BTL advice please?

kingstreet

Post #7.

The husband is self-employed.

marathonic

kingstreet wrote: »

Post #7.

The husband is self-employed.

Sorry, missed that.

Again though, if they're managing fine on their current income, the £18,000 equity could be set aside in the best buy savings account and, on any year where the husband is paying higher-rate tax, pump the amount of money on which higher rate tax would be due into the pension.

I don't know anything about self-employed pension options but would assume that this would be possible.

Louwalshy

OMG, really confused now!
Hubby doesn't earn in higher tax bracket?
So are you all saying its better not to BTL?

kingstreet

Louwalshy wrote: »

We are presuming he buys 50% so £75000? Then we were thinking we could get a £150000 (less a joint deposit) mortgage on this house then use the £75000 towards our other house?
Sorry if I sound completely thick! I'm not I just thought it maybe straight forward lol

You have a property worth £150,000 with a £95,000 mortgage. So, you only "own" £55,000 of it. If someone buys 50%, they would be taking on half the mortgage and half the equity and would pay half for the £55,000 you actually own.

They should therefore give you £27,500 and become party to the mortgage.

You're assuming you can draw out all the equity in the property. One, half of it will be owned by the other party and two, most of it is mortgaged.

Please talk to a broker. You really need to get your head around how it works...

Louwalshy

Thank you kingstreet, getting my head around it now!
I just needed someone to tell me how it would work. Next step the broker x

Conrad

Thrugelmir wrote: »

Have you weighed up the various options to fund a pension?

I ask as BTL property isn't the most tax efficent of the options available.

Nor the best at the current time.

Well I think is a great time.
Pensions are inflexible in that you cant get at the funds under a certain age. Furthermore they are typically lost once you've retired if you die and cannot be passed onto your kids.

Property is a far better option. Not only does one have total control, funding has never been cheaper, prices will rise from here, and rent returns are also rising. I've achieved nearly 9% on a flat I'm currently buying.

Who wants to risk the vagueries of pension investing when you can easily achieve a steady 6%+ yield year in year out, not to mention capital growth?

Gearing means your deposit allows income returns of a higher amount compared to a non geared pension or ISA.

Ok there are risks but 99% of the LL's I've dealt with have managed perfectly well. If the risks outweighed the benefits, no one would do it.

I know plenty of people that have retired on property portfolios and they are nearly always far richer than those that went the pension route.

Typical late 50's client of mine has about 10 properties with very low debt costs. The pension route would have left them hugely less wealthy.

Thrugelmir

Conrad wrote: »

Well I think is a great time.
Pensions are inflexible in that you cant get at the funds under a certain age. Furthermore they are typically lost once you've retired if you die and cannot be passed onto your kids.

Property is a far better option. Not only does one have total control, funding has never been cheaper, prices will rise from here, and rent returns are also rising. I've achieved nearly 9% on a flat I'm currently buying.

Who wants to risk the vagueries of pension investing when you can easily achieve a steady 6%+ yield year in year out, not to mention capital growth?

Gearing means your deposit allows income returns of a higher amount compared to a non geared pension or ISA.

Ok there are risks but 99% of the LL's I've dealt with have managed perfectly well. If the risks outweighed the benefits, no one would do it.

I know plenty of people that have retired on property portfolios and they are nearly always far richer than those that went the pension route.

My comment is made in the context that BTL is a business not an investment. So better left until a sound financial footing is established.

If residential property is such a great investment why didn't BTL take off until 1998?

marathonic

Whilst I'm not saying that BTL is a bad investment, as a mortgage advisor, I'd expect most of the BTL'ers that you meet would be managing just fine. Otherwise, they'd be seeking debt advice as opposed to mortgage advice.

My personal plan is to overpay my mortgage as quickly as possible and, at that point, look into the options of remortgaging on a residential mortgage, secured on my PPR, to buy a BTL.

That way, I get the low rates and can still offset interest against rental profits. I can then pay the new mortgage off quicker given the new rental income and then rinse and repeat.

Plans never work out though so, for now, it's simply pay the mortgage down ASAP.

Thrugelmir

marathonic wrote: »

That way, I get the low rates and can still offset interest against rental profits. I can then pay the new mortgage off quicker given the new rental income and then rinse and repeat.

If you are offsetting the interest where's the profit?

marathonic

Thrugelmir wrote: »

If you are offsetting the interest where's the profit?

What is this profit you speak of?

Seriously though, it'll be tough going but, using this strategy, I could go for, based on todays rates, a residential 3.49% HSBC tracker at 80% LTV with a £599 fee (my PPR will be worth significantly more than the BTL) as opposed to their 3.89% BTL tracker at 65% LTV with a £1,499 fee.

The residential tracker would cost me 2.79% after the tax write off on interest (as I'd be borrowing 100% of the value of the property).

With the BTL product, I'd be able to borrow a maximum of 65% of the value and the 3.89% would cost me 3.38% after the write off.

Effectively, that's a 0.6% difference or £50 a month on a £100k mortgage.

Like I say above, plans never work out so it'll be a miracle if this goes according to plan.