raising cash to buy a house
Discussion
Having sold our house a few years ago, and having spent a couple of years (and a lot of cash) traveling I now find myself back in full time employ, in a rented house.
I feel that I should probably be buying a house as I now feel settled, but despite a healthy salary I have precious little savings left (without liquidating the morgan!)
I do have a flat (no mortgage) which was bought a few years ago, which rents out pretty well, clearly it's probably not the best time to sell it, so I am wondering can I remortgage the flat, to create a deposit for a family house, using its rental income to service the loan, and then get a regular mortgage for the family house based on my salary?
Grateful for any tips
I feel that I should probably be buying a house as I now feel settled, but despite a healthy salary I have precious little savings left (without liquidating the morgan!)
I do have a flat (no mortgage) which was bought a few years ago, which rents out pretty well, clearly it's probably not the best time to sell it, so I am wondering can I remortgage the flat, to create a deposit for a family house, using its rental income to service the loan, and then get a regular mortgage for the family house based on my salary?
Grateful for any tips
sawman said:
Having sold our house a few years ago, and having spent a couple of years (and a lot of cash) traveling I now find myself back in full time employ, in a rented house.
I feel that I should probably be buying a house as I now feel settled, but despite a healthy salary I have precious little savings left (without liquidating the morgan!)
I do have a flat (no mortgage) which was bought a few years ago, which rents out pretty well, clearly it's probably not the best time to sell it, so I am wondering can I remortgage the flat, to create a deposit for a family house, using its rental income to service the loan, and then get a regular mortgage for the family house based on my salary?
Grateful for any tips
Yes, you can get a buy to let mortgage for your flat. You should be able to get up to 75% of the value of the flat but borrowing 60% would be cheaper and easier. The rent should cover more than (125% I think) the mortgage payment.I feel that I should probably be buying a house as I now feel settled, but despite a healthy salary I have precious little savings left (without liquidating the morgan!)
I do have a flat (no mortgage) which was bought a few years ago, which rents out pretty well, clearly it's probably not the best time to sell it, so I am wondering can I remortgage the flat, to create a deposit for a family house, using its rental income to service the loan, and then get a regular mortgage for the family house based on my salary?
Grateful for any tips
You can get a resident mortgage for your family home based on your salary as per normal. You'll need to declare your background BTL mortgage but it should not be a problem.
Goodluck!
I want to talk business Measures of performance now.
So say you have a £100,000 invested in a house that nets you £10,000 a year. Your return on investment is what ? 10% ? Not brilliant really.
If you only had £50K invested and the rest on a Buy to Let Mortgage at say 5%, you'd be paying what ? £2500 a year, and income from the house would be 10K so Profit would only be £7500, but from half the investment. So is that 15% return on investment.
Ignoring the need to buy a house, wouldn't you be better off with 2 houses both with 50% mortgages rather than none, because in my example you could be earning £15000 instead of £10K for the same investment.
I think the financial world uses the word leverage. What do I know? I'm an engineer looking for my first buy to let.
So say you have a £100,000 invested in a house that nets you £10,000 a year. Your return on investment is what ? 10% ? Not brilliant really.
If you only had £50K invested and the rest on a Buy to Let Mortgage at say 5%, you'd be paying what ? £2500 a year, and income from the house would be 10K so Profit would only be £7500, but from half the investment. So is that 15% return on investment.
Ignoring the need to buy a house, wouldn't you be better off with 2 houses both with 50% mortgages rather than none, because in my example you could be earning £15000 instead of £10K for the same investment.
I think the financial world uses the word leverage. What do I know? I'm an engineer looking for my first buy to let.
996c2 said:
Yes, you can get a buy to let mortgage for your flat. You should be able to get up to 75% of the value of the flat
You cna go beyond that now, but the rates & fees aren't attractive.996c2 said:
but borrowing 60% would be cheaper and easier.
Cheaper, yes. Easier? The LTV won't make a difference to the difficulty of getting a mortgage. On all BTL mortgages, beware the fees.
996c2 said:
The rent should cover more than (125% I think) the mortgage payment.
It can be 125% of monthly payment, it can also be 130%, or with some lenders it can be 125% of the interest at SVR. They all have their littel foibles.996c2 said:
You can get a resident mortgage for your family home based on your salary as per normal. You'll need to declare your background BTL mortgage but it should not be a problem.
As long as the BTL is self funding, it certainly won't be a problem.OP, YHM.
Mr POD said:
I want to talk business Measures of performance now.
So say you have a £100,000 invested in a house that nets you £10,000 a year. Your return on investment is what ? 10% ? Not brilliant really.
