Mortgage dilemma

enthusiasticsaver

The only miracle unfortunately which would help you is your property increasing in value again.

For you to have an asset at the end of 17 years you will need to go on to a repayment mortgage and have it cleared by then. In the meantime of course you also need to maintain the property, have it let out all the time as you will be relying on the rent to pay the mortgage and you are liable for tax on the rent received. BTL is no where near as lucrative as it was and effectively you have not been paying the mortgage off so the property is not yours but the banks.

Your first problem is if the property is worth £150k and you need a mortgage of £131k that gives a LTV percentage of 87% and all the main BTL mortgage providers insist on at least a 20% deposit so you would need to reduce the mortgage to £120k by using some of your savings.

An initial search on BTL mortgages gives a rate of 2.59% for 2 years on a discounted rate and a monthly repayment of £727 over 17 years.

To get £120k mortgage you will need a gross income of around £30k per annum. Yours is barely £20k so I very much doubt this will be possible. It makes no difference if you have always made payments on time or have a good credit record. You will not pass the affordability checks as there is no guarantee that rates will stay this low forever.


My advice would be put this down to experience and sell up. Your Dad should not have given your ex £17k and if you sell at the £150k expected you will just walk away with £19k less costs and any money you have to give your Dad but at least you would be rid of the headache and stress. As you have seen there is no guarantee that property prices increase indefinitely. Those days are over in lots of areas in the country.

Lynith72

I will sit down with dad tomorrow and go through it. I appreciate everyone's advice and lots of thanks to enthusiasticsaver. I've been in one hell of a mess. Not knowing which way to turn. Hopefully dad can see from all the advice I've been given and we can move forward.... Thank you everyone x

enthusiasticsaver

Good luck and I hope you find a way forward. Although this is stressful for you and disappointing the BTL has not turned out the way you thought it would, you have assets, the rent is covering the mortgage at the moment and should you decide to sell you are not in negative equity.

getmore4less

How old are your sons?
If they want an inheritance they could contribute.

£650pm rent on £150k is gross yield of 5.2% not too tempting for an investor.

£150k £133k mortgage LTV 89% LTV

You say your rent just covers the mortgage, what rate is that?

BISCUIT1

Could you and your partner live in it and sell their house and wait it out for a price rise so you are not taking the loss?

Lynith72

My rate is 5.5 TMB no longer trade as lenders.

enthusiasticsaver

At that rate then it is a priority to get rid of the mortgage. How are the bonds and stocks and shares isas performing? I might be tempted to use some of that to get the mortgage down to a level you can afford on your pension. I heard that some mortgage companies are starting to lend up to older ages like 80 or 85 so a repayment mortgage might then be feasible for you. Nationwide is doing one. The maximum on your income if they take the rent into account though would be around £83k so you would need to use virtually all your savings to get it down to that level. Why not get it valued and explore putting it up for sale again?

Lynith72

They are doing okay. About 40,000 in isa and 22000 in bonds. But know where near enough to pay the mortgage off. Thank you for the advice.

ViolaLass

But if you used the S&S and bonds money to reduce the mortgage, you might be able to get a better deal for the amount left.

getmore4less

To give more BTL choices a better LTV

£150k £133k mortgage LTV 89% LTV

For these LTV you need to find(+ costs)
80% £13,000
75% £20,500