What are my options? Want new home, paid off flat already.

00ec25

mrlukeduke wrote: »

Or as @AnotherJoe you say I can rent for a while elsewhere to generate some record of consistent income by letting my current flat and consider selling in future.

except that most lenders will not count rental income towards ability to pay off a mortgage on the place you are living in.

Typically they see a LTB (or BTL) loan on a property as one that "wipes its face", ie the income covers the costs of the loan on that property, but is not included in your overall income assessment regarding affordability of another property

saajan_12

mrlukeduke wrote: »

Hi all, I need some guidance about my options going forward as I try to work up the property ladder.

I own outright a very small 1-bed flat in Worthing, Sussex, worth approx £180k. I bought it with my savings/investments money so I have no loans/liabilities. Now my gf and I want to move to a nice place, a "home" if you will, as here is tiny!- okay, why not sell the flat and buy a new home? You'll have ~£165k deposit (sale proceeds in current flat less costs)

A frend mentioned a second mortgage, and said you could also look into using your flat as "collateral" or equity on a loan for a new home. - You can get a Let to Buy mortgage on your current flat. Your max borrowing would be capped at the LOWER of 75% of value (£135k) and the loan amount you can fund by expected rent covering monthly payments. Note your monthly payments would need to cover the higher BTL/LTB interest rates (usually residential mortgages are cheaper) and the expected rent would be what the lender assess based on averages in the area etc, so if you get a higher rent through short term letting or taking in sharers etc, that woudn't help your case.

I'm currently out of work, but have ~£100k savings. I could use this as well, but I want to invest some of it and/or start a business next year. - Then you pretty much won't get a mortgage. My gf is looking for a new job and currently works p/t, with savings of maybe £25k at a push. I could use my flat as a rental in future, my gf is an Airbnb wizz.- AirBnB might get you higher rent per day, but there is a high risk of voids and you are more involved. Also if its a leasehold flat, your freeholder may not allow short lets.

What are my options here? I've seen a place I really like for £280k. Could I put down part deposit, then get a loan using my flat to secure it? What pitfalls are there I need to be wary of? - you have £100k + GF's £25k + LTB loan £135k = £160k. You'd need a further ~£40k from savings or a residential mortgage on the new property for the 280k purchase and costs, plus a job else you won't get either mortgage.

Thanks.

mrlukeduke wrote: »

Thanks both – ok I get you now, that's what I wanted to know basically. Really appreciate the figures, I didn't know that. This is what I wanted to learn about. If you don't know about SDLT, suggest you read some of G_M's sticky's or do some reading on house buying and being a landlord.. there's lots more to learn.

So it seems possibly the best bet is just to start work again once I'm able to (should be able to find something 25k+ a year locally as have the experience), then approach a mortgage advisor. - you'll typcially need 3-6 months income history and be outside any probation periods before you apply for a mortgage.

Or as @AnotherJoe you say I can rent for a while elsewhere to generate some record of consistent income by letting my current flat and consider selling in future. - the assessment of rent income
a) won't count for your residential mortgage for the extra ~£40k
b) will be based on expected average rents, even if you have evidence of higher than expected rental income for a short period.

Read lots and then come back. It'll all come down to needing a job to support a mortgage if you want to keep the flat. However remember being a landlord is timeconsuming especially for AirBnB and if you want to start a business and you can make a comparable return investing elsewhere without the extra stamp duty etc.

I would recommend sell the flat and buy your new home. You can stay mortgage free and if you build up any savings again, you can invest elsewhere or get going on your new business more comfortably as your outgoings are minimal.

AnotherJoe

mrlukeduke wrote: »

Or as @AnotherJoe you say I can rent for a while elsewhere to generate some record of consistent income by letting my current flat and consider selling in future.

For the avoidance of doubt, "consistent income" wasn't behind my suggestion, if by that you mean the income could be used to justify a mortgage on a new house.

