Best house buying option. Please, help!

AnaPet

I need some advice, please. Back in Feb 2015 me and my husband started ltd company, so banks refuse to give any mortgage until Feb 2018 (3yrs of accounts). We have 50000£ on savings and monthly income of 2800£ after TAX and live in rented house . Currently we are looking to have 2 properties: personal home 150k-180k in price and buy to let investment 75-80k. What is the best option for us:
Buy the investment property now with help of friends and family or have a personal loan on top and then remortgage it and have our proper house in 2018 or have a mortgage in 2018 without any personal loans and then have a btl after 6 mths with a minimal deposit? I don't know how banks will look at investment property if we go for the first option and how mortgage rates will be affected then.
Thank you for all advice!

lewishardwick

Sounds like you need to talk to an IFA and Mortgage Broker.

steampowered

Go to see an IFA, but I would have thought that the borrowing on your investment property and your personal loan would be taken account in the size of the mortgage you are able to obtain.

I query whether it is wise to be taking on so much debt, if your husband has a limited company. Is there any risk of your husband's income decreasing, resulting in you being unable to make repayments?

You also need to factor in the risk of interest rates going up in the next few years, and the risk of unexpected expenses on your BTL property - for example if you had to replace the boiler or your tenant failed to pay rent, could you afford to deal with that?

I personally would buy a home to live in first, and only start looking at a BTL property when able to comfortably afford it.

saajan_12

I would buy the home to live in first as its more tax/cost efficient to own your home than rent and own a separate BTL for those initial few years before you buy the second property.
For simplicity, assuming the BTL and your rented properties are similar,
- you earn rent-tax on BTL but pay full rent on where you live.
- you don't earn rent during voids on your BTL but pay rent continuously and maybe even double if you have to move with an overlap.
- redecoration / repairing / cleaning costs on BTL between tenants may be higher to get property looking 'nice and new' and especially if you get a bad tenant.
- tenant finder costs on your BTL for each changeover and credit check / LA fees for where you live if you have to move

Also, you have the hassle of being a LL for those extra years without financial benefit, so Gas Safe certs, Deposit protection, documenting inventory & damage costs..

AnaPet

saajan_12 wrote: »

I would buy the home to live in first as its more tax/cost efficient to own your home than rent and own a separate BTL for those initial few years before you buy the second property.
For simplicity, assuming the BTL and your rented properties are similar,
- you earn rent-tax on BTL but pay full rent on where you live.
- you don't earn rent during voids on your BTL but pay rent continuously and maybe even double if you have to move with an overlap.
- redecoration / repairing / cleaning costs on BTL between tenants may be higher to get property looking 'nice and new' and especially if you get a bad tenant.
- tenant finder costs on your BTL for each changeover and credit check / LA fees for where you live if you have to move

Also, you have the hassle of being a LL for those extra years without financial benefit, so Gas Safe certs, Deposit protection, documenting inventory & damage costs..

Thank you for your comment. In this case we can live in investment property for 2 years, pay back all personal loan before we buy our home and let it only after second purchase.

AnaPet

steampowered wrote: »

Go to see an IFA, but I would have thought that the borrowing on your investment property and your personal loan would be taken account in the size of the mortgage you are able to obtain.

I query whether it is wise to be taking on so much debt, if your husband has a limited company. Is there any risk of your husband's income decreasing, resulting in you being unable to make repayments?

You also need to factor in the risk of interest rates going up in the next few years, and the risk of unexpected expenses on your BTL property - for example if you had to replace the boiler or your tenant failed to pay rent, could you afford to deal with that?

I personally would buy a home to live in first, and only start looking at a BTL property when able to comfortably afford it.

Well, things may happen, but my husband works 8 years in the same business and his income has only increased during years.
In the worst case scenario we can sell the investment house and pay back all loan. We may lose part of savings, but from another hand we can move in our investment property for these 2 years, what will save us ££££ on rent and afterwards have a proper mortgage for our home.

Kynthia

I don't think btl mortgages allow you to live in the property yourself.

Cakeguts

You have to consider what you are going to do if you don't get any rent on the buy to let property for several months. There are already enough landlords who have gone into letting property thinking that it will be easy and profitable whose tenants find that they have got a landlord who cannot afford to make repairs.

Buy a house to live in and then when you have some more savings do a lot of research on being a landlord.

saajan_12

AnaPet wrote: »

Thank you for your comment. In this case we can live in investment property for 2 years, pay back all personal loan before we buy our home and let it only after second purchase.

Then I would get a residential mortgage with a short fixed term, and If/when you are ready to buy another property, apply for a BTL mortgage. Of course this means another application which may / may not be accepted, but your husband's business would have a few more years on the accounts and if you are rejected, you can always stay put.