New house: To use "Buy to let mortgage" or not
Discussion
Hello gents,
I'm considering to purchase a property in London (House). Currently, my own property (2 bed flat), is in a good location and all mortgage paid off. The agents offered me buy to let option, without actually selling my current property, so that we can take equity and use it against the new property. Looking at the numbers they give me, the overall thing would cost me 1400 GBP monthly, and my rental income would be overall 1700 GBP.
The stamp duty + additional deposit towards purchase to reduce monthly fees = neary 100k.
My question: is it too risky to go into this option ? the rental fees looks like covering more than the monthly payments but I have never been a land-lord, and even though my current property is in a quite popular destination, not sure about any risk of not having to find a consistent tenant in the future?!
Thanks!
I'm considering to purchase a property in London (House). Currently, my own property (2 bed flat), is in a good location and all mortgage paid off. The agents offered me buy to let option, without actually selling my current property, so that we can take equity and use it against the new property. Looking at the numbers they give me, the overall thing would cost me 1400 GBP monthly, and my rental income would be overall 1700 GBP.
The stamp duty + additional deposit towards purchase to reduce monthly fees = neary 100k.
My question: is it too risky to go into this option ? the rental fees looks like covering more than the monthly payments but I have never been a land-lord, and even though my current property is in a quite popular destination, not sure about any risk of not having to find a consistent tenant in the future?!
Thanks!
This is called Let-To-Buy.......not Buy-To-Let. 
We do these for lots of clients where the current property hasn't sold yet.........sounds like the Estate Agent is trying to generate 3 lots of commission.....2x mortgages, letting of your property and sale of one of their's that you buy...............
We do these for lots of clients where the current property hasn't sold yet.........sounds like the Estate Agent is trying to generate 3 lots of commission.....2x mortgages, letting of your property and sale of one of their's that you buy...............
We kept our old house - lasted a couple of years before we decided to sell. Being a LL is not for everyone and the returns are not what they used to be. Just hoping the sale goes through quickly as I want out before the new year and the possible wobbles of Brexit so I can invest the money.
Thanks all.
Looks like we gonna go ahead with this. The numbers seem pretty tight, and to be honest, I might rather keep the current flat, as it's quite popular with constant tenants/renters. They say market is slow, and economy crap but I've probably lost 3 houses in the last 6 months to immediate cash buyers. I think things are pretty moving in the rather low-end of London Market, near East London and a bit value considering the space and location.
Looks like we gonna go ahead with this. The numbers seem pretty tight, and to be honest, I might rather keep the current flat, as it's quite popular with constant tenants/renters. They say market is slow, and economy crap but I've probably lost 3 houses in the last 6 months to immediate cash buyers. I think things are pretty moving in the rather low-end of London Market, near East London and a bit value considering the space and location.
I failed to sell my flat in East London so am renting it out. I agreed a three year let at over five thousand pound a month, which seemed great, but my tenant is about to abscond three months in without notice, I’ll have to forego rent while I go through the legal process and am already out of pocket because of the work I agreed to do in exchange for the long lease.
I’ll just slash the price and sell in the spring, it’s not worth the effort.
I’ll just slash the price and sell in the spring, it’s not worth the effort.
Wow, that's disappointing. Its a strange market to be honest, as I've mentioned the houses are being sold very quickly and loads of activity out there. On the other hand, the chain and last minute hesitant buyer behaviours a bit ruining the process. In my building, nearly 30% are renters, so I seriously consider to LET option now, to make things a bit quicker but we'll see..
ooid said:
The numbers seem pretty tight
You need to look at the effect income tax is going to have on your cash flow as well.https://www.gov.uk/government/publications/restric...
Also dont forget additional rate stamp duty on the new purchase.
Re-considering all (including stamp duty and etc..) changed my mind again, and listing the property! 
Already had 1 viewing now, fingers crossed.
Just saw my neighbour's hassle on dealing with both short and long-term tenants, it's a nightmare really, and who knows what type of tenants we might get in the future ? I thought being landlord was not this difficult, I guess we are entering new brexit-phenomena now.
Already had 1 viewing now, fingers crossed.
Just saw my neighbour's hassle on dealing with both short and long-term tenants, it's a nightmare really, and who knows what type of tenants we might get in the future ? I thought being landlord was not this difficult, I guess we are entering new brexit-phenomena now.
So going back to this thread... 
I could not sell our flat yet(its been on the market now nearly 2 months, including christmas break). I have two serious buyers, they had viewed the flat for several times. One of them is a cash buyer, but we do have the feeling, they are in the mood of "lets wait and see, which is quite annoying.
In this period, I have lost another fantastic house to a cash buyer!!..but found another beautiful house, which they reduced the asking price a lot!
So coming back to "equity release" option again. Keep it on rent, for two more years, than sell it once the Brexit crap finally resolves... Am I being too optimistic?
I could not sell our flat yet(its been on the market now nearly 2 months, including christmas break). I have two serious buyers, they had viewed the flat for several times. One of them is a cash buyer, but we do have the feeling, they are in the mood of "lets wait and see, which is quite annoying.
In this period, I have lost another fantastic house to a cash buyer!!..but found another beautiful house, which they reduced the asking price a lot!
So coming back to "equity release" option again. Keep it on rent, for two more years, than sell it once the Brexit crap finally resolves... Am I being too optimistic?
FWIW we put our BTL on the market to sell in July. Had loads of tyre kickers, one cash buyer in Sept who then dropped out in late Nov after the usual messing about.
Now on buyer number 2. Due to complete next week....
IMHO good properties still sell fast. If its border line people are taking their time.
Now on buyer number 2. Due to complete next week....
IMHO good properties still sell fast. If its border line people are taking their time.
ooid said:
So going back to this thread...
