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Mortgage advice - help required
Technaut
Posts: 38 Forumite
Hi folks,
I’m looking for a bit of advice on property and mortgages.
Currently working my way slowly up the property ladder and want to know if I can be a bit more radical about how I get up the ladder instead of the old fashion buy, sell (take the profit – get a bigger place etc).
At the moment I live in a 1 bedroom flat which cost me £58k, when I bought this I put in £6k of my own savings and have a portable mortgage. Within the next year I want to be able to afford a house and here is what I have calculated.
A flat in the next block to me recently sold for £71k and I hope to get a similar figure. I know that the property market has slowed around here a bit. There is waste ground across from the flat at the moment but Tesco will be building a new store there soon and there will also be a new college and other stores. I am hoping that this will increase the saleability of the property and that the current slowdown will not affect me too much.
Anyway, say that I sell the flat for £71k, if I take away the £52 owed for the mortgage and say about a prudent £3k in fee’s I’d be looking to walk away with about £15 or £16k (roughly). Now if I placed that £16k back into the next property I would be able to afford a mortgage in the range of £61-£66k which with the proceeds of the sale would enable me to buy a 2 or 3 bedroom house around these parts (houses around here that require refurbishing are in the £75-£85k range).
However, it would be much better if there was some way that I could release equity from my flat and put this into the next house and rent out the old flat so that over the coming years the rental income would pay off the mortgage and eventually would be a kind of 2nd income. My current income is £24k - rising to £27k over the next few years.
This is something I am not really sure about doing or even if it is possible, what would you do if you were in my shoes? Any comments or advice? J
I’m looking for a bit of advice on property and mortgages.
Currently working my way slowly up the property ladder and want to know if I can be a bit more radical about how I get up the ladder instead of the old fashion buy, sell (take the profit – get a bigger place etc).
At the moment I live in a 1 bedroom flat which cost me £58k, when I bought this I put in £6k of my own savings and have a portable mortgage. Within the next year I want to be able to afford a house and here is what I have calculated.
A flat in the next block to me recently sold for £71k and I hope to get a similar figure. I know that the property market has slowed around here a bit. There is waste ground across from the flat at the moment but Tesco will be building a new store there soon and there will also be a new college and other stores. I am hoping that this will increase the saleability of the property and that the current slowdown will not affect me too much.
Anyway, say that I sell the flat for £71k, if I take away the £52 owed for the mortgage and say about a prudent £3k in fee’s I’d be looking to walk away with about £15 or £16k (roughly). Now if I placed that £16k back into the next property I would be able to afford a mortgage in the range of £61-£66k which with the proceeds of the sale would enable me to buy a 2 or 3 bedroom house around these parts (houses around here that require refurbishing are in the £75-£85k range).
However, it would be much better if there was some way that I could release equity from my flat and put this into the next house and rent out the old flat so that over the coming years the rental income would pay off the mortgage and eventually would be a kind of 2nd income. My current income is £24k - rising to £27k over the next few years.
This is something I am not really sure about doing or even if it is possible, what would you do if you were in my shoes? Any comments or advice? J
0
Comments
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How much rent are you expecting to get?poppy100
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Between £350 and £400 per month.
The mortgage is currently £330 per month.0 -
Two thoughts - first, if you work on a not-quite-worst case scenario, the rent would barely cover the mortgage. As you'll have to convert to a buy-to-let mortgage, you may find that with the higher risk that most lenders associate with a BTL mortgage, your payments will not really be covered by the rent and that's before you increase the mortgage to grab the cash for the next one. Sounds very risky to me at the moment.
Also, how much are you planning to increase your mortgage by and how much of your current mortgage is outstanding? You may not be able to borrow as much as you'd need for a deposit on a bigger place.0 -
Based on £71k valuation, the highest mortgage you would get would be 85% LTV so £60350. So you would raise about £8k. After fees of about £1k you'd have a deposit of around £7k (assuming you found a free valuation/free legal buy to let re-mortgage)
On a rent of £350 - £400 it would be possible to do this, (only just at £350) if you had a 3 yr fixed rate.
The rent would just about cover the interest payments on the mortgage at 6.79%.0 -
whats wrong with just having a home?0
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