Mortgage buy to let..

kingstreet

Buzzz wrote: »

Thought so, will it though as i'm not a FTB?

Sorry, being thick, price you agree to pay, that's what you agree with seller? If so it's not much is it with the deposit I have to hand.

Not sure what else to do with the money really, or least that I haven't researched at present.

I'm sorry, I don't understand the first question. Will what though?

Yes. The purchase price is what you agree with he person selling the property, possibly via an estate agent.

"So it's not much is it?" Again, I don't understand? The rent? That depends on the property/area. Many landlords are looking for rental income and price growth possibilities. You need to spend some time researching the general principles and objectives of a letting business. You are probably getting too many fine details on little things here and not establishing the bigger picture.

Buzzz

Sorry...

I'm not a FTB so it won't open up the FTB lender option will it? I have had a mortgage before, jointly with someone although no longer on it.

You said £88k is the maximum I could agree to pay. Do you mean pay / borrown? If so I meant it's not much and I would hardly be able to get anything for £88k plus my £25k deposit. Sorry, might be barking up wrong tree or misunderstood what you meant.

I am happy to research, just trying to get an idea on whether it's at all viable for me to do this.

kingstreet

No. The point I was making is that most BTL lenders don't want first time buyers, so the fact that you own a property means those lenders will lend to you.

You did misunderstand. I'm saying if you have £22k to put down, that has to be 25% of the agreed price of the property because BTL lenders won't lend more than 75%. So, if you put down £22k, they'll lend you a maximum of £66k and that gives you the maximum £88k you can agree with the vendor as the property purchase price.

For example;-

£88k - £22k = £66k mortgage

100% - 25% = 75% mortgage.

To buy a better property, you'd need a bigger deposit;

£100k - £25k = £75k mortgage

100% - 25% = 75% mortgage.

You'd then need money for fees on top of that and the rental income would have to be higher to support the increased borrowing. I suggest you look around the area you wish to buy and see what the rental values might be for the amount you would have to pay to purchase.

Thrugelmir

Buzzz wrote: »

To be honest I haven't given any of it a massive amount of thought but do need to think of how best to invest this money.

The first consideration you should have is that BTL is a business not an investment. In addition property is an illiquid asset so the whole plan needs to have a long term objective.

Planning to own a home may be a wiser use of the lump sum.

Wywth

Buzzz wrote: »

How do BTL owners normally pay mortgage off or what are the options?

Usually by using part of the rent they receive

If you don't think you will earn enough rent to pay this, you need to carefully reconsider if this is a good investment at all.

In simple terms you have two options:
1. Repayment mortgage. Here you repay part of the capital every month. Initially most of the payment will go towards the interest, but as time progresses and you repay the capital, the shift will move to repaying more & more capital every month

2. Interest only mortgage. Here you only repay the interest on the sum borrowed. You need another plan to repay the capital at the end of the term.
Interest only mortgages are not in favour nowadays (except possibly to those who get into severe finacial difficulties, as it can reduce the monthly payment, but the capital does eventually need to be repaid)
Some more experienced BTL landlords may prefer an interest only mortgage because it maximises their tax allowances. You get tax relief on the interest you are paying, but if you have a repayment mortage you'll end up paying a lot less interest over the term anyway
(Some people can be so intent on minimising tax, they lose site of the most important thing - i.e maximising profit after tax)

If you do obtain an interest only mortgage, to repay the capital, you frequently need a repayment vehicle such as some form of savings plan. Alternatively you may already have somthing in place (e.g. a lump sum pension payment) or you may plan to sell the property before or at the end of the term.
Be careful of any negative equity that may come into play that could (a) prevent you selling the property or (b) still mean you have to come up with an additional lump sum to pay the lender even if you do sell up.

chiefgoobster

Buzzz wrote: »

I haven't thought massively about the landlord headache, although working for a housing association I am well aware of it and would most likey plan to use an agency to manage the property; although I have also thought about buying a larger house in a town area and handing it to a housing association to manage as I know there is a need for larger properties at the moment.

Buzz....
It's a long subject and for some there are pro's and cons....but I would honestly say, if you can NOT use an agency to manage the property then do so ....they charge so damn much for what appears to be doing so little , it's untrue.

They "find" tenants that are already on their books anyway, will call out maintenance people to repair things and will "vet" clients for their suitability.
These are all things that you can easily do yourself or with the help of G**gle etc. Have a nose at Landlordzone....the forums are worth a go.
You can build up your own "team" of repairmen or if capable , do the stuff yourself.
Gut instincts also help with tenants. You can tell so much by having a chat with them. Don't be frightened to tell them they are unsuccesful in being your tenant.

Finally (if not done so) check out the forums here on MSE about
buying, letting, tenants etc. ...have a good trawl through some old stuff.

Good luck fella.

Buzzz

Hi all,
Sorry I haven't been able to log on since last week so haven't replied. Thanks for all your posts, most useful, and I can see I clearly have the wrong plan in mind!

Planning to own a home may be a wiser use of the lump sum.

You might well be right Thrumelgir! I think what I need is to do a bit more research and maybe some financial advice.
I like the idea of owning my own home, one I like, in an area I like, with a straight forward mortgagae. However, what I don't know is if whether rent would cover my possible mortgage, which obviously I would want it to.

Thanks for your tips, think I need to go off and do some more homework

Flashmanchop

I think it would be worth researching your market for your price range. I am unsure of which posatcodes you are thinking properties may be witin your price range, but I always use the below web page to see what allowances people on housing benefit are allowed:-

https://lha-direct.voa.gov.uk/BedRoomCalculator.aspx

This is often a good starting point.

Your clearly not a FTB, which will help when approaching BTL lenders. However, you will be classed as a first time landlord, which will narrow the market down to you.

When assesing the property I always assume that the rent has to be 125% of the mortgage payment, based on a theoretical 7% Interest rate.

this will safeguard youm against any future rises. some people dont, but it is worth doing.

also, I dont personally assume it will be a quick turn around - buyt to let, not live in, and also dont buy to sell. (different avenue all together)

Perhaops start off on Interest only, and then work out at what age you may like the mortgage to be paid off by. Then swap onto a repayment basis.

if you could maybe post up links to properties you may be interseted in i am happy to help further, or PM me.

amnblog

Buzzz - don't do anything until you are sure exactly what you are doing.

Even if it takes months, understand what your objective is and how you are going to achieve it first.