Paper_Monitor

We handle a fair few of these type of purchases (as a result of being next to a major forces airbase).

Can be done on a residential mortgage structure with advance permission to let (with full declaration / nothing untoward) provided the whole paln/story stacks up (this is specifically for forces personnel and a couple of other specific categories).

Do it through a broker with experience in this field and you won't have any nasty surprises later.

Frankly you are making sweeping statements about tax/domicile status and various other issues which demonstrate you need some qualified advice.

wiley25

@JimJames, the issue with the 30% deposits is that I don't have enough money, hence looking into 85% LTV mortgages.

DVardysShadow

wiley25 wrote: »

I'm inclined to disagree a little there, I'm not really doing this for a profit. I'm doing it because of where I'm at in life I am earning around 1800 a month after all my taxes and bills. This money just gets spent on beer, clothes and gadgets.

I am looking for a house around 80k, I have 14k saved up for a 15% deposit and the extra three thousand to cover costs and start a 'house fund'.

Average mortgage on a 80k house for me would be around 350 a month, average rent in the area is 450 a month, that extra 100 would cover insurance, estate agent fees and go into the 'house fund' that would cover maintenance.

I think it is smarter to invest my money into a house and get someone moving in to pay it off, than to just chuck my money in a savings account and probably dip into it.

Plus a can put a substantial amount of money from my wages into the 'house fund' or overpay the capital of the mortgage, it's win win in my eyes.

The 2 highlighted statements are in contradiction.

At the moment, you see a profit of £1200/year [450 - 350] * 12

You get a tax allowance on a loan of 68000. Say £700/year. If you are lucky you are looking at £2000/year

You'll need an agent. That is £50/month. You are left with £1400/year.

You should calculate on 1 month per year of void. That is £400/year [at least you don't pay the agent]. You are left with £1000/year

Repairs and maintenance £500/year. Insurance £300/year. You are left with £200/year.

You could get 4% on your £14000 - ie £560/year.

So to me you look to be down £360/year by doing BTL. It could be worse - gas inspections, unforseen expenditures. And house prices are moving more down than up - so a capital loss too.

Of course the economics are much more in your favour if you have a large deposit and you are looking at LTV below 50%. You are saying "I think it is smarter to invest my money into a house and get someone moving in to pay it off," but there is an inherent fallacy - it is not your money - you are borrowing a bank's money and at high LTV, a renter is not going to be paying it all back for you.

DVardysShadow

jimjames wrote: »

Even if it isn't "making" any money I'd think the BTL is still worthwhile as your mortgage is covered and you then have a property to live in when you return home - assuming the place and location is suitable for you.

Actually if you have tenants, they don't always leave when you whistle and you could probably buy in very little more time than it takes to get them out.

arbrighton

Stick your money in an account with penalties if you take it out? usually have a better return too. Worrying you'll dip into your savings is not really a good reason to become a landlord.

Turnbull2000

DVardysShadow wrote: »

So to me you look to be down £360/year by doing BTL. It could be worse - gas inspections, unforseen expenditures. And house prices are moving more down than up - so a capital loss too.

Maybe so, but he'll eventually own a valuable asset using very little of his own money. Tenants will eventually cover all of the costs. The prospects for future rent rises are also reasonable, so in five or six years time he should clear a decent monthly profit. In a little as 15 years time, the entire rental income less maintenance will be profit.

Once he hits his 40's, he can either enjoy spending the rental income, place it into another retirement fund or release equity for a second or third property.

FTBFun

iyusuf wrote: »

I work for an estate agency and offer very good fee's to landlords and have a competitive comission for selling at only 1%. Anyone interested get in touch

I have - here are my details

:spam:

martinsurrey

wiley25 wrote: »

I am looking for a house around 80k, I have 14k saved up for a 15% deposit and the extra three thousand to cover costs and start a 'house fund'.

Average mortgage on a 80k house for me would be around 350 a month, average rent in the area is 450 a month, that extra 100 would cover insurance, estate agent fees and go into the 'house fund' that would cover maintenance.

the thing is that its not a mortgage for you, its a mortgage for a BTL, which at 85% LTV will be around, if not higher, than 6% (after you tell them the fact your renting it out), so your looking more like £400 a month interest.

take out 10% agents fees, plus the annual fees (£100) and Gas certificates (£75) and 10% void time and you're looking more like £4200 net income, or a £600 cash LOSS, so you're already underwater, without ANYTHING going wrong, factor in wear and tear, new boiler, paint work, carpets, roof maintenance, legal fees to evict bad tenants and your looking significantly down.

put the money in an ISA at 4% and you get £600 a year tax free, without worry.

DVardysShadow

Turnbull2000 wrote: »

Maybe so, but he'll eventually own a valuable asset using very little of his own money. Tenants will eventually cover all of the costs. The prospects for future rent rises are also reasonable, so in five or six years time he should clear a decent monthly profit. In a little as 15 years time, the entire rental income less maintenance will be profit.

Once he hits his 40's, he can either enjoy spending the rental income, place it into another retirement fund or release equity for a second or third property.

He could indeed reach that point. HOWEVER at the moment, he does not have the equity so his profits will be eaten in interest charges - because of a high loan and higher interest ratess due to high LTV. And there will be no capital appreciation for a few years to come.

For those reasons , he would be well advised to keep saving for a few years to come before jumping in. At 15% equity, he will be on the margins between profit and loss, so the money is definitely better in an ISA until he reaches the ability to get his LTV below 70%