Housing conundrum

herbiesjp

Vande

The figures we would need would be the outstanding mortgage on Hastings and current value of Hastings. We would also need to know what is the price of the property in Oxford that you are looking to buy.

Vande

herbiesjp,

The outstanding mortgage on Hastings is £69080 of which I have only been paying interest off so far since the initial deposit, as requested by my mortgage provider. I do not know the current value of Hastings as it has not been valued since it finally transferred into my posession last May. At that time it was £105 000, which was around £15000 more than the price I agreed the previous December and so still paid. I did still have to pay stamp duty at that time though of course.

In Oxford prices are high, but occasionally in areas surrounding Oxford 2 bedroom properties do appear at around the £100 000 mark, thus allowing me to live in it and rent a room out to help pay the mortgage if there was any way I could get it in the first place lol.

Flats are usually cheaper than houses, but I am very sceptical about flats now because of their leashold status and all the expense that incures, as I have found out.

Do I not have any advantages at all through not being a "first time buyer" anymore then?

Thank you again

herbiesjp

Vande

Thanks for the figures - Based on the oustanding loan, and property value (even if it is a year ago) you have a lot of equity in the Hastings property. What you could do is release as much as possible (rental income permitting) and thereby increase the amount of deposit you would have available.

By having a higher deposit would mean needing a lower mortgage on the Oxford property, which is needed baseed on your current income situation.

By raising more mortgage on the BTL Hastings prooperty, you can offset this mortgage interest against your rental income to reduce your tax bill.

This looks achievable but will need greater looking into the figures.

slater14

herbiesjp,

Sweet baby Jesus what on earth are you suggesting!

The guy earns 14k for Gods sake!.

His rental income doesnt cover his most basic outgoings on the BTL -
Mortage, void time, monthly service charges, TAX (which he hasnt even mentioned so far! so one must presume are not in his budget), letting fees (usually 10% - 15%), rental protection premium (another 10% of rent), Basic Buildings Insurance, Council tax (@ 50% unoccupied property) or are we presuming 100% let for 25 years?.....etc etc etc.

Exactly WHICH figures, indices, calculations are you using to suggest that he should be gearing himself to near 100%?

*I am quite literally sat here swearing at my monitor*

No wonder this bubble has got out of hand.

Shame on you hebiesjp.

zag2me

Get a new higher paid job or buy a shared equity property, either with friends or with the government scheme "homebuy" which lets you buy 75" of the house and rent the other 25" of it.

Personally I was in a situation where my yearly wage was 20k and I couldnt get a mortgauge. I went out and looked hard at my job and decided to leave. Im now earning 10k more a year and have just bought my first home.

herbiesjp

@Slater 14

I think that you will agree that the OP is big enough to make his own decisons as to gearing.

The OP has asked if it possible to acheive his goal.

My answer is that based on his figures it would appear achieveable. - I have NOT suggested that the OP take any course of action either way - that is down to the OP to decide.

The purpose of the board is for people to ask questions such as this, and then wait for answers - whether or not they decide to go ahead with any of the suggestions is down to the OP.

Shame on you to suggest otherwise.

Before anyone could suggest anything in more detail, a more comprehensive review of OPs situation would be needed e.g. a full financial review.

Are you aware of the OPs full finanacial details?

slater14

herbiesjp,

As you can plainly see he earns well below the average wage and is highly geared already. Exactly HOW MUCH more information do you need?

From someone who uses the tag - Financial adviser - in his posts I expect more. Others have the cover of ignorance for such advice.

Are you honsetly suggesting he should BORROW his deposit for his next purchase?

1. What % gearing would you consider the OP aims for?
2. How do you see the OP servicing the increased debt on his BTL if he takes out further loans?
3. What deposit should he aim to put down on his purchase in Oxford?
4. Should said deposit be coming from savings or should he BORROW the deposit?
4a. In which case what is his TRUE % mortage on his Oxford proposal?
5. Which sub-prime lender do you have in mind as I presume no standard lender will touch this proposal?

Finally, and honestly.......WOULD YOU ADVISE THIS TO YOUR OWN CHILD?

SHAME ON YOU.

herbiesjp

slater14

In answer to "how much information do you need?" - the answer is quite simple, you need to know about the OPs WHOLE circumstances before making any recommednation. That is what the FSA prescribes, and that is what I adhere to.

That is why what I have posted is NOT a recomendation, but a route the the OP can look in to, to achieve their goal of maintaining both properties if they wish. This is by no means the only avenue the OP can follow to achieve this goal.

Many people who hold a property, and wish to buy a second property, will and do raise funds via the equity they hold in their first property. There is nothing wrong with that is there? Again, I am not looking at affordability or any other scenario, as I am not making a recommendation, that is for the OP to look into very closely.

Point 1 - 4a nobody should answer - only the OP should answer. Again, this information would come out follwoing a full review with the OP to find out such things as attitude to risk current tax status, savings set aside, possible job changes, is there a partner to take into account etc. etc. This is just the tip of the iceberg on the questions front.

I am not in the business of making assumptions or guessing.

I would not expect the OP to start putting all his personal details on the open board and would expect them to go to a fully qualified mortgage adviser/broker to look into the scenario further.

As for point 5 and sub prime lenders - you'll be happy to know that sub prime lenders are not the only lenders to offer BTLs

You are very emotive in your language and I would like to have a balanced discussion. Again I have not recommended any action, just advised of one possible route. You have advised another - fair enough.

slater14

herbiesjp,

You are very wise to avoid the points I raised.

You and I both know that this individual is in no financial position in the current climate to be thinking of gearing himself so highly. Equity Release for BTL was not meant for people with such a shaky foundation.

It would have been decent of you to point this out at the outset and that a sub primer was going to mug him if he goes forward.

Believe me, I know BTL is not only a sub prime product. In a "Hypothetical" case where someone is earning 14k, their first BTL is not meeting the 125% rule BEFORE he has borrowed further against the property to use as a depsit for another property...he's with sub prime and the lovely rates that go with such villains.

Thank you. its been enlightening.

herbiesjp

slater14

Not avoiding the points raised, but I'm sure you are well aware that no one would be in a postion to answer them, as they are the questions only the OP can answer as it is his decision.

You are again assuming that there are no further details to add into the equation, or even answers to the questions that you raise, when saying that the OP is in no financial position.

Again I would base any recommendation on facts and not assumptions, that is why I have not recommended any actions.

I can only assume you have not read my post, but sub prime lenders are not the only lenders that will look at this BTL scenario - have I made any recomendations or mentioned any names of sub prime lenders? Prime lenders would look at this scenario, so why would I have to mention sub prime?

You mention the "125% rule", however you omit the 115% rule the 130% rule you omit that these could be calculated at the pay rate of a scheme and a lenders notional rate or just cover the loan by 100% - to mention just a few ways of calculating rental cover.

As you can see there are many ways of calculating rental cover, as I am sure you are aware.

You say he's with sub prime again, but again I'm quite happy to say that that would not have to be the case.

I agree that sub prime lenders rates are high, but they are there for people with adverse credit - again do you know something about the OP that he has not posted?

Unfortunatley I think you have seen my post and taken it as a recommendation - but it has been posted as an option. Whether you like the option or not is down to you and the others reading.

But as you can see from the small points about BTLs I have responded to above - BTLs are not as clear cut as they would appear, as you need to know them inside and out before you can recommend.

As with any financial commitment affordability is paramount, not only when you sign up but also in the future.

I have enjoyed locking horns as it were, and only hope that the OP has gained an insight into the options.