Best buy-to-let mortgage?

IveSeenTheLight

A_Nice_Englishman wrote: »

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?

Your right here. Investing £31,250 in a 6% deposit account would return £1,875 in the first year. With compound interest (assuming 6% every year) this would return £134,121 over a 25 year period.

However, even assuming that house prices remain the same as today for the next 25 years the LL would have a property valued at £179,000.
Add to this a £964 yield per year in the same 6% deposit account would return approx an additional £4,137 over the 25 years

The difference between his £31,250 return in a deposit account and the valuation of the house after 25 years is quite a substantial amount, to the tune of more than £49,000 + any house price increase (does anyone know of a property the same price today as it was 25 years ago?).
£179,000 + £4137 - £134,121 = £49,016

Ultimately, the point of this post is to show that a BTL investor does not necessarily need any rental yield (although it is beneficial if they do) or any property price increase if they have marketed it correctly and get tenants to pay for the mortgage throughout the term.

dunstonh

IveSeenTheLight wrote: »

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.

http://www.nationwide.co.uk/hpi/default.asp

master_ian

You guys are fantastically thorough in your figures... Yes, I HAVE SEEN THE LIGHT has nailed it as to our investment plan, with capital growth and rental income being central in the equation and not simply putting money into an account. BTW, the £830 rental/month is a conservative estimate, as we are looking more towards the £900 mark.Yes, dunstonh we did look at 5 year BTL fixed rates, but none could beat the 2 year 5.49% fixed that we are going for.And apologies to the OP for 'hijacking' the thread...did not mean to, just wanted to ask a question....;-0

A_Nice_Englishman

IveSeenTheLight wrote: »

Your right here. Investing £31,250 in a 6% deposit account would return £1,875 in the first year. With compound interest (assuming 6% every year) this would return £134,121 over a 25 year period.

However, even assuming that house prices remain the same as today for the next 25 years the LL would have a property valued at £179,000.
Add to this a £964 yield per year in the same 6% deposit account would return approx an additional £4,137 over the 25 years

The difference between his £31,250 return in a deposit account and the valuation of the house after 25 years is quite a substantial amount, to the tune of more than £49,000 + any house price increase (does anyone know of a property the same price today as it was 25 years ago?).
£179,000 + £4137 - £134,121 = £49,016

Ultimately, the point of this post is to show that a BTL investor does not necessarily need any rental yield (although it is beneficial if they do) or any property price increase if they have marketed it correctly and get tenants to pay for the mortgage throughout the term.

We're talking about an interest-only mortgage aren't we? In that case he would have a property worth £179K +/- any change in the price and a debt of £179K

A_Nice_Englishman

master_ian wrote: »

You guys are fantastically thorough in your figures...

If I was doing this for real I would consider a whole range of scenarios with different interest rates, rates of property inflation / deflation, income tax and capital gains tax rates, forced sales at various durations etc etc