Let to buy

PeterJames123 · 5 December 2021 at 8:17PM

Hi,

We have a property worth £260k with 90k remaining but have outgrown it and looking to upsize. The mortgage is currently £420 a month.

The houses we are looking at are around £325k

We were thinking about selling up however if we were to sell we would be left with around £137k after solicitors fees, stamp duty, furniture and on a £325k house. If we then put that down as a deposit our mortgage repayments would be £619 a month.

Alternatively I had a thought of changing our current properly into let you buy, rent it for £1200 a month as it’s in an area where the houses rent instantly.

If we were to do that.

We can release £97500 but be left with £64k after £18k stamp duty and £15 for. Put £64k down as a deposit and be left with a mortgage of £870 however the other property would be renting for £1200. We would take £450 to payback the bank, £100 management fee. We would still be left with £650 which we could then put towards our new mortgage of £870 bringing it down to £220 a month.

I’m not sure if my numbers are correct and if there is something obvious I am missing. Our estate against said houses in our area instantly go. Looking forward to hearing your thoughts ok this or if you feel there is a better solution. Thanks.

SDLT_Geek · 5 December 2021 at 8:35PM

PeterJames123 said:

Hi,

We have a property worth £260k with 90k remaining but have outgrown it and looking to upsize. The mortgage is currently £420 a month.

The houses we are looking at are around £325k

We were thinking about selling up however if we were to sell we would be left with around £137k after solicitors fees, stamp duty, furniture and on a £325k house. If we then put that down as a deposit our mortgage repayments would be £619 a month.

Alternatively I had a thought of changing our current properly into let you buy, rent it for £1200 a month as it’s in an area where the houses rent instantly.

If we were to do that.

We can release £97500 but be left with £64k after £18k stamp duty and £15 for. Put £64k down as a deposit and be left with a mortgage of £870 however the other property would be renting for £1200. We would take £450 to payback the bank, £100 management fee. We would still be left with £650 which we could then put towards our new mortgage of £870 bringing it down to £220 a month.

I’m not sure if my numbers are correct and if there is something obvious I am missing. Our estate against said houses in our area instantly go. Looking forward to hearing your thoughts ok this or if you feel there is a better solution. Thanks.

On buying a £325,000 house, if in England, the stamp duty land tax would be £16K rather than £18K. Is the purchase to be in England?

PeterJames123 · 5 December 2021 at 8:39PM

SDLT_Geek said:

PeterJames123 said:

Hi,

We have a property worth £260k with 90k remaining but have outgrown it and looking to upsize. The mortgage is currently £420 a month.

The houses we are looking at are around £325k

We were thinking about selling up however if we were to sell we would be left with around £137k after solicitors fees, stamp duty, furniture and on a £325k house. If we then put that down as a deposit our mortgage repayments would be £619 a month.

Alternatively I had a thought of changing our current properly into let you buy, rent it for £1200 a month as it’s in an area where the houses rent instantly.

If we were to do that.

We can release £97500 but be left with £64k after £18k stamp duty and £15 for. Put £64k down as a deposit and be left with a mortgage of £870 however the other property would be renting for £1200. We would take £450 to payback the bank, £100 management fee. We would still be left with £650 which we could then put towards our new mortgage of £870 bringing it down to £220 a month.

I’m not sure if my numbers are correct and if there is something obvious I am missing. Our estate against said houses in our area instantly go. Looking forward to hearing your thoughts ok this or if you feel there is a better solution. Thanks.

On buying a £325,000 house, if in England, the stamp duty land tax would be £16K rather than £18K. Is the purchase to be in England?

It is yes.

grumiofoundation · 5 December 2021 at 8:43PM

PeterJames123 said:

Hi,

We have a property worth £260k with 90k remaining but have outgrown it and looking to upsize. The mortgage is currently £420 a month.

The houses we are looking at are around £325k

We were thinking about selling up however if we were to sell we would be left with around £137k after solicitors fees, stamp duty, furniture and on a £325k house. If we then put that down as a deposit our mortgage repayments would be £619 a month.

