Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • billy2shots
    • By billy2shots 10th Nov 18, 8:03 AM
    • 239Posts
    • 256Thanks
    billy2shots
    Help. Using home to fund a house purchase
    • #1
    • 10th Nov 18, 8:03 AM
    Help. Using home to fund a house purchase 10th Nov 18 at 8:03 AM
    Current situation

    - Mortgage free on a home with a value of circa £325-£350k

    - 36 years old , married with 2 children.

    -Household Income £56k per year

    - would like to buy new property currently for sale at £425k

    Objective

    - Purchase the second property which will be the family home and rent out current property.

    - Be as tax efficient as possible

    Challenges

    - Increased stamp duty rate for purchase of second property. Exaggerated because I'm doing things backwards and buying a more expensive property as a second home.

    - Total borrowing would be £450k
    - I would effectively need a £200k mortgage on property 1 valued at £325k and £250k mortgage on property 2 valued at £425k. With my income (and potential rent income from property 1, £1k a month before tax) I'm not sure I would secure the finance.



    Help!!!

    Does what I'm proposing make sense and is it realistic?

    How would I even go about something like this?

    If it is feasible, are there more tax efficient ways to go about things than others.

    In my mind it's simple. Sell property 1 and buy property 2 meaning a much smaller total mortgage and less stamp duty. The Mrs however is very reluctant to sell the home where we married and the kids were born.
    Last edited by billy2shots; 10-11-2018 at 8:06 AM.
Page 1
    • Mutton Geoff
    • By Mutton Geoff 10th Nov 18, 8:29 AM
    • 1,343 Posts
    • 1,493 Thanks
    Mutton Geoff
    • #2
    • 10th Nov 18, 8:29 AM
    • #2
    • 10th Nov 18, 8:29 AM
    Why complicate your life, increase your debt and force yourself into a business you donít know much about for the sake of nostalgia?
    Compensation/Refunds - £4,655 | Stooz Profits - £7,636 | Quidco - £4,060 | Tax Avoidance - £107,000
    All with a big thank you to Martin and MSE.com from Mutton Geoff!
    • billy2shots
    • By billy2shots 10th Nov 18, 8:35 AM
    • 239 Posts
    • 256 Thanks
    billy2shots
    • #3
    • 10th Nov 18, 8:35 AM
    • #3
    • 10th Nov 18, 8:35 AM
    Why complicate your life, increase your debt and force yourself into a business you donít know much about for the sake of nostalgia?
    Originally posted by Mutton Geoff

    I'm willing to look into it (which is why I'm asking here) if it makes my wife happy and if it makes financial sense in the long term.
    • AnotherJoe
    • By AnotherJoe 10th Nov 18, 8:55 AM
    • 12,903 Posts
    • 15,157 Thanks
    AnotherJoe
    • #4
    • 10th Nov 18, 8:55 AM
    • #4
    • 10th Nov 18, 8:55 AM
    Have you done the maths on being a landlord? Including the higher interest rate on your mortgage you'll be paying due to havinga worse LTV? The extra tax you'll pay on the rental Income? How long will it take to earn back the additional £13k from your profits ? (Not the income!)
    Are you aware of all the legal requirements of being a landlord? Have you considered that strangers will be living in the place and perhaps not treating it as you would let alone worse case.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • datlex
    • By datlex 10th Nov 18, 10:49 AM
    • 1,990 Posts
    • 2,347 Thanks
    datlex
    • #5
    • 10th Nov 18, 10:49 AM
    • #5
    • 10th Nov 18, 10:49 AM
    Current situation

    - Mortgage free on a home with a value of circa £325-£350k

    - 36 years old , married with 2 children.

    -Household Income £56k per year

    - would like to buy new property currently for sale at £425k

    Objective

    - Purchase the second property which will be the family home and rent out current property.

    - Be as tax efficient as possible

    Challenges

    - Increased stamp duty rate for purchase of second property. Exaggerated because I'm doing things backwards and buying a more expensive property as a second home.

    - Total borrowing would be £450k
    - I would effectively need a £200k mortgage on property 1 valued at £325k and £250k mortgage on property 2 valued at £425k. With my income (and potential rent income from property 1, £1k a month before tax) I'm not sure I would secure the finance.



    Help!!!

    Does what I'm proposing make sense and is it realistic?

    How would I even go about something like this?

    If it is feasible, are there more tax efficient ways to go about things than others.

    In my mind it's simple. Sell property 1 and buy property 2 meaning a much smaller total mortgage and less stamp duty. The Mrs however is very reluctant to sell the home where we married and the kids were born.
    Originally posted by billy2shots
    I'm willing to look into it (which is why I'm asking here) if it makes my wife happy and if it makes financial sense in the long term.
    Originally posted by billy2shots
    Seems to me your wife is happy with things as they are. You are bringing in a decent income and don't have a mortgage. Why get into unnecessary debt?
    • xylophone
    • By xylophone 10th Nov 18, 10:59 AM
    • 28,908 Posts
    • 17,509 Thanks
    xylophone
    • #6
    • 10th Nov 18, 10:59 AM
    • #6
    • 10th Nov 18, 10:59 AM
    Does your wife actually want to move?

    Would she want to rent out the property which has so much sentimental value to her?
    • billy2shots
    • By billy2shots 10th Nov 18, 3:44 PM
    • 239 Posts
    • 256 Thanks
    billy2shots
    • #7
    • 10th Nov 18, 3:44 PM
    • #7
    • 10th Nov 18, 3:44 PM
    That's the crux of the issue. I think she likes the idea of moving but panics when push comes to shove.