What was behind my sugegstion was, try being a LL for a couple of years to see if you can deal with the hassle and understand the real costs, and only then try to buy a new residence "from scratch" rather than using the equity from selling that flat to minimize your mortgage.
IMNSHO, the maths on being a LL are very dodgy these days, its not like 10,20,30 years ago when house price inflation was your friend and provided much of the gains long term. When house prices are falling or even stationary, with all the new laws and likely more to come, that makes it financially mediocre at best.

burtbot1

Also with AirBNB, you can only do this a few times a year, in order to prevent people doing this all year round. So you could do that here and there, but not on a long term/continual basis.

tlc678910

AnotherJoe wrote: »

the maths on being a LL are very dodgy these days, its not like 10,20,30 years ago when house price inflation was your friend and provided much of the gains long term. When house prices are falling or even stationary, with all the new laws and likely more to come, that makes it financially mediocre at best.

I agree that if you need to have a sizeable mortgage on your let property keeping the property is financially pointless unless you expect house price inflation.

If the house price remains static you will have a minimal income from the let from which to recover extra stamp duty, insurance, voids and repairs/maintenance. If the property requires an investment like a new boiler/kitchen or bathroom at some point it will take a long time to recover the money. If you have a repayment mortgage it is very likely that you will have to subsidise the cash flow of the let property from your own income affecting your quality of life in your new home.

If you expect prices to drop it is worse than pointless to keep the property as your total worth if it drops would be less than if you had just sold up. The price drops of 2008 have taken many years to recover and still haven’t recovered in places.

Don’t assume that there is easy money to be made without carefully thinking through your numbers and how likely you think different house price scenarios are.

Tlc

Niv

burtbot1 wrote: »

Also with AirBNB, you can only do this a few times a year, in order to prevent people doing this all year round. So you could do that here and there, but not on a long term/continual basis.

Please explain this, I am not aware of this restriction. What measures are in place to stop someone airBNBing their place throughout the year?

AdrianC

You have £180k of equity in your current flat, and £125k of savings. You want to buy a £280k property. You have zero hope of getting any mortgage, since neither of you have any significant demonstrable income.


There's an obvious way forward here, and it doesn't involve AirBnB.

seatbeltnoob

AdrianC wrote: »

You have £180k of equity in your current flat, and £125k of savings. You want to buy a £280k property. You have zero hope of getting any mortgage, since neither of you have any significant demonstrable income.


There's an obvious way forward here, and it doesn't involve AirBnB.

OP isn't an idiot, idiots don't gather £125K in savings. So stop talking like he's an idiot.

OP clearly stated reasons why they don't want to sell the property they have and can't spend the savings they have on buying a bigger property.

I don't know why you post on forums talking down to people in a condescending way and glossing over facts presented by users which made your advice invalid.

Such as the case in my flex pipe issue in the motoring board where you assumed that I was going to get a welder to weld together the flex pipe. I went no where near inferring this. When I questioned why you put words in my mouth you just re-iterated thatI said that when I didn't. Could you now please go back to the thread and show me where I said that or RETRACT your statement which you have misled other posters as well.

Your reply in my thread have helped me ZERO amount and have helped the OP ZERO amount in this thread too.

xylophone

Why not work while considering your options for starting a business?

And why not sell the flat and use your savings to buy the new home?

AdrianC

seatbeltnoob wrote: »

OP clearly stated reasons why they don't want to sell the property they have and can't spend the savings they have on buying a bigger property.

Which is all very well and lovely, but reality means that they have no other choice.


Apart from anything else, it's going to take a fair few AirBnB bookings to make up the £8,400 of +3% SDLT that'd be payable on the new purchase if they wish to own both properties.

£180k + £125k = £305k in current assets.
They want to own £180k + £280k + £125k = £585k in assets... With no demonstrable income to back the required borrowing up.

At absolute most, they'd be able to borrow ~75% against the £180k property as a BtL mortgage (at higher rates than residential, obv). That's £135k. Add all of the £125k savings to that, and that's still £20k short of the purchase price of the new property, even before considering the purchasing costs - call it £35k short, by the time they've been taken into account, including the SDLT hike.



Is there any business plan to support the AirBnB lettings funding the borrowings? Is a "very small 1bed flat in Worthing" particularly desirable on AirBnB? What daily rent, after fees and costs, and what occupation %age?