Alternatively I had a thought of changing our current properly into let you buy, rent it for £1200 a month as it’s in an area where the houses rent instantly.

If we were to do that.

We can release £97500 but be left with £64k after £18k stamp duty and £15 for. Put £64k down as a deposit and be left with a mortgage of £870 however the other property would be renting for £1200. We would take £450 to payback the bank, £100 management fee. We would still be left with £650 which we could then put towards our new mortgage of £870 bringing it down to £220 a month.

I’m not sure if my numbers are correct and if there is something obvious I am missing. Our estate against said houses in our area instantly go. Looking forward to hearing your thoughts ok this or if you feel there is a better solution. Thanks.

You haven’t included income tax in your calculations.

Do you want to start a residential letting business?

Do you have the funds to pay the mortgage for say 12-18 months if. You don’t get any rent, plus the 0000s for legal and repair costs? (This is obviously worst case scenario but better to plan for the worst)

Considering the 10k cost in starting this business (the +3% SDLT) even if you could clear say 500 a month after taxes costs that’s 20 months to get this cost back.

PeterJames123 · 5 December 2021 at 9:07PM

grumiofoundation said:

PeterJames123 said:

Hi,

We have a property worth £260k with 90k remaining but have outgrown it and looking to upsize. The mortgage is currently £420 a month.

The houses we are looking at are around £325k

We were thinking about selling up however if we were to sell we would be left with around £137k after solicitors fees, stamp duty, furniture and on a £325k house. If we then put that down as a deposit our mortgage repayments would be £619 a month.

Alternatively I had a thought of changing our current properly into let you buy, rent it for £1200 a month as it’s in an area where the houses rent instantly.

If we were to do that.

We can release £97500 but be left with £64k after £18k stamp duty and £15 for. Put £64k down as a deposit and be left with a mortgage of £870 however the other property would be renting for £1200. We would take £450 to payback the bank, £100 management fee. We would still be left with £650 which we could then put towards our new mortgage of £870 bringing it down to £220 a month.

I’m not sure if my numbers are correct and if there is something obvious I am missing. Our estate against said houses in our area instantly go. Looking forward to hearing your thoughts ok this or if you feel there is a better solution. Thanks.

You haven’t included income tax in your calculations.

Do you want to start a residential letting business?

Do you have the funds to pay the mortgage for say 12-18 months if. You don’t get any rent, plus the 0000s for legal and repair costs? (This is obviously worst case scenario but better to plan for the worst)

Considering the 10k cost in starting this business (the +3% SDLT) even if you could clear say 500 a month after taxes costs that’s 20 months to get this cost back.

Hi,

no we don’t want to start any kind of business. We simply want to use our current property’s rent to help pay for our new properties mortgage.

We have £10k saved up as a back up rent if the property does not rent. We do know that our 3 bed current house is a highly rentable area and estates have said that the houses usually rent within 6-10 days of them being listed due to the location and the fact they have private parking, and in a relatively new area being built in 2010.

grumiofoundation · 5 December 2021 at 9:14PM

PeterJames123 said:

grumiofoundation said:

PeterJames123 said:

Hi,

We have a property worth £260k with 90k remaining but have outgrown it and looking to upsize. The mortgage is currently £420 a month.

The houses we are looking at are around £325k

We were thinking about selling up however if we were to sell we would be left with around £137k after solicitors fees, stamp duty, furniture and on a £325k house. If we then put that down as a deposit our mortgage repayments would be £619 a month.

Alternatively I had a thought of changing our current properly into let you buy, rent it for £1200 a month as it’s in an area where the houses rent instantly.

If we were to do that.

We can release £97500 but be left with £64k after £18k stamp duty and £15 for. Put £64k down as a deposit and be left with a mortgage of £870 however the other property would be renting for £1200. We would take £450 to payback the bank, £100 management fee. We would still be left with £650 which we could then put towards our new mortgage of £870 bringing it down to £220 a month.

