Fairly clueless 1st time buyer, possibly for buy to let...

Bhav_2

Hi All,

I am pretty much a novice when it comes to mortgages so was wondering if i could get some advise before embarresing myself...

Some info you might need:
Age: 29
Income: £31000
deposit: £0
Credit rating: Good (i think)
I have been in permanent employment for the last 8 years.

My question is, how much deposit can i get if any? If i could muster up a 5% deposit, how much difference would it make?
Also, ideally i will be buying a flat to let initially and then possibly move in at some stage... would i need to know/do anything else?

My mortgage knowledge comprises of reading Martin's Mortgage guide for first time buyers....

Any help much appreciated,

Bhav

herbiesjp

You cannot get a 100% or 95% property to let out

You will need more of a deposit and you will need to make sure that the rental income covers the mortgage payments - a rough rule of thumb is that you will need 130% coverage

Bhav_2

herbiesjp wrote: »

You cannot get a 100% or 95% property to let out

You will need more of a deposit and you will need to make sure that the rental income covers the mortgage payments - a rough rule of thumb is that you will need 130% coverage

Thanks herbiesjp... Not good news! So what would be the minimum deposit on a place costing £150k if i was buying to let? Or would it totally depend on the rent potential?

Also, what would stop me from buying the house to "live in" and then changing my mind and renting out after a month or two?

dunstonh

Also, what would stop me from buying the house to "live in" and then changing my mind and renting out after a month or two?

Lender then says to you that they wont allow it and ask you to repay the money they have lent you. If you dont tell them it is mortgage fraud.

Why do you want to go buy to let? Many people are now losing money on buy to lets as the rental yields are so low.

So what would be the minimum deposit on a place costing £150k if i was buying to let?

£22,500 deposit and the rental income would have to exceed the mortgage with a bit to spare. With a 4% yield meaning £500pm.

£127,500 interest only mortgage costs £732 a month so you would be losing £232 a month on that example and you wouldnt get a mortgage as it is a bad business proposition.

You would need a rental yield in excess of 7.5% and they are not easy to come by nowadays.

Lavendyr

Why not wait, save up a deposit and then buy when you want to live in the place?

It seems now is a bad time for buy-to-let. In my area prices on lettings have been slashed recently as there is an absolute glut of properties on the market, especially flats - supply exceeds demand, so prices have to drop, so buy-to-letters end up having to top up their mortgages more, and as a result the whole thing is just not profitable.

You're on a good salary - I'd suggest you save away as much as possible towards a deposit, whether through investments or through simple savings accounts, rent as cheaply as possible in the meantime, watch the market and wait until you want to buy a house to live in.

djbd1973

There was an article on buy-to-lets on the fool website this week.
here is the link -

http://www.fool.co.uk/news/property-home/2007/09/11/easy-money-from-buy-to-let.aspx?source=ioowfeml0040008

They talk about a couple of differing points of view regarding buy-to-lets and the average national and regional rental returns.

Mr_helpful

You need a 10% deposit for buy to let but these days the biggest problem is getting enough rent. There are ways of upping the rental value that us people with a BTL portfolio use. Buy to let is bit of a specialist area and so you need a broker with experience and preferably one who wont charge you a fee. Some leder will accept a 5% builders deposit so you may actually get a property to let out with only 5% deposit

Hoario54

Mr_helpful wrote: »

Some leder will accept a 5% builders deposit so you may actually get a property to let out with only 5% deposit

But buying a brand new flat to rent out on this basis may not be a sensible move in the current market.

You will pay a premium for a new property and as has been mentioned elsewhere, there is a glut of property available to rent as the world and his wife piled into Buy To Let.

A search on Google will help you find a number of "distress" stories where novice landlords have bought new flats off plan and have been unable to rent them out at a figure that would cover an interest only mortgage let alone pay the monthly mortgage costs in full and offer a decent return.

A number of would be landlords are being forced to sell their brand new flats at a loss.

Think very carefully before pursuing this idea and remember when you can see a bandwagon clearly you have already missed the opportunity.