I could not sell our flat yet(its been on the market now nearly 2 months, including christmas break). I have two serious buyers, they had viewed the flat for several times. One of them is a cash buyer, but we do have the feeling, they are in the mood of "lets wait and see, which is quite annoying.
In this period, I have lost another fantastic house to a cash buyer!!..but found another beautiful house, which they reduced the asking price a lot!
So coming back to "equity release" option again. Keep it on rent, for two more years, than sell it once the Brexit crap finally resolves... Am I being too optimistic?
If, on the day you complete on the 'new' place, you own more than one property (in your case the new place and the flat..) you will be liable to pay the additional 3% SDLT on all bands of the new property purchase price.I could not sell our flat yet(its been on the market now nearly 2 months, including christmas break). I have two serious buyers, they had viewed the flat for several times. One of them is a cash buyer, but we do have the feeling, they are in the mood of "lets wait and see, which is quite annoying.
In this period, I have lost another fantastic house to a cash buyer!!..but found another beautiful house, which they reduced the asking price a lot!
So coming back to "equity release" option again. Keep it on rent, for two more years, than sell it once the Brexit crap finally resolves... Am I being too optimistic?
You can claim the ADDITONAL 3% back on the basis that you are buying a main home, before selling your current main home, but you only have 18 months in which to complete the disposition of the flat. Else you will forfeit the potential to claim back the extra SDLT you have paid.
This would serious dampen the rosy looking finances of the whole thing as could easily cost you £20K, or roughly the income of letting the flat out for a year or so @ say £1,800 month.
You could hold out on the flat sale to get the best possible price, but beware; hold out too much and you might:
a. have to slash it to get shot before 18 months is up
b. not be able to sell it and end up not getting the SDLT back and end up with the joys of being a LL long-term, waiting for capital appreciation minus CGT (which will now be payable on whatever scale of course...), to reimburse you for the SDLT to make the whole thing feel like it was 'worth it'.
Doesn't sound like you're having difficulty finding places you want to be, so why not cash the flat and rent yourself for short time to make yourself the attractive and very proceedable buyer, having nothing to sell, like those people that keep beating you to it.....?
HTH - Nick.
Edited by NicoG on Tuesday 15th January 12:25
Edited by NicoG on Tuesday 15th January 12:26
Simple question you need to ask yourself:
How long will it take, netting just £300 pcm before any other costs, to recoup the 3% landlord uplift of the SDLT from your next purchase.
If it's a house in London, I imagine the answer won't be a particularly short period of time. I have been through this process recently and decided my money would likely work better for me invested in other places.
How long will it take, netting just £300 pcm before any other costs, to recoup the 3% landlord uplift of the SDLT from your next purchase.
If it's a house in London, I imagine the answer won't be a particularly short period of time. I have been through this process recently and decided my money would likely work better for me invested in other places.
Over over under steer said:
Simple question you need to ask yourself:
How long will it take, netting just £300 pcm before any other costs, to recoup the 3% landlord SDLT uplift on your next purchase.
If it's a house in London, I imagine the answer won't be a particularly short period of time. I have been through this process recently and decided my money would likely work better for me invested in other places.
How long will it take, netting just £300 pcm before any other costs, to recoup the 3% landlord SDLT uplift on your next purchase.
If it's a house in London, I imagine the answer won't be a particularly short period of time. I have been through this process recently and decided my money would likely work better for me invested in other places.
Over over under steer said:
Simple question you need to ask yourself:
How long will it take, netting just £300 pcm before any other costs, to recoup the 3% landlord uplift of the SDLT from your next purchase.
If it's a house in London, I imagine the answer won't be a particularly short period of time. I have been through this process recently and decided my money would likely work better for me invested in other places.
You've just reminded me of the further point I intended to make but forgot....How long will it take, netting just £300 pcm before any other costs, to recoup the 3% landlord uplift of the SDLT from your next purchase.
If it's a house in London, I imagine the answer won't be a particularly short period of time. I have been through this process recently and decided my money would likely work better for me invested in other places.
Many mortgage lenders, Sarnie would concur, are increasingly looking to see that more than 100% of the cost of the BTL (or LTB) mortgage is recouped by the rental agreement, so to safeguard against periods of voids etc etc.
Some ask for 120% some as much as 140%
£1,700 income against £1,400 cost is marginal for the lower figure, let alone the 140% requirement..
Is the £1,400 figure for a repayment mortgage on the flat or I/O?
NicoG said:
You've just reminded me of the further point I intended to make but forgot....
Many mortgage lenders, Sarnie would concur, are increasingly looking to see that more than 100% of the cost of the BTL (or LTB) mortgage is recouped by the rental agreement, so to safeguard against periods of voids etc etc.
Some ask for 120% some as much as 140%
£1,700 income against £1,400 cost is marginal for the lower figure, let alone the 140% requirement..
Is the £1,400 figure for a repayment mortgage on the flat or I/O?
Correct, although I don't thinks it's ever been as low as 100%.......it used to be 125% but got increased circa 3 years ago to 145%.Many mortgage lenders, Sarnie would concur, are increasingly looking to see that more than 100% of the cost of the BTL (or LTB) mortgage is recouped by the rental agreement, so to safeguard against periods of voids etc etc.
Some ask for 120% some as much as 140%
£1,700 income against £1,400 cost is marginal for the lower figure, let alone the 140% requirement..
Is the £1,400 figure for a repayment mortgage on the flat or I/O?
Standard stress rates are now;
Loan amount x 5.5% /12 x 145% = minimum rent required to borrow the requested loan amount......
Some lenders will alter parts of the above slightly depending on circumstances or if you take a five year fixed rate etc............
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