Advice on letting my house - mortage / finance

sghughes42

I currently own a house in Stockport, mortgaged via Nationwide with about 11 years left on the mortgage. I've had to relocate due to work and am renting a bungalow elsewhere.

I don't need to sell at the moment and due to the fairly low prices at the moment I was thinking of keeping hold of the house and renting it out.

The problem is that it needs around £7500 of work doing to get it up to standard. Once that is done I'm told it will earn about £550 pcm which will return about £475 to me after the agents take their cut for managing the property.

Now, Nationwide will allow me to rent the house out, but they won't allow me to release any equity as I'm no longer living there. Based on the lower estimate for the value of the house I have around £50k equity - £36k left to pay on the mortgage.

What are the options for raising the money needed for the renovation and what are the things to be wary for?

I've looked at BTL mortgages but the rates seem quite high - generally around 5% once any initial offers are finished, compared to 2.5% on my existing deal. Also, it looks like I'd be paying a minimum of £500 for fees to move mortgage, likely more.

I did look at loans, it looks like I could get one at around £200 pcm for 5 years. It would mean more outgoings per month but less overall.

The mortgage is around £305pcm so the rent wouldn't quite cover it, but I'd only need to top up maybe £20-30 pcm for the first 5 years, assuming I had fairly constant tenants in the place.

Any tips or general advice on this?

Thrugelmir

After six months, the Nationwide will load your mortgage with a 1.5% additional charge.

May take the shine off your plans.

sghughes42

Interesting, the chap on the phone didn't mention that. It makes remortgaging to a BTL maybe the more attractive offer then if I'll be paying a similar rate.

sghughes42

Any more advice out there?

starbarboy

Hi there

How essential is it that you spend £7,500 on upgrading the property? There may be people willing to rent it in its current state, albeit at a lower rental.

If upgrading the property is essential however, I can't think of any other options other than borrowing the money - which you have already considered. The benefit of spending the money to upgrade is not only that you could obtain a higher rental figure, it would hopefully make it easier to sell if and when the time ones.

Sorry, other than that I can't think of any magic answer to your dilemma.

Good luck whatever you decide to do.

Stephen

sghughes42

Thanks for the reply. The amount of work needed is hard to explain simply! No way I could rent it at the moment, it needs redecoration as a minimum but from talking to a builder friend it would be likely that the cost of redecoration wouldn't be much less than a full replaster and paint due to the age of the house and what we can tell of the state of the plaster under the paper (all of which has some damage so would need removing)

It seems more sensible to do the whole job in one go rather than spending maybe £4k now and another £6k in the near future.

I think I need to find a local IFA to ask about BTL mortgages...

dimbo61

Why lose money every month ?
Other costs
Landlord insurance
Agents fees
Gas safety cert
Maintenance
Electric cert
Mortgage costs and TAX

sghughes42

dimbo61 wrote: »

Why lose money every month ?
Other costs
Landlord insurance
Agents fees
Gas safety cert
Maintenance
Electric cert
Mortgage costs and TAX

I'm looking more to the long term. Property prices are low at the moment but on the rise. If I sell now I'll have sold at the bottom and have to try and buy again towards the top which doesn't seem sensible if you can avoid it. In the longer term I could well end up much better off.

There is also the fact that it might take 6 months or more to sell - the last house on the street was on the market nearly a year. I would have to cover mortgage, council tax, bills etc for that time which could easily run in to several thousand. Surely that is losing money as well?

Might be a daft point, but if I'm making a loss then there will be no tax to pay.... I believe I can also offset the cost of the works against tax, although I will then have to pay tax when if / when I come to sell.

sghughes42

Looking at the BTL options, there appear to be a few that offer rates of around 3% for two years then rise to 5%. However, these all come with fees of over £1k.

RBS offer a fee-free deal at 4%. For the sums involved, this only adds about £30 a month to the mortgage so less than the fee I'd pay up-front elsewhere.

Does anyone have experience of RBS or know of a better deal out there?

ACG

You could go down the Buy to Let route or potentially get consent to let from your existing lender and a secured loan for the additional extra.

There are a couple of ways of doing this, its probably worth speaking to a Mortgage Advisor and going through the different options and the numbers to do this the cheapest way possible.

sghughes42

ACG wrote: »

You could go down the Buy to Let route or potentially get consent to let from your existing lender and a secured loan for the additional extra.

There are a couple of ways of doing this, its probably worth speaking to a Mortgage Advisor and going through the different options and the numbers to do this the cheapest way possible.

I'm told (above) that Nationwide would bump my rate up to 4% so it would seem that I might as well change mortgage and get the whole amount from one source. It would mean paying more overall but would give monthly repayments less than the amount of rent I would realise.

I'm trying to find a local mortgage adviser, unfortunately being new to the area I don't know who to ask...