Does this sound sensible?

5446

Hi all

I'm looking to buy a house (B). I currently have a flat (A) that is mortgage free which i will keep to let out.

the plan:

remortgage property A on a buy to let to raise a deposit for property B. the remortgage will be interest only for 10 years.

buy property B on a low LTV mortgage using the deposit raised from property A. the mortgage will be a repayment mortgage.

pay off the outstanding amount on the remortgage over 5 years.

will offset a bit of tax on the rent gained from the BTL mortgage payments.

the figures seem to add up, both will be 2 year fixed rates .... i'm aware i may have to do something after 2 years.

anything i should consider?

kingstreet

Yes. The ten year term. What happens if for some reason you can't pay it off?

If you're going interest-only, use the longest term you can. You'll pay the same each month and retain the flexibility of paying it off when you want without the risk of having no choice but to pay it back in ten years if it doesn't prove viable for you to do so for some reason.

5446

thanks.

the 10 year term is so that I can pay it all of in 15 years ..... after which i'm sure i will need/want to stop working. e.g. 10 years repayment on property B, interest on property A ..... followed by 5 years capital paid off on property A.

if property A is let out at a reasonable price i should be able to afford fairly easily on my salary.

GMS

As kingstreet says your payments will be the same per month on interest only whether 10 or 20 years. Be careful of taking the shorter term as if there is a problem with the plan you could find yourself needing to refinance.

Why not take the longer term and look to repay earlier. That way the pressure is off a bit.

Thrugelmir

What if lenders expect you to provide the deposit on remortgaging to purchase property B?

Check the tax position as well. The purpose of the remortgage monies may well be an issue in terms of obtaining tax relief.

getmore4less

Agree longest terms posible without impacting rates

Gross/net yields on the rental
LTV on the rental


Ideally you want to structure debt to get the full Value at start of rental offetable against income.


Do you want to become a landlord?

What retirement provisions for 10 years time?

5446

hi all .... and thanks.

so, have been having second thoughts about the buy to let mortgage. can't get my head around it all really, having two mortgages on the go .... with the BTL one being interest only.

i initially wanted a 15 year total term because of my age ..... however, i can see the idea behind taking it out over 2o years and over paying when possible.

current thinking is something like a 5 year fixed rate mortgage on property B, the new house. under this scenario i can only afford enough deposit to get a LTV of 85%, as follows:

Purchase price £190,000
Deposit £28,500
Mortgage £161,500

The Nationwide 4.79% fixed for 5 years looks good in this case.

However, am I being a bit silly about this?

I realise that going the BTL on property A route would give me the benefits of:
a bigger deposit for property B (thus a lower LTV and better rate)
able to offset the interest payment on the BTL against tax


The big problem is, in my head .... it all seems much more straightforward getting the one purchase mortgage .... and more secure as there won't be a mortgage on property A.

the other thing that seems a bit dicey is having an interest only BTL ..... although of course, I realise that is the best way of maximising the tax offset thing.

Fo those of you that haven't lost interest yet ....... property A is probably worth about £100,000 - £110, 000 ....... and it cost £45,000 when I bought it in 1999/2000 (can't remember exact date!).

Had a rental agent round (recommended to me) and they reckoned a rental value of £625 pcm.



as ever, all thoughts appreciated.

bigadaj

You maybe need to think about t his a bit more, buy to let is a new business for you, there is commitments and no little risk, including voids, nightmare tenants and the like. This could be fine for you but there are costs and responsibilities that need to e considered.

Thrugelmir

BTL is a business venture.

Seek advice if necessary. Better to spend a few hundred pounds with an accountant now. Rather than lose thousands in the future.

Yorkie1

Have you looked into what being a LL involves? See here:
http://forums.moneysavingexpert.com/showpost.php?p=52421475&postcount=6

Have you double checked that your lease of your flat indeed allows you to let it out?

5446

thanks all, i appreciate the advice for caution.

in relation to letting the flat out, I actually rented it before buying for a while so it should be fine. Plus we own the freehold ourselves (myself and my 2 neighbours).