Is this a good idea?

AdrianC

Owain_Moneysaver wrote: »

And if it's a semi or terrace (which a lot of local authority houses are) there may be liabilities if the local authority still owns part of the building and has a scheme for repairing or upgrading the whole building.

As well as all the usual costs of maintenance of course, which are currently covered by the rent.

And that's not even going near the political arguments, of course.

Rosemary7391

I wouldn't do this. Your mortgage payments will be about £400 a month, and you'll be paying all sorts of fees to get it, plus extras like buildings insurance, boiler service that you're not currently paying. You might come out ahead, but it's close enough that any repairs probably mean you won't. I'd stay put and just buy the 4 bed when you can.

Gemandcraig

The paragraph about double count - Can you expand what that means please? We would be paying £1k a month in mortgage so 500 from rent we are paying now and 500 extra savings to reduce equity.
Gem

Rosemary7391

Gemandcraig wrote: »

The paragraph about double count - Can you expand what that means please? We would be paying £1k a month in mortgage so 500 from rent we are paying now and 500 extra savings to reduce equity.
Gem

http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

Have a play with the figures. It sounds like you might've forgotten the interest if you think £1k/month for 2 years = £20k equity to play with.

The thing about double counting was to do with equity, not mortgage payments. You'd need, say, 25% of the 3bed + 10% for the 4 bed in equity; you couldn't say, I have 25% equity in the 3 bed and expect a lender to give you a 100% mortgage for the 4 bed. You need enough equity in both.

piglet25

I am sure there is a clause about renting out a property purchased through RTB within so many years

AdrianC

Gemandcraig wrote: »

The paragraph about double count - Can you expand what that means please? We would be paying £1k a month in mortgage so 500 from rent we are paying now and 500 extra savings to reduce equity.

So you'd be paying £1k/mo in total?
Interest on a £90k mortgage is going to be about £225-250/mo, so you'll initially only be actually paying off £750/mo.

marksoton

This plan really isn't viable.

Cakeguts

I don't understand how much this property is costing you. At first you say 100k and then you say 110k. If it is 100k you will have 10k as a deposit and then borrow 90k as a mortgage. Working on the basis that you will be allowed to borrow 90k you would then have to pay £1000 more than you mortgage repayment each month to make your figures work. A mortgage repayment includes paying off interest on the loan. In the first few years of a mortgage your repayments mostly consist of interest and a small amount of capital repayment. So for example if your mortgage repayment was (to use your numbers) £500 per month most of this would be interest on the loan of 90k so you would only be paying a small amount off the loan which is what increases your equity. To get the increase in equity that you think you want you would have to pay £1000 more than the monthly mortgage repayment.

I think what you haven't thought about is the amount of interest you have to pay back on a mortgage as well as the money you borrowed. So the mortgage consists of 90k that you borrow plus the interest charged on that 90k.

If you are having to pay all this money to reduce your borrowings on the first property how are you going to save for the deposit on the second property. Remember you can't get the equity out of the first property to buy the second property unless you sell the first property. What I don't understand in your idea is if you can get a mortgage for a 4 bed house with a deposit of 20k why don't you just save the 20k now and buy the 4 bed now?

Ex council houses are not attractive to good private tenants. Good private tenants want houses that have always been privately owned and are not on a council estate. So don't expect to get tenants that look after the property and pay the rent on time. For an ex council house you would need to expect to get tenants that would not be accepted for nice properties that had always been privately owned.

Gemandcraig

Thanks Mark - Was just an idea to save us paying dead money in rent!
Gem

marksoton

And that's before you look at attractive mortgage rates. Most would restrict over payments.