    With a 6 and 8 year old more space will be needed in the future. My current roof will need replacing in the next 5 years. The master plan was to extend our current place , add in a loft extension (over new rear extension as well) and modernise throughout. £80k-£100k of work. I am saving hard and hoped to be somewhere near in 4 years.
    I'm worried that we will end up with a home too big and expensive for the street meaning we will never see the outlay back when we come to sell. Plus the fact a !!!!!!!ised place is never the same a purpose built home. Which leads to us talking about moving every so often.

    We have a Ltd company of 2 care homes and I manage 1 on a day to day basis. I'm used to landlord certificates, insurance, having people live in the places we own. I'm not sure I want the responsibility for yet another property and the maintenance involved.
    • pinklady21
    • By pinklady21 10th Nov 18, 4:26 PM
    • 862 Posts
    • 631 Thanks
    pinklady21
    • #8
    • 10th Nov 18, 4:26 PM
    • #8
    • 10th Nov 18, 4:26 PM
    If your wife doesn't want to sell it, why do you think she would be happy to let it to someone she doesn't know?
    What will the conversation between you be if the tenants trash the place?
    • billy2shots
    • By billy2shots 10th Nov 18, 7:14 PM
    • 239 Posts
    • 256 Thanks
    billy2shots
    • #9
    • 10th Nov 18, 7:14 PM
    • #9
    • 10th Nov 18, 7:14 PM
    Went to see the house today along with 6 other viewings before and after us. There was an open house last week with a lot of interest apparently. I know it's normal for EAs to exaggerate the demand to tempt bids. This time I believe them because I saw 2 families leave before us and the next couple arrived when we were there.

    My wife is very keen on it as am I, she understands that we would need to sell to make things affordable.
    I have no doubt this house will go before we can get ours on the market and sold.
    We do have an option although I feel guilty with what it involves.

    Plan B

    - put our current home up for sale whilst making an offer on new place.

    - Make an offer and if accepted

    - My dad has offered to loan us £200k (the guilty bit)

    -Take a £250k mortgage which allows overpayment

    - pay the higher rate stamp duty for the second home.

    - move in and then spruce up my current property if I have had no offers.

    - when sold then pay my dad back, overpay a chunk off the mortgage to bring that down, claim the higher rate stamp duty back.

    Looks simple on paper but I'm not sure I need the stress of having a property that might not sell for a while given Brexit and time of the year.
    • Slithery
    • By Slithery 10th Nov 18, 7:23 PM
    • 1,357 Posts
    • 2,110 Thanks
    Slithery
    - My dad has offered to loan us £200k (the guilty bit)

    -Take a £250k mortgage which allows overpayment .
    Originally posted by billy2shots
    Have you found a mortgage lender that will agree to this?
    • billy2shots
    • By billy2shots 13th Nov 18, 7:16 AM
    • 239 Posts
    • 256 Thanks
    billy2shots
    Update


    Having spent time thinking about everything we have decided we do want to move and my wife does agree and want to sell our house.

    We have our heart set on the house that is new to the market and we want it.
    Ours isn't even on the market so the new conundrum of the day is how do we raise the finances in the short term until ours sales.

    We have a shortfall of £240k that we need to borrow.
    Before I do a DIP I have tested s few calculators which suggest a max borrowing of £230k. I'm also led to believe this will be reduced due to the fact I will be running 2 homes (all be it temporarily).

    I'm stuck whether to push ahead with this or try another route.


    Alternative.
    My current mortgage free home is valued at £315k- £340k.
    I'm thinking about the logistics of raising the £240k I need against this home in the short term.
    My concerns are that it would push me into a higher LTV product and the fact the loan is secured against that property so when it sells am I expected to clear the loan or like a mortgage (with the ability to port) can the loan be ported against the new property.

    I fully understand the risks of mine not selling in the short to medium term.
    I'm also aware that I should get a buyer for mine in place first however we looked for places for over a year until recently and nothing came up. We have a very narrow search criteria. This place came out of the blue when we had given up and taken ours off the market. It is very well valued and similar homes seem to go within days/weeks meaning we need to act fast to secure it.

    Any help much appreciated
    • getmore4less
    • By getmore4less 13th Nov 18, 8:21 AM
    • 35,052 Posts
    • 21,414 Thanks
    getmore4less
    Ok you have decided to sell but this struck me

    We have a Ltd company of 2 care homes and I manage 1 on a day to day basis. I'm used to landlord certificates, insurance, having people live in the places we own. I'm not sure I want the responsibility for yet another property and the maintenance involved.
    Originally posted by billy2shots
    If this business owns the homes you already have a substantial exposure to property did you really want more?

    I would effectively need a £200k mortgage on property 1 valued at £325k and £250k mortgage on property 2 valued at £425k. With my income (and potential rent income from property 1, £1k a month before tax)
    Gross yield of 3.7% not that good and once you account for the extra costs(and a new roof soon ish) getting any return is going to be a long time.


    Might you be better off investing more into the business to scale up.

    Hopefully that is giving better than 3.7% returns.
    • billy2shots
    • By billy2shots 13th Nov 18, 8:48 AM
    • 239 Posts
    • 256 Thanks
    billy2shots
    Ok you have decided to sell but this struck me



    If this business owns the homes you already have a substantial exposure to property did you really want more?



    Gross yield of 3.7% not that good and once you account for the extra costs(and a new roof soon ish) getting any return is going to be a long time.


    Might you be better off investing more into the business to scale up.

    Hopefully that is giving better than 3.7% returns.
    Originally posted by getmore4less


    Thanks for taking the time to reply but things have changed. See post above yours for my latest query.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

3,030Posts Today

7,625Users online

Martin's Twitter