Best mortgage type?

Cornucopia

Won't that be the case whatever you do?

In fact, going forward, each property in your portfolio will have its own deposit.

mikeopvc

Further down the line yes that will be the case, but initially I was thinking I'd need to do up and sell a few, gaining a bit more profit each time until such a time that I could afford to just let one out and still have enough for a deposit on the next one.

mikeopvc

From what I'm reading online I think an offset mortgage requires savings too, I don't have that much saved so I don't think it's an option for me.

Cornucopia

mikeopvc wrote: »

Further down the line yes that will be the case, but initially I was thinking I'd need to do up and sell a few, gaining a bit more profit each time until such a time that I could afford to just let one out and still have enough for a deposit on the next one.

Yes, I guessed that was the plan. I did something slightly similar (in the 90s and 00s) but I moved each time, and not all of the properties needed refurbishment (in fact some were brand new).

That simplifies things with tax and mortgages enormously, though it can be unpleasant to live in a building site. After I bought my third property, I was able to buy another alongside it, and I had two at a time for some while (typically one to do up, and one to retreat to when the "doing-up" got too much).

There's no easy answer (otherwise everyone would be doing it).

I think I would be doing a detailed spreadsheet to try to judge the viability of it. The issue being that if you went with a Bridging Loan, and the project ended up being 8 months end-to-end, which is not unheard of, then you'd be paying £4k+ in interest and fees, which may knock quite a hole in your budgeting.

Cornucopia

mikeopvc wrote: »

From what I'm reading online I think an offset mortgage requires savings too, I don't have that much saved so I don't think it's an option for me.

Not necessarily - that's just the way the Banks tend to explain it.

mikeopvc

Cornucopia wrote: »

I think I would be doing a detailed spreadsheet to try to judge the viability of it. The issue being that if you went with a Bridging Loan, and the project ended up being 8 months end-to-end, which is not unheard of, then you'd be paying £4k+ in interest and fees, which may knock quite a hole in your budgeting.

I intend to get it complete within 6-8 weeks max, this is realistic as I'm doing refurbs all the time for my customers, now I want to do it for myself too.
The plan was to budget for 4 months bridging loan interest which means I'll have most of 2 months to sell, if no sale then that's when I'll have to get a buy to let mortgage on the now habitable property then save up the rent paid until it's enough to cover the early repayment charges

mikeopvc

Cornucopia wrote: »

Not necessarily - that's just the way the Banks tend to explain it.

So how could an offset mortgage work for me with very little savings?

Cornucopia

Say that the Lender offers up to 80% LTV.

So with your property valuation your mortgage element would be £160k and the remaining equity of £52k would sit in a savings area (not necessarily an account) with its value offsetting your mortgage.

Subject to the rules of the bank, you would potentially have complete flexibility to draw on that £52k and pay it back later, which is very efficient both in interest and tax terms.

mikeopvc

Cornucopia wrote: »

Say that the Lender offers up to 80% LTV.

So with your property valuation your mortgage element would be £160k and the remaining equity of £52k (would sit in a savings area (not necessarily an account) with its value offsetting your mortgage.

Subject to the rules of the bank, you would potentially have complete flexibility to draw on that £52k and pay it back later, which is very efficient both in interest and tax terms.

£52k isn't enough for me to buy the property and do it up, unless I get a buy to let mortgage which I can't get

Cornucopia

Based on your figures, I can't see any way for you to do this without two loans (probably one on each property).

Lenders simply aren't offering the near 100% advances that you would need to release to get close to your new property purchase price.

Therefore, you are likely to need to take a further advance on your old property to provide a deposit for a mortgage or bridging loan on the new property.

As I said, I think you need to crunch the figures yourself...