Let to buy?

rosstipha

Hi guys.
I’m 37 currently own a £100k property with around £78k left on the morgatge. I have 12 years left on my morgatge (paying just under £600 a month to keep the term short fixed for 2 years) I find it easy to pay, I’m also able to save £400 a month towards my next property.

I want to move in the next 2-3 years
But if I could I’d like to keep this house and rent it out. Both my neighbours are rentals at around £600 too, usually snapped up quick too.

Considering I don’t want to sell up. What do I do with my £400 a month over the next 3 years
Pay it off the current morgatge or save it to use as a deposit on my next home.
I thought I’d need a cash deposit but my friend said you can let to buy and use your current house as equity?
Lost on me. Can anyone help

Thanks in advance


R

Comms69

rosstipha wrote: »

Hi guys.
I’m 37 currently own a £100k property with around £78k left on the morgatge. I have 12 years left on my morgatge (paying just under £600 a month to keep the term short fixed for 2 years) I find it easy to pay, I’m also able to save £400 a month towards my next property.

I want to move in the next 2-3 years
But if I could I’d like to keep this house and rent it out. Both my neighbours are rentals at around £600 too, usually snapped up quick too.

Considering I don’t want to sell up. What do I do with my £400 a month over the next 3 years
Pay it off the current morgatge or save it to use as a deposit on my next home.
I thought I’d need a cash deposit but my friend said you can let to buy and use your current house as equity?
Lost on me. Can anyone help

Thanks in advance


R

Well you'll be operating a loss in that case...


1: income tax, thats £120 straight off the income (roughly, as you will have some deductible expenses)
2: expenses - whilst deductible as above, there's still a cost involved in repair and maintenance
3: mortgage rate - at the minute you're on a residential mortgage, that will increase if and when you switch to BTL
4: financial pressure, can you really afford to pay two mortgages for upto 6 months??

Pixie5740

Let to Buy mortgages generally require a maximum LTV of 75% meaning you need 25% equity in the property. You don't have 25% equity at the moment, you only have 22% equity at present. This means you will still need to save money towards the deposit for your next home plus money for the higher rate of SDLT plus solicitors fees etc.

sal_III

First thing you should ask yourself is "Do I want to intentionally become a LL?". I suggest you watch several episodes of "Bad tenants, Rogue Landlords" first, and if after that you are still convinced it's a good idea go for it.

Do you have sufficient income to cover 2 mortgages for 6+ months if things go bad with the rental?

The equity in your current place is barely enough for BTL mortgage on it - 22% when the usual requirement is 25+

You don't have equity for deposit on a new house where you plan to live. The "Let to buy" is usually usable if you own your current property outright (or high level of equity) and want to raise a deposit for a new home, without selling the old.

rosstipha

Sorry my intentions would be to reduce my current morgatge payments when I choose to rent it out. Say 18 years for that value will be half of what I pay now.

I’d have 9 years left and around 20k of savings in the bank.

Comms69

rosstipha wrote: »

Sorry my intentions would be to reduce my current morgatge payments when I choose to rent it out. Say 18 years for that value will be half of what I pay now.

I’d have 9 years left and around 20k of savings in the bank.

But would they lend to you at those rates?


BTL attract higher rates.

rosstipha

Pixie5740 wrote: »

Let to Buy mortgages generally require a maximum LTV of 75% meaning you need 25% equity in the property. You don't have 25% equity at the moment, you only have 22% equity at present. This means you will still need to save money towards the deposit for your next home plus money for the higher rate of SDLT plus solicitors fees etc.

Thanks I’m not looking to do this now. More on 3 years when I have more paid off.

My question really is do I save the additional 400 a month as a deposit or do I put it off the current house giving me a much bigger equity?

sal_III

rosstipha wrote: »

Sorry my intentions would be to reduce my current morgatge payments when I choose to rent it out. Say 18 years for that value will be half of what I pay now.

I!!!8217;d have 9 years left and around 20k of savings in the bank.

Doubling the mortgage term doesn't result in halving the monthly payment, even at the current low rates, god knows what will happen in 3 years. Competitively ignoring the difference between residential and BTL rates

rosstipha

sal_III wrote: »

Doubling the mortgage term doesn't result in halving the monthly payment, even at the current low rates, god knows what will happen in 3 years. Competitively ignoring the difference between residential and BTL rates

I’m not ignoring anything I’m here for advice on should I save or pay off.
Of course we don’t know where we are in 3 years.
Not very friendly this community is it.

loveka

I would save it as a deposit myself. You will need a large deposit for a let to buy mortgage.

You could run this by a broker though?

I have just done let to buy. I spoke to 2 brokers who crunched the numbers for me. They can do it in 5 minutes. The advantage to them is that you might use them when you do the mortgage.

rosstipha

Thank you Lovenka