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buy to let and leasehold
chrishar
Posts: 178 Forumite
I am considering a buy to let and as I understand you have two ways of the investment rewarding you:
1. capital increase
2. monthly profit from rent after all costs
The question I have, is if the lease is under 80 years and starts to affect the property value, will this cause a problem?
For example the property value could fall, but the loan (interest only) will stay the same. Therefore it could go into negative equity?
One way to avoid this could be to have a repayment mortgage, however the disadvantage would be less interest to set against the taxable income.
Is there any way of making it work, or is the only answer to extend the lease?
1. capital increase
2. monthly profit from rent after all costs
The question I have, is if the lease is under 80 years and starts to affect the property value, will this cause a problem?
For example the property value could fall, but the loan (interest only) will stay the same. Therefore it could go into negative equity?
One way to avoid this could be to have a repayment mortgage, however the disadvantage would be less interest to set against the taxable income.
Is there any way of making it work, or is the only answer to extend the lease?
0
Comments
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With a leasehold it's not a matter of the property value could fall, it will. The longer the lease-extension is held off the more expensive it will become.
If you're not planning to still be alive in 80 years time and have no dependents who you're interested in leaving your assets to, lease-length is of no consequence.0 -
thanks, so it is only worth worrying about if you plan to sell at some point?
would it be possible then that someone dies with a flat worth hardly anything with 5 years left on the lease, but still have a £100,000 interest only mortgage for example? if they kept payments up and were on a standard variable rate?0 -
would it be possible then that someone dies with a flat worth hardly anything with 5 years left on the lease, but still have a £100,000 interest only mortgage for example? if they kept payments up and were on a standard variable rate?
If it was a 25 year mortgage no lender would lend on a lease with 30 years left!RICHARD WEBSTER
As a retired conveyancing solicitor I believe the information given in the post to be useful assuming any properties concerned are in England/Wales but I accept no liability for it.0 -
so is there an expiry date on a buy to let mortgage? it doesn't just go up to a higher rate indefinitely after a fixed deal?
how can you know if you may want to sell at any point in the 80 years? is it always best to extend the lease asap then.0 -
Lenders will not lend on leases shorter than.... hmm ... I'm not a mortgage expert, but around 70 years?
But yes, as leases get shorter, their value drops (as does their saleability). So you must factor this into your business plan.
You do have a business plan......?0
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