1st BTL now...am I crazy?

[Douglas Arfempty]

After some advice please gents.

Currently living in a 2 bed semi with a LTV of around 60%.
Just had an offer accepted on a 3 bed detached which shall become primary residence.
Planning on letting out current property by taking out a new LTB mortgage at 75% LTV, which shall release enough equity for deposit on new property.
Will have 2 mortgages sat at 90% and 75% respectively.
House will let for £450 a month. BTL Mortgage interest only at £209 a month (2 yr fixed ~4%).
We've got someone lined up to rent our house out already.
Mortgage advisor said income not an issue (60k joint).

We are thinking long term pension, not that this will be the first of many etc.

With all the recent spotlight on BTL are we crazy for considering this now?

Thanks,

[Douglas Arfempty]

Thanks for all the advice, you've raised some brilliant points.

We purchased the property for 60k 5 years ago and it is now at 110k, which is at the top end for the area.

On that basis, because the capital increase is not going to be all that great, we're going to sell.

However, we are continuing on a LTB basis until we complete on our new purchase. Once this is done we'll sell our existing property. Any obvious flaws in this plan? It'll cost us a fair bit, (4k ish in estate agents fees, conveyancing again(!) and the ERC on the mortgage, plus a couple of months of mortgage payments) however we feel it'll be worth it in the long run.

Thanks once again for all the advice.

[Douglas Arfempty]

MrChips said:

Why would you carry on with the LTB if you're then going to sell it? I can only guess it's because you don't want your current purchase to fall through?
If so then depending on the figures (especially the ERC) you might be better to offer some cash towards the vendor of the house you're buying, in return for allowing you to get it advertised and sold.
Else... what happens if it doesn't sell? You'll have mortgage payments coming out, and you'll be unlikely to find a tenant to rent somewhere that's also for sale.
Sounds pretty risky unless i'm missing something!

If you're going through with the LTB, then you might as well get a tenant in for a year or two, and then sell at a later date. Or as a minimum don't get a fixed LTB mortgage with early repayment charges.

It would cost us around 4k as mentioned. You raise a good point on the ERC, it's not too late to change the mortgage selection so will look into this, which should halve that 4k. Offering the vendor a couple of K won't make a difference to them. On an interest only we can meet the LTB payments comfortably, long term if necessary however houses around here sell well to first time buyers.
Just don't want to take the risk of the purchase falling through. This house is a 20-30 year keeper at least due to the area it's in, and they don't come up for sale too often.