Landlords - what type(s) of mortgages you have and why?

amnblog

uncreative wrote: »

If someone offered you a fully paid off property worth £90,000 giving you £500 per month in 15 years time and all it would cost you is £100 a month contribution.

Or two, worth £180,000 giving you £600pm after mortgage costs, without a £100 a month contribution.

M0ney

I recently started a 5 yr fix @ 4.44% with Virgin Money.

ifeelsad

We took out a 3 year fix on our BTL originally, but are now paying the standard variable rate of 2.5%.

At the time we wanted a repayment one as the plan was to rent it out until the mortgage was paid off and then sell it.

Now I wish we'd taken out interest only, but our rate is so low that I'm not going to change it.

MsWow

Lots of replies and lots of suggestions!:beer:

uncreative and amnblog I don't understand your calculations. Do explain please?

Socksey

All mine are repayment mortgages on fixed rates for 2-5 years... I want them paid off by the time I retire and they are set up so that the monthly mortgage payments are a bit less than the rent I receive so I can plan for voids...

uncreative

MsWow

AMN and I are coming at it from different angles. I want to own the properties "forever" and pass them on to children so that my 3 kids have an income generating opportunity of their own, or an asset to sell. This is option below.

AMN is looking at the properties not as something to own, but something to generate as much revenue as possible on the way through. Option C) below.

Take the hypothetical example of a street with 10 rental properties, each costing £30,000 that will give you £500 a month (if only...!)

If I had £30,000 to invest in properties then I could do the following:

A) Play it safe and buy 1, then get £500 a month clear income,

Buy 3 on a repayment mortgage, putting £10,000 down on each and having £20,000 mortgages for the rest, and pay the repayment mortgages back, so not getting much income on the way through, but realising that in 15 years time you would own 3 outright instead of 1 with the tenants having effectively "paid the mortgage"

C) Act as a true BTL landlord and buy all 10 putting £3,000 deposit on each and getting an interest only mortgage. That way you would get £5,000 a month income for the next 15 years and then be faced with a decision to sell or refinance at that time, but you would own none of them. If the property market crashes at that moment in time then you may have a heck of a problem. However if the property market booms then you have been able to participate the in capital gain on 10 properties instead of 1 or 3 so you may be absolutely minted!

Each to their own and please take professional advice etc.. etc..

But thats how I see it. It depends on your attitude to risk.

uncreative

Socksey wrote: »

All mine are repayment mortgages on fixed rates for 2-5 years... I want them paid off by the time I retire and they are set up so that the monthly mortgage payments are a bit less than the rent I receive so I can plan for voids...

Ditto that ^^^

MisterB1959

we have four properties all on interest only. my wife has now retired aged 53 (as opposed to the state pension age of 68) and uses the income as her 'wage'. if we had repayment mortgages then she would still have to continue working. she now only pays tax on the income over the threshold, if she was working she would pay tax on ALL the income (after allowable deductions of course)


it works for use (and we have a lot of equity in the properties aswell, continuing to increase)


if you were in similar circumstances, it might be better to get two btl's on interest only and increase your quality of life and reduce your time at work? you might never be cash rich but the benefits of being able to spend quality time cant really be measured.


PS I am writing this from our mobile home in France, retiring early while in good health certainly has its benefits !!

MsWow

uncreative Thank you so much for your answer. It makes sense now. You are truly kind to take your time and write such a long message.

We are going to get some money back once we remortgage and perhaps we should buy another house just to leave to both of our children something once they are all paid off. Also we would like to use the little profit that we make to pay our current residential mortgages so we don't have to work forever.

MisterB1959 I hate you . Thank you as well for your comment. Are you planning to sell the properties once you've reach the loan term so you can repay the lenders?

Socksey how many properties you have?

regprentice

Whats the letting market like where you are.

If you have a repayment mortgage you are likely to be charging a higher rent than landlords with an io mortgage.(or have less 'margin' for error built into your income) As is said previously the is the preferred mortgage type for 'professional' landlords.

You will also be up against 'accidental' landlords who can undercut you (i know of couples who had two properties and now live together and rent one out...i also know people who have inherited a 'granny' flat from a deceased relative). For these people just having cash coming in can be enough.

You need to be clear how your numbers stack up against the market as well as simply getting your numbers to add up in the first place.