Advice Please - Buy to let

oswestry123

Hi Everyone,

Myself and my husband currently live in Oswestry and own a 3 bed semi worth around £160,000 on which we have a £97,000 mortgage over 19 years.

We have just set up a 10 year fixed rate at 5.28% with Woolwich (Barclays) on our house.

I have started to get really interested in investment in property and would love to own another property to rent out.
I don't think we would be able to afford the mortgage payments on anything around Oswestry as most properties are over £100k. I have a friend that lives in Abertillery, South Wales where houses are cheaper and am looking at spending around £70,000 on a 2 bed terrace.

I earn £26,000 a year and my husband earns £22,000 a year. Problem is a lot of my money is tied up in share schemes that I cann't get to at the moment so all of the deposit I have for this property would be 2k.

Does anyone know if I could get a mortgage on a second property, ideally I would like to rent it and sell it in around 5 years time to enable myself and my husband to move somewhere bigger when we start to have a family. Also the house would need work doing, do i have to get a buy to let mortgage to rent it out or can i just try for a normal mortgage and then do it up and rent it in 6 months or so.

Does anyone know if we would have a shot at getting a second mortgage and if so any suggestions who with??

Thanks for all your help.:beer:

dunstonh

You wont be able to do it. You need at least 15% deposit on a BTL mortgage. Plus you will find the rental incomes barely meet the mortgage costs nowadays if you only put 15% down. Indeed, in many areas, people are now paying more on the mortgage and they are in the rent.

Five years is quite a risk as well and you are probably unlikely to make a penny and could even face a loss. Lets assume the mortgage and letting agency and related costs sees you losing £100pm. Over 60 months, that is £6000 lost. You also have the costs of buying the property and selling it in 5 years to factor in. There are looking at £3000 odd. You will also have refurbishment costs probably so lets add £1000 and hope you get a good tenant and no empty periods. So, over a 5 year period, you have lost £10,000. To break even you would need 14% growth on property value.

The way things are going, that is possible in some areas but quite possible to do the reverse in others.

The last property price crash took 12 years to recover in some areas. If that occurs in the next 5 years you could find yourself stuck where you are as you cannot afford to move. If interest rates go up higher than expected, you could end up being worse off by £200pm and if property prices drop at the same time you could find yourself in negative equity.

I'm afraid that you have probably missed the boat for a short term gain.