FTB looking to take a residential mortgage and rent a room

n15h

Hi all,.

I am looking to take out a FTB residential repayment mortgage, fixed for 5+ years over a 30/35 year term. The property will ideally be a 2 or 3 bedroom property of which I will be living in 1 room as the main occupant and I will rent the other room(s) out.

I wondered if anyone could give me guidance on how to go about this when applying for the mortgage.

I don't have an AIP / DIP yet but want to start the process soon. There are properties that I've seen on Zoopla / Rightmove etc. and I believe now is the right time for me to step foot into the mortgage market.

Ideally the plan is to live in this property until the fixed term is over, and then look to re-mortgage, using the equity built up to apply for another mortgage and purchase another property as my main home. The first property will then be fully rented out to cover the cost of the mortgage.

Thanks

dimbo61

Well you can rent out a room under the Government rent a room scheme and get up to £4250 tax free.
If you charge more than that in rent you have to pay tax
Have you got a deposit saved ?
Now if you lived in the right area and overpay every month for five years you maybe able to change your mortgage to a BTL in a few years.

Let_Us_See

Basically, you will be a one-room prisoner in your own flat?

Are there any particular reasons that indicate such a significant property price rise in the next 5 years that will allow you to carry out your proposed plans as in the early years of a mortgage very little capital is repaid.

Perhaps you should learn to walk before you start running?

ViolaLass

Have you worked out how much of the mortgage you will have paid off in the first 5 years and therefore how much equity you would have?

silvercar

Lenders don't usually consider the rental income you will get from renting the spare bedrooms as income, when deciding how much to lend. So you need to have enough income from employment to justify the mortgage you want, plus of course the deposit and money for fees and furnishings.

mrginge

Only a large deposit is going to see this plan going anywhere.

Brock_and_Roll

Bag of a fag packet, assuming a 5yr fixed rate of 3% on a 35 year term, then will have paid off circa 15.5% of the capital at 60 months.

mrginge

Brock_and_Roll wrote: »

Bag of a fag packet, assuming a 5yr fixed rate of 3% on a 35 year term, then will have paid off circa 15.5% of the capital at 60 months.

How do you work that out?

TrickyDicky101

mrginge wrote: »

How do you work that out?

Indeed, I make it only 8.7%

jamei305

Fag packets can be hard to write legibly on.

n15h

Everyone, thank you for your responses above

I should have been clearer in the OP. I have saved £35K for a deposit plus an extra £5K to use for fixtures & furnishing. I have kept an additional £5K aside for emergency purposes / savings.

If I find a 3 bed property for £165K in the Midlands, I am hoping to get a mortgage of £130K fixed for 10 years and a term of 35 years at 5%. The estimated monthly repayment on capital and interest is £650 which I can comfortably afford.

If I overpaid an extra £100 per month, in 5 years, I will have repaid £13500 of the capital borrowed or 10%. I have also assumed that house prices may rise (I know, I know) so am assuming that in 5 years, I will hopefully have built at least £2K equity in the property.

Therefore, could I then borrow £15.5K (13500 + 2000) towards the purchase of another property? I am also hoping to have saved around £15K from salary and maturing investments.

I know alot of the above is based on estimations but I guess I am just looking for support to make sure my thinking is correct. I want to build a property portfolio for the future and think this is the only way I can proceed to build this.