best rate buy to let

cam5

hi every one my buy to let fixed rate is ending early next year the morgage is 150,000 the house has just been valued at 250,000 when i took out the morgage i decided to go with interest only, for 2 years then changes to repayment, i have just recieved a letter from the morgage company to say that the morgage will be 1050 from next year, the rent i get is 850 p,m.
how ever i have 30.000 pounds cash to play with at the moment sitting in my bank, i need some advice please im thinking to use this to pay off the morgage wich would then bring it down to 120.000 and at best i could get a repayment morgage of 770 m,p which would cover the morgage and a little bit left over or do i go with the interest only again,
my long term plan is to keep this house.
sorry for the long post
thanks in advance for any replies

dunstonh

Time to sell the asset isnt it? Rental yield is only 4.08%. Even less after tax if you do what you plan to do by reducing the mortgage.

cam5

yeh thanks for that, but im looking for some constructive advice

hearts

I would continue with the Interest Only.

dunstonh

cam5 wrote: »

yeh thanks for that, but im looking for some constructive advice

dumping a low yielding asset is contructive advice.

What you want to do is going to increase your tax liability reducing the yield below 4%. When you look at the risk involved with this investment the potential return doesnt match it. Once the yield falls below 5% you have to question the viability of the property.

poppy10_2

cam5 wrote: »

the rent i get is 850 p,m.
how ever i have 30.000 pounds cash to play with at the moment sitting in my bank, i need some advice please im thinking to use this to pay off the morgage wich would then bring it down to 120.000 and at best i could get a repayment morgage of 770 m,p which would cover the morgage and a little bit left over

Your sums are wrong. You've forgotten to factor in the income you are currently earning from the interest on that £30,000 in the bank, which you will lose if you plough it into the mortgage. That would be around £110 per month you'll lose.
Add that to your new repayment mortgage of £770 gives you £880, meaning you will still be losing money each month if your rental income is only £800. :T

cam5

my ifa has told me that i can get a morgage for 130.000 fixed two years for 750 p.m or morgage for 150.000 for 950 p.m so for 200 less a month on a repyment seems good, considering the rent i will revieve p.m is 850. ok the yield isnt as good as i would like but its good enough, in this day and age buy to let investors are never going to get the yield they wand unless they are putting down a substantial deposit, to the people that are saying sell, why !!!! to sell means i would be left with no investment , that dont sound to good to me with the rent covering the morgage on repayment surly thats what every one wants in this day

A_Nice_Englishman

I tend to agree with dunstonh and would sell,take the profit, and reduce my exposure to what most people think is likely to be a weak market at best.

If I wanted to keep the £100K in residential property I would buy a more expensive house to live in myself. At least that way I'd have a nicer place to live in and not have to worry about future CGT liabilities. However it might be better to diversify, depending on what other assets yo have, of course.

cam5

to diverisify is a bigger gamble in its self, at least with this propert i know where i stand ithink ill go with my ifa advice which is to reduce the morgage with the money i have gl to all...

mystic_trev

Go for it Cam, there's never been a better time to Invest in BTL :rolleyes: - Why don't you go on to www.singingpig.co.uk - You'll get plenty of back slapping advice over there!

Gorgeous_George

There would be costs involved with selling and again if you choose to re-buy later. It still seems that selling is the sound way ahead.

Is the rent set at the right level? What prospect is there for future rent rises? If you go for a 5 year fix, what do YOU think its value will be in 5 years' time (the next review point)?

There is little value in reducing the mortgage by converting to repayment because of the income tax issue. Any repayment could be saved elsewhere in tax-free and/or tax-efficient savings vehicles.

I prefer life of mortgage base rate trackers.

GG