What will happen to House Price/Demand with new BTL Tax in April?

westernpromise

MoneyEM wrote: »

Haha. Well it's possible for me. I have been living here for 2 years (stratford) with no price rises to the rent in 2 years £1300pcm, only just changed this month to £1420, there is an identical flat in our building with an asking rent of £1675 so I think we have been pretty lucky. I share the flat and pay half but still, it's a lot of money.. It is a 3 minute walk to the station and it's really spacious with 2 double bedrooms though. My mortgage for a house in kent is gonna be cheaper, and with travel, brings it up to around the same.

Good for you. The only two pieces of advice I would proffer would be these.

1/ Don't buy somewhere because you think you'll make money off it. Buy wherever you like best of all the choices in front of you. If that's a 1-bed in a smart area rather than a 2-bed in a slightly less smart area - or indeed vice vera - that's fine. If you want to do it, so will someone else in due course when you're ready to sell. My sister used to do this wrong - she would buy suburban family houses thinking she could flog them on to suburban families, but not having a family she had no idea of what families actually looked for.

2/ Go for the shortest mortgage term you can withstand, eg 20 years rather than 25 if you can, and get a rate fix. If you take a 5-year fix on a mortgage at 3%, after 5 years you'll have paid off 15% of the loan. On a 20-year term you'll pay of 20% of the loan over the same period. The point of this is that in the event of a downturn like we saw in 2008-2010, you can repay your way out of trouble. If you bought the house and its price instantly fell 20% and failed to recover, you couldn't care less because after 5 years you'll have repaid 20% of the loan.

This incidentally is the biggest difference between now and 30 years ago when I was your age. Back then, rate fixes were more or less unknown and rates were generally higher, in the 8 to 16% range. So FTBs made very few inroads into their debt for the first 10 years. When prices did fall, we were stuck - but you needn't be.

lisyloo

I'd give a slightly different view on 2).
Get the longest term you can without penalties to overpay assuming you a real relatively well disciplined.
Pay it down as quick as you can because mathematically you save a lot of interest (compounded future years interest) but having a long term would give you flexibility to lower your payments temporarily should you fall on hard time temporarily e.g. Get sick or get made redundant.
So I'm effectively proposing the same but with flexibility.

Doesn't work for people likely to spend the spare cash on the latest iPhone or Jimmy choose (that's posh for shoes).

MoneyEM

westernpromise wrote: »

Good for you. The only two pieces of advice I would proffer would be these.

1/ Don't buy somewhere because you think you'll make money off it. Buy wherever you like best of all the choices in front of you. If that's a 1-bed in a smart area rather than a 2-bed in a slightly less smart area - or indeed vice vera - that's fine. If you want to do it, so will someone else in due course when you're ready to sell. My sister used to do this wrong - she would buy suburban family houses thinking she could flog them on to suburban families, but not having a family she had no idea of what families actually looked for.

2/ Go for the shortest mortgage term you can withstand, eg 20 years rather than 25 if you can, and get a rate fix. If you take a 5-year fix on a mortgage at 3%, after 5 years you'll have paid off 15% of the loan. On a 20-year term you'll pay of 20% of the loan over the same period. The point of this is that in the event of a downturn like we saw in 2008-2010, you can repay your way out of trouble. If you bought the house and its price instantly fell 20% and failed to recover, you couldn't care less because after 5 years you'll have repaid 20% of the loan.

This incidentally is the biggest difference between now and 30 years ago when I was your age. Back then, rate fixes were more or less unknown and rates were generally higher, in the 8 to 16% range. So FTBs made very few inroads into their debt for the first 10 years. When prices did fall, we were stuck - but you needn't be.

I am not looking to buy somewhere to make money from - yes I want to use it as an investment but I am very particular with where I want to live (15-20 minute walk from train station, 2 or 3 bed Victorian terrace character house) and I won't settle for less...

As for the shorter mortgage term, I wouldn't like to pay a high mortgage every month, I would rather choose a longer term one with no repayment penalties as lisyloo says, as I would like to overpay different amounts with what I have left over. I will try to aim to get into a better LTV ratio by time I remortgage for a better deal.

MoneyEM

lisyloo wrote: »

I'd give a slightly different view on 2).
Get the longest term you can without penalties to overpay assuming you a real relatively well disciplined.
Pay it down as quick as you can because mathematically you save a lot of interest (compounded future years interest) but having a long term would give you flexibility to lower your payments temporarily should you fall on hard time temporarily e.g. Get sick or get made redundant.
So I'm effectively proposing the same but with flexibility.

Doesn't work for people likely to spend the spare cash on the latest iPhone or Jimmy choose (that's posh for shoes).

You have the same way of thinking as I do, as I stated above. Some months I would like to overpay by £800 and others maybe only £100 or £200. I do like my latest iphone and the occasional designer handbag, but only where I can afford to.. I think I've always been good with money, and been careful not to waste it. I try to keep my costs down as much as possible.

kinger101

It might be a bit quieter as those in a rush to meet the April deadline disappear from the market. But it will pick up again eventually. There tends to be more available in spring as well.

I wouldn't stop looking though. You never know when the property you want comes on the market.