Husband wants to remortgage out home to buy another property.

jackie_w

Hi

We currently have approx £30,000 left on our mortgage, current house value £250,000 approx.
My husband wants to remortgage our home so he can buy another property and let it out!!!!

I'm very nervous about this, I would rather pay our mortgage off as quickly as possible and have the security of always having a roof over our head.

He knows a couple of people who let out properties and they have told him he is mad if he doesn't do it, but I thought new tax rules etc came into force and having a second property isn't really worth it now.

Is it still worth it or would it be better to pay our mortgage off asap?

cahillg81

If you have enough for a deposit and stamp duty then do it, you will get a better return than the money sitting in a bank.

Too many people enter the BTL sector though without proper planning.

jackie_w

cahillg81 wrote: »

If you have enough for a deposit and stamp duty then do it, you will get a better return than the money sitting in a bank.

Too many people enter the BTL sector though without proper planning.

Thanks for replying, he said he is hoping when we remortgage to borrow approx £90,000 from the equity on our home and use that to buy another property.

I just hate all the uncertainty and would rather out mortgage was paid off.

tacpot12

The new tax rules mean paying 3% extra tax on the purchase price and paying tax on the full rental income from furnished properties; there used to be an allowance such that you only paid tax on 90% of the income. It's still financially worthwhile, but it is not risk free or easy.

Does he really want the hassle of having to deal with letting agents, HMRC, tenants, additional bank accounts, insurance companies, and filling out self-assessment tax returns for you both? Does he know all the laws and regulations that will need to be complied with?

I'm a landlord and don't mind the paperwork or the risks involved, but it is not for everyone. If your husband is already self employed, he will have more of an idea about what will be invoked in running a property rental business. And you will be running a business in the eyes of the law. You will have responsibilities to your tenant that you need to meet.

You need to discuss your worries with your husband. You also need to take your existing pension provisions into account. I wouldn't be taking a risk like this if I had good pension provision. I think you should only take risks if you have to.

Get him to have a read of the forums at https://www.landlordzome.co.uk.

amnblog

Given the UK market, this move should mean that on balance that you will be more 'asset' rich in 10 to 15 years time - although, like all investment there is a element of risk.


Until you get personally 'comfortable' with the risk, this should be a non starter.

_CC_

cahillg81 wrote: »

If you have enough for a deposit and stamp duty then do it, you will get a better return than the money sitting in a bank.

Too many people enter the BTL sector though without proper planning.

And so you should, your capital is at much greater risk.

The question is if the person wants to expose themselves to that level of risk and how BTL stacks up to other investments with that risk profile.

AnotherJoe

Is he doing this because he's just said "mortgage =X rent = X+ therefore it's winner" or has he a fully worked out plan over say ten years with initial costs, ongoing expenses, allowance for voids (periods when no tent) etc?

jackie_w

He said he is doing this as a way to have money when he retires (approx 20 years) he thinks once our current mortgage is paid off there is no point is saving money as its it worth it.

There is a little part of me that thinks we should consider it but I would rather wait until next year. my husbands job was under the threat of redundancy earlier this year and his work is still quiet so I would prefer to wait but he doesn't want to. He says I'm too cautious and hold him back.

ACG

There are 2 trains of thoughts on this.

I have been a landlord, I would never do it again. The money was great, but it was all of the hassle that comes with it. Using a management company is useless as they charge you and just act as a middle man or invoice you for work that has been carried out at inflated prices.

That being said, I have a couple of landlords who started out with 1 and working full time and have gone on to either leave or reduce their hours at their main job and live off the income from their portfolio.

Your major concern, ie losing your house I do not think should be the issue as such. Depending on how much he wants to purchase a buy to let for, you would only need to increase your Mortgage by a small amount.

For example, most BTL mortgages need a 25% deposit, but can be as low as 20% without too many problems. So if you are buying for £120,000 its "only" an extra £30,000.

Speak to a broker with your husband. Do the sums and then decide if its something you should do once you know the facts and figures. Maybe also speak to your husbands friends about the negatives. As I said, I would never do it again, but I do have clients that always make me think twice when I see that they are making thousands per month profit.

jackie_w

Thanks ACG, I speak to mutual friends who do this, they have 4 properties. What they do is remortgage their home every time they want to buy a new property and they hammer the mortgage. They too are doing this for their pension and they both work full time.

My husband would rather remortgage for the full amount for the new property (he says about £110,000 + what he have left on our current mortgage approx £30,000) so he is buying the let property outright and whatever rent we get pay that to the mortgage plus about £500 -£600 per month of our own money.

AnotherJoe

jackie_w wrote: »

Thanks ACG, I speak to mutual friends who do this, they have 4 properties. What they do is remortgage their home every time they want to buy a new property and they hammer the mortgage. They too are doing this for their pension and they both work full time.

My husband would rather remortgage for the full amount for the new property (he says about £110,000 + what he have left on our current mortgage approx £30,000) so he is buying the let property outright and whatever rent we get pay that to the mortgage plus about £500 -£600 per month of our own money.

Is that because he's done the sums showing the benefits of a lower interest rate vs a higher BTL rate that he can offset against income. Or just "because" ?