Buy to Let

old_hat

Hi all,

Have struggled to sell our flat so have decided to stay and save for a deposit for a house and then convert our flat into a buy to let.

Value Approx: 185k. Mortgage left: 103k plus 18k to pay back on a key workers loan.

We would look to buy a house worth around 350k.

Question is: could we get a 5% mortgage to buy a house or are there other options and so on to look at?

If not, what is savings would we need to enable this to happen? Thanks

Thrugelmir

What's the remaining term left on the lease?

old_hat

84 years. But we are happy to extend and have the funds to within the next month or so

AnotherJoe

We would look to buy a house worth around 350k.

Question is: could we get a 5% mortgage to buy a house or are there other options and so on to look at?
========

Are you aware you'll have to pay an extra 3% stamp duty on that house of 350K?
Total SDLT would be £18k or an extra £11k or so, which isnt too far from teh sum you'd have asa deposit !
So you'd be better off to drop the price of your flat by even £10k instead of becoming an accidental landlord.

old_hat

Sorry for my ignorance but why would dropping the price of our flat stop us from paying the SDLT on the new property?

Pixie5740

If priced correctly anything will sell.

old_hat

Sorry, its getting confusing here. Im talking about how much savings I would need not selling

So remortgage say 140k of a 190k property is 75%.

I would have to pay 100k off the mortgage plus 19k off the equity loan. That would leave 21k which is enough to cover stamp duty for the next house.

Say i then saved 35k for the 350k house which i can achieve in 2 years. Would this be acceptable to lenders?

We both earn over 100k and at that time would have no debt

AnotherJoe

old_hat wrote: »

Sorry for my ignorance but why would dropping the price of our flat stop us from paying the SDLT on the new property?

Because, for example if you dropped the price by £10k and as a result got a buyer for the flat, you wouldn't have to pay an extra £11k to buy your new house.

You'd also find it far easier to get a mortgage on the new house, and could do it quicker as you wouldn't have to save the £11k or you could save a bit more and get a 90% mortgage or better which would give you more choice of lenders and a better mortgage rate, which would save you more money.

Edit; just seen your post 7. So, the question to me is, do you want to be a landlord or not ? Your initial post makes it seem as if you are being forced into it due to not being able to sell. If that's the case, then dropping he price is the answer.

If OTOH you have a hankering to be a landlord, do a full financial analysis , including the extra £11k, to see if you'd even be making a profit, and then think about the hassle, and then decide.
When you do the financial analysis take into account a better LTV on your house meaning lower mortgage repayments. If for example you paid £1,000 a year less due to better mortgage rate, youd need to make much more than that on the BTL to compensate, around £1700.

old_hat

We are thinking of keeping the flat so would my figures work out

old_hat

Thanks for this - the issue is not with the price - we had actually sold to a cash buyer for 10k more but they pulled out because they changed their mind and we have had a second buyer pulling out because of poor advice from their solicitor. I am just exploring options as I am wondering if, with the above figures, the option of keeping the flat and buying new would be feasible. From there we would then have a goal of how much to save to achieve this goal.


Not committing to this option but wondering if this could work so that we do not rely on the fortunes and luck of buyers.
Thinking of saving like mad to get a deposit for house.


2 years time: on our flat - assuming 190k value, new 140k BTL mortgage 25% LTV (pay off 95k existing mortgage and 19k equity loan leaving 26k which we could put towards the new house)


Hopefully in 2 years have saved 35k which is 10% of a 350k house. Use the 26k to cover stamp duty. Plus we could save extra if we wait a few months..


All this is hypothetical but all I really want to know is; if we decided to go down this route, would it be possible. Joint salary over 100k

Verix

Short answer: yes potentially, if the property is self financing. However it is impossible to say what mortgage policy will be then given all the changes with the BTL market etc.