Buy to Let Borrow dilemma

Makite

Hi all

I've have a dilemma and really dont know what to do.

We have the opportunity to buy a family's house for £140K which we would rent out. To fund this I am getting a £105K buy to let mortgage & £35K mortgage on my residential property. No issues so far.  However, my family member is saying she would be giving me back £40K as part of inheritance whilst she's still alive. I'd probably use £20K of this for home improvements leaving £20K 'spare'.

The thing is I have £15K in savings + the £20K from above would be £35K in saving having just taken 2 mortgages for £140K. It seemed straight forward at first but now I'm getting myself in a muddle of the best way to fund to purchase.

What do you think would be the better course of action here? 

Thank you in advance.

diystarter7

Hello
The best way IMO, is to retain a decent cash sum, and I'd not be comfy with less than 10k for a rainy day.

Interest rates can go up and will, cost of repairs going up, risk of bad T's not paying rent, possible eviction costs, the possibility of you losing work, becoming ill for a few months, other unexpected large bills ie car breaking down big time, your boiler goes and as does in the rental, roof leaks etc etc.

so IMHO, keep back a decent amount of cash. Once everything is up and go, reconsider your next steps.

kingstreet

You are buying a property from a member of your family?

Where is that family member going to live afterwards?

Makite

Yes buying from a family member who is going to live with another family member in their home.

tightauldgit

Makite said:

Hi all

I've have a dilemma and really dont know what to do.

We have the opportunity to buy a family's house for £140K which we would rent out. To fund this I am getting a £105K buy to let mortgage & £35K mortgage on my residential property. No issues so far.  However, my family member is saying she would be giving me back £40K as part of inheritance whilst she's still alive. I'd probably use £20K of this for home improvements leaving £20K 'spare'.

The thing is I have £15K in savings + the £20K from above would be £35K in saving having just taken 2 mortgages for £140K. It seemed straight forward at first but now I'm getting myself in a muddle of the best way to fund to purchase.

What do you think would be the better course of action here? 

Thank you in advance.

Well it depends really. How much cash are you comfortable having in the bank in case of emergencies or changes in circumstances? Are the mortgages already agreed and set, what costs would be involved in amending them? Can you take the mortgages out and repay them early, what costs would be involved in that. 

In theory the 'best' thing to do would be to take whatever 'spare cash' you have and use that to fund the purchase by reducing the most expensive mortgage by the same amount. But it may just be a load of hassle to do so and depending on your mortgage rates and savings rates the difference may only be a few hundred £ a year. So don't drive yourself mad thinking about it. 

Makite

Thanks for the replies, appreciated.