Buying first buy-to-let

Gspree

I purchased my first property in June 2017 and recently set myself the goal to buy my first buy-to-let within the next 2-3 years.

The property I bought was for £222,500 and I managed to do this with a £160,000 mortgage (the absolute maximum I could get at the time), a £44,000 help-to-buy equity loan and an £18,500 deposit.

I manage to save at least £1000 each month (£350 of which per month is from renting out my spare room). So nearly 11-months after this purchase I have a little over £12,000 saved.

I've noticed some 2/3 bed flats which are nearby in a decent condition, within commuting distance to London, near a University campus, all the desirables etc an
d they appear to be on the market at around £130,000. After doing a little research they seem as though they might give a good return if I manage to obtain a buy-to-let mortgage on one.

Sooo currently the remaining mortgage on my existing property is £155k and I'm fully aware the help-to-buy amount will be accruing interest on top of the original £44,000 in a little over 4 years' time, on top of the current property now being worth about £232,000 (at an average estimate) then that £44k is more likely to be £46k already.

I guess as well as having this goal I'm also looking for general advice as to what you might do in my situation and if you could answer these questions too that would be a bonus;

Can I use the income from renting out my spare room (currently let at £4,200 pa) as a factor in obtaining a buy-to-let mortgage? Will it help in any way? (I can't seem to find the answer to this question anywhere!?).

Would it be feasible remortgaging in a year or two to pull out a small (maybe £20k) amount in equity to use as a deposit on a buy-to-let? I'm thinking of doing this when I near the end of my 2-year fixed rate and going onto a new fixed rate as I'm sure there's only one direction BOE base rates will be heading!

If I weren't to go for a buy-to-let based on % increases it would be far more beneficial right now to pay down my mortgage rather than the help-to-buy loan - can anyone think of any reasons as to why this might not be the case? Aside from a crazy increase in local property prices?

Constructive criticism please! There may be some dumb, glaring mistakes in what I've just written - please point them out and how I can get around/mitigate any mistakes and sorry if this all reads a little chaotically I've just quickly bashed it out whilst fresh in my mind.

Additional info:
My salary has increased by £4k pa since last year
I have no dependants/ children etc and am 27 years old
I've got a good chunk of what I've saved working as best for me at the moment as I think I can obtain (all earning 5%+ interest and picking up short-term joining bonuses from index trackers/ p2p lending sites)

Thanks!

anselld

You must pay off the HTB loan before you consider anything else.

YHM

As above, you will breaching the HCA HTB guidelines if you look to rent out the property (potentially already doing so by having a lodger) whilst your equity loan is in place. Remember that equity loan you are talking about releasing from the property, isn't actually yours, its the governments....

As a minimum you need a 20% deposit on a BTL and this will take a while to get there based on the figures you have disclosed.

Gspree

Thanks for the input guys. So it looks like i'll be paying off this first half in one chunk ASAP then

YHM wrote: »

As above, you will breaching the HCA HTB guidelines if you look to rent out the property (potentially already doing so by having a lodger) whilst your equity loan is in place. Remember that equity loan you are talking about releasing from the property, isn't actually yours, its the governments....

As a minimum you need a 20% deposit on a BTL and this will take a while to get there based on the figures you have disclosed.

I looked this up and as long as I'm residing in the property I can rent out a spare room. I can't find anything official on the HTB website (IMO it's one of the least helpfull sites I've ever come across) saying otherwise. But the general consensus on all forums etc is that this is completely legal.

EDIT: And thanks for the 20% deposit info on the BTL mortgage - I had no idea of this!

Thrugelmir

Gspree wrote: »

on top of the current property now being worth about £232,000 (at an average estimate) then that £44k is more likely to be £46k already.

Given that you'll need to find this money to remortgage at some point. Paying down your current mortgage provides a guaranteed return. There's plenty of time to buy a BTL. The beauty of residential property is that there's no tax implications to consider.

dimbo61

So well done on saving £1,000 a month and building that emergency fund.
I would look at the savings rates you can get compared to your mortgage rate.
If you can overpay the mortgage every month while also paying into regular savers. Nationwide offer a 5% saver. Maybe 50/50 so you might be able to pay off half the help to buy loan in 4 years.
You could then look at remortgaging to clear the rest of the loan with a new mortgage.
Consider an offset mortgage new time you remortgage.

anselld

Gspree wrote: »

I looked this up and as long as I'm residing in the property I can rent out a spare room. I can't find anything official on the HTB website (IMO it's one of the least helpfull sites I've ever come across) saying otherwise. But the general consensus on all forums etc is that this is completely legal.

It is legal to take a lodger in a spare room, but that was not what your post was asking about. You were asking about buying a second BTL property whilst retaining the HTB Equity Loan which is clearly against the terms of the HTB scheme.