Buying a second home/ Renting out old one

Carl2510

Hi all, first time posting, basically I bought a house two years ago, to get on the property ladder I bought the house for 120K me and my brother are both on the mortgage. Basically my idea was to rent it out in a couple more years so I’ve just remortgaged and got a cheaper deal on another two year fixed. My question is am I best of selling it on in two years time as I’ve found if I want another house which I would like to be in the region of 150/180K I would be paying a stupid amount of stamp duty tax Upto nearly 7K on a house worth 180K am I best of selling to just avoid this and hopefully get some money back for the house I bought, will I be treated differently by mortgage lenders even though I’ll be buying my second house with my savings and not using any equity from this house? I don’t want to be punishing with a high interest rate just because I’ve got another house I’m on minimum wage and I’m not like these other landlords who snap up property to max out there profits just wanted a nice little bit of extra income to help in the future. All help is appreciated.

csgohan4

Some HTB schemes have clear definitions of what a FTB is, but if your buying an old house it would not matter if you have sold your house and therefore no extra stamp duty to pay


Having a BTL on minimum wage is dangerous and you risk void periods, eviction costs e.t.c. I would get rid of it imo

Carl2510

When I pur it up for buy to let it will be in my name and my brothers so shouldn’t be a problem I thought as he’s on 26k a year.

I just want to know do lenders give you worse deals if you already have a house that your renting? I will be offering at least 20% on my next house if not more if I find a cheap enough one I like, but as I now know I’ll be stung with this stamp duty that will take a large sum out of my savings.

Pixie5740

Carl2510 wrote: »

When I pur it up for buy to let it will be in my name and my brothers so shouldn’t be a problem I thought as he’s on 26k a year.

I just want to know do lenders give you worse deals if you already have a house that your renting? I will be offering at least 20% on my next house if not more if I find a cheap enough one I like, but as I now know I’ll be stung with this stamp duty that will take a large sum out of my savings.

It depends on whether the BTL is wiping its own face or not. If it is paying for itself then it shouldn't impact your affordability when getting another mortgage.

I think trying to purchase a £180k property with a 20% deposit when you're earning NMW is going to be unrealistic in terms of affordability. Assuming your working 40 hours a week that a gross annual income of £16,286.40 and you're looking at a £144k mortgage which would be almost 9 times your annual income.

FYI you are exactly like the other landlords because you are also letting property in order to make money. There is nothing wrong with that but there is no need to pretend that you are somehow better than the others.

Carl2510

I’ll be buying my next property with my gf, so we will have two incomes to get a higher borrowing, she’s an apprentice atm at dental practise so by next year she will be qualified. I’m currently in line for a pay rise to about £10.46 so I’ve worked it out on that, for two years time. Which from what I’ve seen they would be willing to lend Upto 180K that is my limit anyway for a house I don’t want to be spending more than that. But I also don’t want to make my life harder if I’m going to be crushed with a stupid interest rate on my new home just to keep one I’m renting out. I would like to keep the rented one as in a few more years hopefully prices have gone up and I can sell it.

Pixie5740

Who knows what interest rates will be doing 2 years from now.

John_Deer

I have a couple of the buy to let properties and one of my friends who is a financial adviser for high net worth individuals mentioned a few interesting points that now question my judgement over owning buy to lets long term. Basically, he implied that if the money was with a Wealth management company , then over the last 10 years , then would have made you 10 percent plus every year. It's not to say, things will carry on like that in the future and we have had some troubled times in the world economy over the last few years and if the UK or Europe is doing badly,. it doens't mean than Asia etc isn't growing anymore. He works for Hargreeves but I know this is true as we have our pension with Quilter and then have done the same.
Now what he was suggesting was if they utilised your ISA allowances every year (or two lots of you are married), then the return you would get, would be tax free (within ISA wrapper ) along with Capital gains etc plus you don't have the problem of the govt. constantly screwing up buy to let landlords. When you take off costs from your rental yields and tenants rights etc, it's becoming not as attractive asset class as others. I would advise spreading your risk in multiple assets classes with property being one of them but I for sure, will be looking at more than just property.

Carl2510

Would I be better off securing a second mortgage through my current one as a secured loan or would they prefer I put down a deposit on my next house which I want to live in through the savings I’ll have in the next couple of years?

Pixie5740

Carl2510 wrote: »

Would I be better off securing a second mortgage through my current one as a secured loan or would they prefer I put down a deposit on my next house which I want to live in through the savings I’ll have in the next couple of years?

Nobody knows what the mortgage market is going to be like in 2 years time. What is applicable now might not be applicable then and not all lenders are alike. As it stands at the moment you jointly own the rental property with your brother so if you want a second mortgage secured against the rental property then you will need to borrow the money jointly with your brother, would he agree to this? There is also a limit to how much equity you can release from the rental property.

What are your brother's longer term plans for the rental property?

Carl2510

He is due to have a baby in a few months so Is also wanting to rent it out, as he will probably go into renting with his girlfriend.

So will we both be taxed in income generated from renting it out. And am I allowed to secure a loan against my current mortgage even if my brother won’t be on the new house deed.

Pixie5740

Carl2510 wrote: »

He is due to have a baby in a few months so Is also wanting to rent it out, as he will probably go into renting with his girlfriend.

So will we both be taxed in income generated from renting it out. And am I allowed to secure a loan against my current mortgage even if my brother won’t be on the new house deed.

You will not be securing a loan against your current mortgage, the loan will be secured against the property. As the property is jointly owned the second loan will also need to be in joint names meaning you each will have joint and several liability for the debt. The fact that you want to use that money to purchase another property that won't have your brother named on the deeds is irrelevant.

This is very basic stuff. Are you sure you are going to cope with becoming a landlord and complying with all the relevant legislation?