10% & btl or 15%?

catoutthebag

Would you put down a 10% deposit on flat to live in in a highly popular sought after area. ..then build on residual savings for the next home a few years down the line, with the intention of letting out the flat as future retirement income.

Or put all your money into a 15% deposit and use any future sale/equity fully into your next home few years down the line?

(Info: single, no dependant, okay income, no debts, early 30s, have private pension for last 4-5 years)

pyueck

This is a personal choice, nobody here will be able to accurately predict which will be your best option financially, let alone whether you are prepared for the possible implications of being a landlord.

catoutthebag

Granted it's personal choice - just like every other question asked usually. ..just curious to what others would do.

Given its a property I would have lived in, I would be familiar with any issues that may arise with a btl. The area is one that is affluent with young working couples and professionals. ..not dss/students

pyueck

No it's not like other questions, you are asking for investment advice. Nobody knows what will happen with interest rates, rental yields, house prices etc. so it really is your choice.


Personally I think at this moment in time you should focus on building up a larger deposit before doing BTL. I think you will struggle to get a BTL mortgage with a 90% mortgage on another property, but hey the banks give money to people I wouldn't in a million years, so I may be wrong on that!

Pixie5740

I would put down a larger deposit now as the lower 85% LTV mortgage will probably have a lower interest rate than the 90% LTV mortgage. Then I would over pay as much as I can to the mortgage without incurring any penalties as you're unlikely in find a savings account offering a higher interest rate than the mortgage lender is charging you.

Then further down the line you would have the options of selling the flat, which you should have built a good bit of equity up in, to buy somewhere else or you could remortgage the flat using a let-to-buy mortgage to release some equity to buy somewhere else whilst retaining the flat to let out.

catoutthebag

Pixie5740 wrote: »

I would put down a larger deposit now as the lower 85% LTV mortgage will probably have a lower interest rate than the 90% LTV mortgage. Then I would over pay as much as I can to the mortgage without incurring any penalties as you're unlikely in find a savings account offering a higher interest rate than the mortgage lender is charging you.

Then further down the line you would have the options of selling the flat, which you should have built a good bit of equity up in, to buy somewhere else or you could remortgage the flat using a let-to-buy mortgage to release some equity to buy somewhere else whilst retaining the flat to let out.

Thanks. Didn't realise about your second paragraph.
So say I put 15%...overpaid as much as I could. ..then wanted to release equity to buy a house and rent flat out. .

- how much equity threshold would I be required to have in the flat to let it out?

- what are the costs of remortgaging to do the above

- would there be any other issues or obstacles

I think that is my best option currently then

catoutthebag

Pixie5740 wrote: »

I would put down a larger deposit now as the lower 85% LTV mortgage will probably have a lower interest rate than the 90% LTV mortgage. Then I would over pay as much as I can to the mortgage without incurring any penalties as you're unlikely in find a savings account offering a higher interest rate than the mortgage lender is charging you.

Then further down the line you would have the options of selling the flat, which you should have built a good bit of equity up in, to buy somewhere else or you could remortgage the flat using a let-to-buy mortgage to release some equity to buy somewhere else whilst retaining the flat to let out.

Kinda put off by it now so will probably stick to 10% and overpay a little whilst always saving a little in cash isa to second deposit
http://www.theguardian.com/money/2014/jun/12/can-i-get-a-let-to-buy-mortgage

DireEmblem

I'm in a similar boat cat - well I am considering buying, but not 100% on the route.

I do like the idea of BTL, but I first need my own place I think before I consider that. I am stuck between two thoughts - get the best place I can afford to pay off over many years(2/3bed), or get a 1 bed, and a second BTL once its paid off.

Pixie5740

catoutthebag wrote: »

Kinda put off by it now so will probably stick to 10% and overpay a little whilst always saving a little in cash isa to second deposit
http://www.theguardian.com/money/2014/jun/12/can-i-get-a-let-to-buy-mortgage

I don't understand how that article has put you off. What's your alternative plan? Get a BTL mortgage which you'll also need a 25% deposit for? Cross your fingers and hope that you get CTL in a few years time and that you will meet the affordability to get a second residential mortgage?

I doubt you'll get a better interest rate on a cash isa that you'll pay on your mortgage but it's your money so its up to you. I do think you should talk through your options with a mortgage broker. Perhaps focus on buying a home so you can move out of your parents' house and put an investment property on the back burner for now.