I’m not sure if my numbers are correct and if there is something obvious I am missing. Our estate against said houses in our area instantly go. Looking forward to hearing your thoughts ok this or if you feel there is a better solution. Thanks.

You haven’t included income tax in your calculations.

Do you want to start a residential letting business?

Do you have the funds to pay the mortgage for say 12-18 months if. You don’t get any rent, plus the 0000s for legal and repair costs? (This is obviously worst case scenario but better to plan for the worst)

Considering the 10k cost in starting this business (the +3% SDLT) even if you could clear say 500 a month after taxes costs that’s 20 months to get this cost back.

Hi,

no we don’t want to start any kind of business. We simply want to use our current property’s rent to help pay for our new properties mortgage.

We have £10k saved up as a back up rent if the property does not rent. We do know that our 3 bed current house is a highly rentable area and estates have said that the houses usually rent within 6-10 days of them being listed due to the location and the fact they have private parking, and in a relatively new area being built in 2010.

If you rent out a property you are starting a business and you need to pay tax on any profit.

Profit includes any equity being paid off. You cannot offset mortgage interest against profits, instead you get a tax credit worth 20% of the mortgage interest.

You also need to aside by all the rules and regulations of being a landlord. Even if you use an agent you need to make sure that they (ie you as they are your agent) are abiding by the rules. It will be you that suffers if they make a mistake - eg not protecting deposit.

SpiderLegs · 5 December 2021 at 9:14PM

PeterJames123 said:

…

We can release £97500 but be left with £64k after £18k stamp duty and £15 for. Put £64k down as a deposit and be left with a mortgage of £870 however the other property would be renting for £1200. We would take £450 to payback the bank, £100 management fee. We would still be left with £650 which we could then put towards our new mortgage of £870 bringing it down to £220 a month.

I’m not sure if my numbers are correct and if there is something obvious I am missing. Our estate against said houses in our area instantly go. Looking forward to hearing your thoughts ok this or if you feel there is a better solution. Thanks.

Voids + tax + maintenance costs?

I think I’ve missed something. Your current mortgage is £420, but you are going to release an additional 97k and that mortgage only increases to £450? Doesn’t your £1200 income have to now service a 180k mortgage?

canaldumidi · 5 December 2021 at 9:14PM

PeterJames123 said:

grumiofoundation said:

PeterJames123 said:

Hi,

We have a property worth £260k with 90k remaining but have outgrown it and looking to upsize. The mortgage is currently £420 a month.

The houses we are looking at are around £325k

We were thinking about selling up however if we were to sell we would be left with around £137k after solicitors fees, stamp duty, furniture and on a £325k house. If we then put that down as a deposit our mortgage repayments would be £619 a month.

Alternatively I had a thought of changing our current properly into let you buy, rent it for £1200 a month as it’s in an area where the houses rent instantly.

If we were to do that.

We can release £97500 but be left with £64k after £18k stamp duty and £15 for. Put £64k down as a deposit and be left with a mortgage of £870 however the other property would be renting for £1200. We would take £450 to payback the bank, £100 management fee. We would still be left with £650 which we could then put towards our new mortgage of £870 bringing it down to £220 a month.

I’m not sure if my numbers are correct and if there is something obvious I am missing. Our estate against said houses in our area instantly go. Looking forward to hearing your thoughts ok this or if you feel there is a better solution. Thanks.

You haven’t included income tax in your calculations.

Do you want to start a residential letting business?

Do you have the funds to pay the mortgage for say 12-18 months if. You don’t get any rent, plus the 0000s for legal and repair costs? (This is obviously worst case scenario but better to plan for the worst)

Considering the 10k cost in starting this business (the +3% SDLT) even if you could clear say 500 a month after taxes costs that’s 20 months to get this cost back.

Hi,

no we don’t want to start any kind of business.

But you are planning to do just that. Being a landlord and letting out a property IS a business. With business expenses, regulations to comply with, and taxes to pay.