Best buy-to-let mortgage?

master_ian

Sorry readers. Something wrong with my settings...I cant separate paragraphs!

undercoat11

So what are you waiting for? You clearly have it all sewn up.

silvercar

Therefore:rental income: £830 annual rental income (with 1 month void/yr) = £830 x 11 = £9130Mortgage interest: 5.49%mortgage £148750 x 5.49% = £8166£964 yield after expenses/annually.

I can't see any figures for building insurance or gas certificate. Will you use a letting agent to find a tenant? They charge about 10% of the anual rental, more if they manage the property as well.

master_ian

Hi Silvercar - The buildings insurance and gas/boiler certs are included in the £5K we put aside (see earlier post). We will be managing it ourselves but will get an agent to find tenants at the price of 5%.Another option is 2 yr tracker - 4.99% but fees of 2.5%. This is actually more expensive over the 2 years than the 5.49% fixed 3 year with £980 fee.(mortgage = £148,750) However, with economists saying a downturn in IR next year is now forcasted, maybe a possibilty. However, we're leaning towards the fixed rate.

A_Nice_Englishman

So you're putting up £31,250 for a return of £964 p.a.?

You'd get twice as much in interest if you put that money on deposit so I assume you are relying in capital growth?

I wouldn't do this with property prices at an all-time high but then it's not my money and I don't know what other investments you have.

master_ian

I can see where you're coming from Nice Englishman...however, this is a long term (15 yr projected) investment and something we have thought about for some time. We are looking at both capital growth and rental income, and although initially the returns will not be as good as putting money in the bank, we are both comfortable with our decision. Yes, property is at an all time high, but we dont want to speculate and wait on a massive correction, because this property feels right and the 'right time' to buy can be relative one's circumstances. Thanks for the advice though. At the moment the vendor does'nt want to budge on £175K...Doh!

dunstonh

but we dont want to speculate and wait on a massive correction

You are speculating though. You are speculating on there not being a correction in house prices because you arent making any money on the rental side.

Of course the problem is will there or will there not be a correction. If there is, when and by how much. It is interesting to note that the IMF have suggested that they feel the UK could potentially see a bigger drop in house prices than the US has seen as the increases before were greater. Although they do say that undersupply could hold prices up to some degree. It is also worth noting that property investment funds have just had their first negative quarter since 1992. The time of the last property crash. So, all the indicators show pressure on house prices and only time will tell.

The last property crash saw some areas not recover the price for 11-12 years. So, a repeat of that with your timescale could see you see end up with little or no gain.

A_Nice_Englishman

Useful information, dunstonh, thanks.

I think if I wanted to put money into residential property at the moment I would buy a more expensive house. At least I would have the benefit of a nicer place to live in and not have to pay CGT on any profit when I sold.

Gorgeous_George

master_ian

It's a little rude to hijack someone else's thread

You don't pay CGT on losses so that shouldn't be an issue. If you have a 15 year plan why not look for a longer (life of mortgage) deal. Otherwise, you'll be asking the same question again in 18 months or so.

Let's consider year 2.

Mortgage interest: £8166
Rental income: £9130
Buildings insurance: £250
Repairs/maintenance: £500
New tenant find (5%): £500

What' s happened to the yield? What are you getting for all the hassle and a tax return?

GG

IveSeenTheLight

dunstonh wrote: »

The last property crash saw some areas not recover the price for 11-12 years.

This is interesting.
Do you have a link to show which areas have shown house price increases / decreases over the last 20 years?
It would be a very worthwhile web address to visit.