Letting current home/buying another

OliBenson

Hi everyone, long time lurker, first time poster and very much hoping for some advice!

I'm in a very fortunate position whereby I have received a very large inheritance of £500k. My wife and I have found our dream home which is £650k and own our current home which is valued between £400-£450k with a mortgage of £218k, purchased 5 years ago for £300k. The rental market in our area (SW London) is good and we have had it valued at £1500-£1750 pcm.

Ideally what we would like to do is let our current home and purchase the £650k home, with a mortgage of £200k (leaving us £50k of the inheritance for costs/some work to the house/contingency if we have lack of tenants. In summary:

- I have an income of £45k plus a car allowance, wife has £16k but as she is newly freelance as far as the mortgage is concerned she can not be included. Savings of £15k + £500k
- Own house with mortage of £218k, which we plan to get BTL mortgage with monthly income of £1500.
- Would like to purchase new home at £650k with mortgage of £200k

I've spent a huge amount of time doing the numbers and it all seems perfectly feasible to me but am I right?

Thanks in advance.

Ollie

ACG

I have not checked any particular products but i would be very surprised if those numbers did not stack up. It all looks fine to me.

Thrugelmir

Putting aside the mortgage. A rental income of £18k gross on a property worth £400k is only 4.5%. This is pre costs, interest and tax. Not a particularly good return on the investment.

If you want a BTL or possibly 2. You may be better selling your current house. Buying for cash your new home. Then buying properties which are better suited to BTL. At a much higher gross yield at least 8% if not 10%.

Smi1er

Thrugelmir wrote: »

Then buying properties which are better suited to BTL. At a much higher gross yield at least 8% if not 10%.

OP lives in SW London. Not many properties in SW London will get anywhere near 8-10% Yield

OliBenson

Thank you for all the replies so far, they're much appreciated. What is the general consensus at the moment on length to fix a BTL mortgage (or am I opening a can of worms?). On my own home I like the comfort of a 5 year fix, knowing what my fixed outgoings will be but obviously with BTL the rate seems to be about 1% more for an equivalent mortgage.

Allowing 25% for costs, on a 5 year fix 4.2% BTL mortgage of 218k I would just about break even letting for £1500 pcm after tax. Does that sound about right?

Jenniefour

Smi1er wrote: »

OP lives in SW London. Not many properties in SW London will get anywhere near 8-10% Yield

Agreed - unless you're very, very lucky. BTL's in London are more usually bought for the longer term capital gain. 10% yields as standard in London are in the dim, distant past.

Selling the current house to other BTL's doesn't make a lot of sense to me as there are thousands of pounds of associated costs and a lot of hassle.