If you only had £50K invested and the rest on a Buy to Let Mortgage at say 5%, you'd be paying what ? £2500 a year, and income from the house would be 10K so Profit would only be £7500, but from half the investment. So is that 15% return on investment.
Ignoring the need to buy a house, wouldn't you be better off with 2 houses both with 50% mortgages rather than none, because in my example you could be earning £15000 instead of £10K for the same investment.
I think the financial world uses the word leverage. What do I know? I'm an engineer looking for my first buy to let.
Don't talk about LEVERAGE. It's why the sSo say you have a £100,000 invested in a house that nets you £10,000 a year. Your return on investment is what ? 10% ? Not brilliant really.
If you only had £50K invested and the rest on a Buy to Let Mortgage at say 5%, you'd be paying what ? £2500 a year, and income from the house would be 10K so Profit would only be £7500, but from half the investment. So is that 15% return on investment.
Ignoring the need to buy a house, wouldn't you be better off with 2 houses both with 50% mortgages rather than none, because in my example you could be earning £15000 instead of £10K for the same investment.
I think the financial world uses the word leverage. What do I know? I'm an engineer looking for my first buy to let.
t hit the fan, don't you know anthing? 
Mr POD said:
I want to talk business Measures of performance now.
So say you have a £100,000 invested in a house that nets you £10,000 a year. Your return on investment is what ? 10% ? Not brilliant really.
If you only had £50K invested and the rest on a Buy to Let Mortgage at say 5%, you'd be paying what ? £2500 a year, and income from the house would be 10K so Profit would only be £7500, but from half the investment. So is that 15% return on investment.
Ignoring the need to buy a house, wouldn't you be better off with 2 houses both with 50% mortgages rather than none, because in my example you could be earning £15000 instead of £10K for the same investment.
I think the financial world uses the word leverage. What do I know? I'm an engineer looking for my first buy to let.
10% is a brilliant return. You would be very lucky to net that.So say you have a £100,000 invested in a house that nets you £10,000 a year. Your return on investment is what ? 10% ? Not brilliant really.
If you only had £50K invested and the rest on a Buy to Let Mortgage at say 5%, you'd be paying what ? £2500 a year, and income from the house would be 10K so Profit would only be £7500, but from half the investment. So is that 15% return on investment.
Ignoring the need to buy a house, wouldn't you be better off with 2 houses both with 50% mortgages rather than none, because in my example you could be earning £15000 instead of £10K for the same investment.
I think the financial world uses the word leverage. What do I know? I'm an engineer looking for my first buy to let.
Highly risky stocks are supposed to return 7% or so in the very long term.
The European long term risk free rate is 4.5% so 10% would be awesome.
Your mortgaged example is indeed and excellent demonstration of the power of leverage.
You could take it further.
Why not have a 99% mortgage.
You need £5k or so to cover it but net £10k so your £1k investment in the house is giving you a return of 500% per annum.
I think I would do this 100 times because then I will have half a million quid by this time next year.
Awesome. Where do I sign?
IMHO it is a question of BEING SENSIBLE.
Firstly I would want to get THE VERY BEST interest rate on any mortgage. I think that means you want AT LEAST a 40% deposit.
Then I would consider how much cash I have to invest and what type of property I want to buy.
You probably want to maximise the amount you have to spend which means you will end up close to that 40% deposit level.
I would repeat again though that expecting a 10% return on the total property value is probably way too optimistic.
So if I
walm said:
Mr POD said:
I want to talk business Measures of performance now.
So say you have a £100,000 invested in a house that nets you £10,000 a year. Your return on investment is what ? 10% ? Not brilliant really.
If you only had £50K invested and the rest on a Buy to Let Mortgage at say 5%, you'd be paying what ? £2500 a year, and income from the house would be 10K so Profit would only be £7500, but from half the investment. So is that 15% return on investment.
Ignoring the need to buy a house, wouldn't you be better off with 2 houses both with 50% mortgages rather than none, because in my example you could be earning £15000 instead of £10K for the same investment.
I think the financial world uses the word leverage. What do I know? I'm an engineer looking for my first buy to let.
10% is a brilliant return. You would be very lucky to net that.So say you have a £100,000 invested in a house that nets you £10,000 a year. Your return on investment is what ? 10% ? Not brilliant really.
If you only had £50K invested and the rest on a Buy to Let Mortgage at say 5%, you'd be paying what ? £2500 a year, and income from the house would be 10K so Profit would only be £7500, but from half the investment. So is that 15% return on investment.
Ignoring the need to buy a house, wouldn't you be better off with 2 houses both with 50% mortgages rather than none, because in my example you could be earning £15000 instead of £10K for the same investment.
