Buy-to-let mortgage

GMS

Speak to another broker.

Did the broker you used try any applications to lenders?

Thrugelmir

lonestarfan wrote: »

I'm no expert either but I thought the point of BTL is that you sell the property at the end of the term and pocket the increase in value. That is how you repay the mortgage isn't it?

And if property does not increase in an upward straight line? But heads downwards instead.

seven-day-weekend

GMS wrote: »

Speak to another broker.

Did the broker you used try any applications to lenders?

We have actually got a broker working on our behalf who is letting us know whether we can have a mortgage or not on Tuesday. She seems hopeful.

The one who told us that no-one would touch us was one recommended by Barratts who just took our details and gave us information over the phone.

So yes, I hope our own will come up with something a little better!

Thanks all for your advice. Will let you know if we get anything.

kingstreet

I've looked at the criteria for the two biggest BTL lenders and both accept pension income, so I think this is down to a broker with little experience making a sweeping statement, talking only about lenders he has experience of dealing with.

seven-day-weekend

Revived this post to say, we now have a btl mortgage in principal for a flat we are considering for which we are going to initially offer £70k. ( We have changed both the broker and the flat!). An offer for £72 has been accepted previously, but the buyer was made redundant and could not proceed.

It is a very large 2b flat, six years old, a repossession, the compromise is the area, which is not the best but not the worst either, right near the major hospital for the area. It has allocated parking in a secure gated area at the rear.
http://www.rightmove.co.uk/property-for-sale/property-41072342.html;jsessionid=791C882696E85D41081F4667C66923B7

AFAIK, having not tested the appliances, all it needs is a coat of paint and one new carpet. I know we have to have a gas certificate done every year, that is not a problem.

A quick search shows other 2b flats in the development selling recently for c. £82k.

In the eyes of experienced investors, does this look like a reasonable deal? The idea is to sell it when prices rise and get a small income in the meantime.

And is it best to have an IO mortgage or a repayment? We have been quoted for an IO, but I can't see thta there would be any problem in having a repayment.

Your thoughts?

gallygirl

seven-day-weekend wrote: »

In the eyes of experienced investors, does this look like a reasonable deal? The idea is to sell it when prices rise and get a small income in the meantime.

And is it best to have an IO mortgage or a repayment? We have been quoted for an IO, but I can't see thta there would be any problem in having a repayment.

Your thoughts?

The location near a hospital sounds good and flat looks like you've said, only needing minimal work. Just had a look on rightmove and there are only 7 other flats and 2 modern houses to rent in the area so you should have no problems getting a tenant.

An IO mortgage means you can offset all the interest against tax, repayment means you are reducing the overall debt so will have more capital when you sell it. It won't be saving you anything in interest as you won't be letting the mortgage run its' course, and you could use what would have been the repayment part of the mortgage elsewhere.

Bit concerned you seem to be expecting capital growth - may be creeping up a bit but can't see prices taking off. The advantage is you get the growth on the whole value even though you've only invested a deposit. I wouldn't be basing any decisions around that though.

Have you worked out what your yield will be? Not the gross yield, but your actual yield after you've taken off all costs and factored in voids, repairs etc? It will be lower than you think and you may well decide it's not worth the hassle. May be better off sticking in a S&S ISA.

IMHO BTL only really works these days if you have a number of properties or you've owned the property for a long time so low mortgage. House price rises no longer offset the hassle. Sorry to be so negative.

seven-day-weekend

Thanks Galleygirl, not negative at all, just pragmatic and exactly the sort of advice we are looking for.

I don't pay any tax, my husband does, so could offset his share against it, it will probably put him out of tax altogether.

We are not expecting a huge rise in house prices, but as long as we can make a small income from it (more than sticking our money in the bank), and not sell at a loss, we shall be satisfied, although obviously it would be nice to make a small profit too. We are thinking maybe 10 years plus here. We are limited to ten years because of our age. With a repayment mortgage it will be paid for by then and if the worst came to the worst, we could just continue to rent it out.

Yes we have worked out the costs, such as maintenance, service charge and gas certificate etc. We are also aware that we will have to pay the mortgage whether or not we have a tenant, although hopefully this will not arise.

We also know someone who is a rentals agent and will approach her for her to give us advice on rental etc. before we make an offer (She's someone my husband used to teach LOL!)..

We are looking to do this as we know a bit about renting houses and don't know anything about S&S ISA's so it is more in our comfort zone

seven-day-weekend

Forgot to say, it is right next to a Secondary school (with a good Ofsted report). Don't know whether that is an asset or not!

The main thing I personally am worried about is the IO mortgage, and I don't think we will be able to afford a repayment mortgage.

dimbo61

We have a repayment mortgage on our BTL property and want to get an IO mortgage but do not have enough equity yet.
Now if you can get IO BTL then do so and put the difference in payments into savings every month to cover TAX bill and other costs.
You are running a business and the nice taxman HMRC allows you to offset the IO mortgage costs against your rental income.
Like the flat, 2 bedrooms and 2 bathrooms which you can rent to 2 nurses, doctors or teachers. First floor so feels safer than ground floor, gated parking, modern ,cheap to heat EPC B , Plastic windows ?
Check the management charges, sink fund, can you let out ?
If you put down 25% say £18500 and can rent for £400/500 a month that is not a bad return.
In the long term you could always sell your home and move in yourself once you have paid off the mortgage to release equity to enjoy retirement.

seven-day-weekend

Thanks for your reply dimbo, much appreciated and made me feel better about the IO mortgage.

The thing is, because it is a repossession it is about £10k cheaper than other 2 beds in the block have sold for recently. We were going to put a deposit of £20k and have the rest on mortgage. So in effect we would have £30k equity on an £80k flat. So as long as we could sell it for £50k in the futuere,w e would at least be able to pay the mortgage off, even if we lost our equity (worst-case scenario). That doesn't appear to me tto be too much of a risk? (Even though I am panicking about it!).

We will ask our friend the lettings agent about how much we could get, but I think we should be able to get £450-£500 pcm.

And yes, it has got plastic windows. Also the communal areas are well kept and carpeted, so are the landscaping and car park at the back (well kept, not carpeted, ).

The service charge etc works out at about £70 a month. 118 years remaining on the lease. It is OK to let out, other flats in the block are rented.

I don't think we would ever want to live there, it is the other side of town to where we would like to live, but of course it is always a possibility.