I think the financial world uses the word leverage. What do I know? I'm an engineer looking for my first buy to let.
Highly risky stocks are supposed to return 7% or so in the very long term.
The European long term risk free rate is 4.5% so 10% would be awesome.
Your mortgaged example is indeed and excellent demonstration of the power of leverage.
You could take it further.
Why not have a 99% mortgage.
You need £5k or so to cover it but net £10k so your £1k investment in the house is giving you a return of 500% per annum.
I think I would do this 100 times because then I will have half a million quid by this time next year.
Awesome. Where do I sign?
IMHO it is a question of BEING SENSIBLE.
Firstly I would want to get THE VERY BEST interest rate on any mortgage. I think that means you want AT LEAST a 40% deposit.
Then I would consider how much cash I have to invest and what type of property I want to buy.
You probably want to maximise the amount you have to spend which means you will end up close to that 40% deposit level.
I would repeat again though that expecting a 10% return on the total property value is probably way too optimistic.
So if I
For all risks there is erm 'Mitigation' to coin a phrase they use in the Engineering World.
So lets take my example of a £10000 house. Obviously the lower the deposit, the higher the leverage, but the higher the interest rate, and therefore the less profit. So there's a balance to be played around with there. Lots of what if's done on Excel to find the optimum. Assuming you can't expect to have someone in for 12 months of the year, you might want a float to cover 'few' months interest, so that might lower your return, because that'll earn less interest than you pay out, but also lower the risk.
I'm pretty much a novice when it comes to the idea of a BTL but I'm also highly risk adverse, and I think that doing your homework is important.
I've a very lot of research to do before I invest, if at all.
sawman said:
Thanks for the comments guys, speshly scotal
Mr Pod, I understand your logic, I think 10% yield is pretty unlikely in most markets, I've been getting 5-7% over the last 7 years or so.
I've been comparing 6 potential markets.Mr Pod, I understand your logic, I think 10% yield is pretty unlikely in most markets, I've been getting 5-7% over the last 7 years or so.
York - where my son hopes to be at university from October - Return will be poor because house prices are high.
Derby - where I'm currently contracting. Houses are CHEAP in Beruit, and close to big employers with lots of graduates and contractors, but both actually want the wow factor and that's a different price and area.
But quite frankly both are too far away to support long term
Preston - Student market. Houses cheap, but who knows what the fees will do to demand for housing at lesser polytechnics.
Ormskirk - Very close to Edge hill University (Nee teacher training College) Close to home, and I know the town well, but housing is more expensive than :
Liverpool - 2 Markets City or River Front Appartments, but I feel that too many have been built and demand isn't as high as you'd imagine. Or Student housing around the Cathedrals. Reasonable prices for terraced houses and Strong student market.
But the main problem is that whilst I'm slightly risk adverse, my wife would rather put spare money under the bed.
Mr POD said:
I've been comparing 6 potential markets.
York - where my son hopes to be at university from October - Return will be poor because house prices are high.
Derby - where I'm currently contracting. Houses are CHEAP in Beruit, and close to big employers with lots of graduates and contractors, but both actually want the wow factor and that's a different price and area.
But quite frankly both are too far away to support long term
Preston - Student market. Houses cheap, but who knows what the fees will do to demand for housing at lesser polytechnics.
Ormskirk - Very close to Edge hill University (Nee teacher training College) Close to home, and I know the town well, but housing is more expensive than :
Liverpool - 2 Markets City or River Front Appartments, but I feel that too many have been built and demand isn't as high as you'd imagine. Or Student housing around the Cathedrals. Reasonable prices for terraced houses and Strong student market.
But the main problem is that whilst I'm slightly risk adverse, my wife would rather put spare money under the bed.
I don't think risk averse means what you think it does York - where my son hopes to be at university from October - Return will be poor because house prices are high.
Derby - where I'm currently contracting. Houses are CHEAP in Beruit, and close to big employers with lots of graduates and contractors, but both actually want the wow factor and that's a different price and area.
But quite frankly both are too far away to support long term
Preston - Student market. Houses cheap, but who knows what the fees will do to demand for housing at lesser polytechnics.
Ormskirk - Very close to Edge hill University (Nee teacher training College) Close to home, and I know the town well, but housing is more expensive than :
Liverpool - 2 Markets City or River Front Appartments, but I feel that too many have been built and demand isn't as high as you'd imagine. Or Student housing around the Cathedrals. Reasonable prices for terraced houses and Strong student market.
But the main problem is that whilst I'm slightly risk adverse, my wife would rather put spare money under the bed.
scotal said:
If you are renting to students, remember to check the HMO rules.
(amongst other things.)
Totally - plus the notable higher wear and tear on HMO's(amongst other things.)
The other thing to consider is the now £9k p.a. student fees. Surely that will reduce the number who go to Uni, some like Oxford/Cambridge etc the top ones should be fine but the others clearly they will have a reduction.
One thing I did on my last house was to vastly release equity from the rental properties so that on the house I was buying the LTV was sub 60% ie notably lower interest rates (and yes I did the net calculations).
MrPOD as an engineer the concept of gearing is obviously something you have grasped quickly, but in your ROI calcs you are ignoring the appreciation of the asset and only considering the yield. This might get you closer to your 10% annualised return. If you keep the house for a VERY long time.....! (or fill it HMO stye or let it for tourists!)
House price appreciation may be a short-term challenge, but buy right and it will help your returns given sufficient time.
House price appreciation may be a short-term challenge, but buy right and it will help your returns given sufficient time.
Take some equity out of the flat, by using a BTL mortgage. Ensure that the income from 9 months of letting comfortably covers 12 months worth of mortgage, to allow for empty months and maintenance. (Use a spreadsheet to take out as much as you can, within the realms of sensible interest rates. Bear in mind they will go up.)
Keep £10,000 to one side for the cost of moving, and doing any work that might be required on the new place, and you have your deposit.
From that, look at where the best rates are, related to LTV, and you will have your shopping budget for the new place. Get the mortgage agreement in place.
Go shopping.
Good luck! The shopping is the fun bit.
Keep £10,000 to one side for the cost of moving, and doing any work that might be required on the new place, and you have your deposit.
From that, look at where the best rates are, related to LTV, and you will have your shopping budget for the new place. Get the mortgage agreement in place.
Go shopping.
Good luck! The shopping is the fun bit.
louiebaby said:
Take some equity out of the flat, by using a BTL mortgage. Ensure that the income from 9 months of letting comfortably covers 12 months worth of mortgage, to allow for empty months and maintenance. (Use a spreadsheet to take out as much as you can, within the realms of sensible interest rates. Bear in mind they will go up.)
Keep £10,000 to one side for the cost of moving, and doing any work that might be required on the new place, and you have your deposit.
From that, look at where the best rates are, related to LTV, and you will have your shopping budget for the new place. Get the mortgage agreement in place.
Go shopping.
Good luck! The shopping is the fun bit.
That pretty much bears out my plan, I have taken a bit of advice and have a budget in mind. I have to say I'm a bit underwhelmed by what my budget will get me, particularly bearing in mind the moving expenses stamp duty etc. So I'm not in any hurry as I don't see prices rocketing any time soon. Keep £10,000 to one side for the cost of moving, and doing any work that might be required on the new place, and you have your deposit.
From that, look at where the best rates are, related to LTV, and you will have your shopping budget for the new place. Get the mortgage agreement in place.
Go shopping.
Good luck! The shopping is the fun bit.
Just have to see what comes up!
Okay I had 2 erm senarios I ran past a mortgage advisor, and his response leaves me cold.
Okay so what If I have £200K equity in my house and he can get me a 3.5% mortgage on £125K, so that I can buy the buy to let outright.
That's not what I want to do.
I have money in my Ltd company that I don't want to take out as either salary or dividend, I have an 'investor' who is prepared to put a reasonable sum of money up front as a Loan (terms as pretty good, as it happens) and I have some more money which I could also loan to my business.
But I'd need to take on a £130K loan and as a first time buy to let, he doesn't think he'd find a lender willing to punt it on 3 run down flats in a grade 2 listed building in Beruit, and if they were it would be more than the 3.5%.
BUT pyshologically I like owning the house I live in.
Okay so what If I have £200K equity in my house and he can get me a 3.5% mortgage on £125K, so that I can buy the buy to let outright.
That's not what I want to do.
I have money in my Ltd company that I don't want to take out as either salary or dividend, I have an 'investor' who is prepared to put a reasonable sum of money up front as a Loan (terms as pretty good, as it happens) and I have some more money which I could also loan to my business.
But I'd need to take on a £130K loan and as a first time buy to let, he doesn't think he'd find a lender willing to punt it on 3 run down flats in a grade 2 listed building in Beruit, and if they were it would be more than the 3.5%.
BUT pyshologically I like owning the house I live in.
Deva Link said:
sawman said:
I do have a flat (no mortgage)
One thing no-one else has mentioned is that, assuming you're declaring the income from the flat, you're missing out on the ability to offset mortgage interest against the income for tax purpose.I did have a mortgage on the flat originally, but settled it when selling our main res, before going overseas - as we didn't want the hassle of a mortgage at the time.
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