How to buy second property, primary home owned outright
Discussion
Fast Charlie said:
Income is pension only.
They are looking to purchase the 2nd home to live in.
Deposit would be limited, is it possible to use equity in current home to cover this?
Wouldn't they then need 2 mortgages - one to buy the property they will live in then a 2nd BTL mortgage to free equity from the 1st?They are looking to purchase the 2nd home to live in.
Deposit would be limited, is it possible to use equity in current home to cover this?
Sarnie will probably explain better - they'll need a Let to Buy mortgage on the current property for the deposit/purchase.
They will then need a mortgage on the second property, unless the downsizing is to the extent that the re-mortgage amount on the first property is enough to cover the outright purchase of the second.
What's the plan to cover the mortgage payments if they do end up with two mortgages?
They will then need a mortgage on the second property, unless the downsizing is to the extent that the re-mortgage amount on the first property is enough to cover the outright purchase of the second.
What's the plan to cover the mortgage payments if they do end up with two mortgages?
Fast Charlie said:
Income is pension only.
They are looking to purchase the 2nd home to live in.
Deposit would be limited, is it possible to use equity in current home to cover this?
They would need a Let-To-Buy mortgage not a Buy-To-Let mortgage (different criteria and regulated differently).They are looking to purchase the 2nd home to live in.
Deposit would be limited, is it possible to use equity in current home to cover this?
They could lend against the current property's rental value. What that is would then dictate how much could be lent. You would then know if thats enough to buy the 2nd property outright or not.
GT03ROB said:
Puzzles said:
Do they really want to be a landlord?
It's a good question. Seems a lot more hassle all round than its worth.Don’t forget the extra 3% SDLT, associated with buying a second property, when looking at the economics.
GT03ROB said:
Puzzles said:
Do they really want to be a landlord?
It's a good question. Seems a lot more hassle all round than its worth.LooneyTunes said:
GT03ROB said:
Puzzles said:
Do they really want to be a landlord?
It's a good question. Seems a lot more hassle all round than its worth.Don’t forget the extra 3% SDLT, associated with buying a second property, when looking at the economics.
Rates also tend to be higher on a BTL mortgage.
Add in the tax and I would be amazed if they were not losing money each month by buying a BTL property.
If they sold and downsized, how much money would they have left over after stamp duty and all costs? If this is a decent sum it might be more profitable to just stick this in a 1 year fixed interest account and have zero hassle or risk.
Fast Charlie said:
My family own there home outright but are thinking of down sizing and retaining the current property to generate an income by letting it.
The question is what is the best way to go about this? One thing that might influence any advice is that they are of retirement age.
The question is what is the best way to go about this? One thing that might influence any advice is that they are of retirement age.
If it were my family (as you say) of retirement age and with only a pension income, I would say you must be mad.
In retirement it is far better not to have any debts. Worry is not good when getting older.
Taxation changes and interest rate rises, have now made BTL a poor investment.
Remember inflation alone might increase property values, but a second home is liable to CGT (now charged on inflationary increases).
Imagine a no rent period, but still having a BTL mortgage to pay.
As Lord Hanson used to say, what downsides are there and how much could we lose?
Many prospective BTLers probably say, how much will we make?
Hope that helps. Lots of careful thinking needed, before diving in.
Joey Deacon said:
LooneyTunes said:
GT03ROB said:
Puzzles said:
Do they really want to be a landlord?
It's a good question. Seems a lot more hassle all round than its worth.Don’t forget the extra 3% SDLT, associated with buying a second property, when looking at the economics.
Rates also tend to be higher on a BTL mortgage.
Add in the tax and I would be amazed if they were not losing money each month by buying a BTL property.
If they sold and downsized, how much money would they have left over after stamp duty and all costs? If this is a decent sum it might be more profitable to just stick this in a 1 year fixed interest account and have zero hassle or risk.
Don't under estimate the emotional stress of renting out a home. It's very different to renting out a house.
Factor in Agent fees of say 8% pcm
Factor in a £10K slush fund
With % rates the way they are atm there won't be much profit from a BTL
Downsize by all means and stick the money in a 5% account. They simply don't need the hassle of becoming first time landlords at their age
Factor in Agent fees of say 8% pcm
Factor in a £10K slush fund
With % rates the way they are atm there won't be much profit from a BTL
Downsize by all means and stick the money in a 5% account. They simply don't need the hassle of becoming first time landlords at their age
Also worth considering how much may need to be spent on the house to bring it up to lettable standard?
Factor in new bathroom and kitchen every 5-7 years and the 'profit' goes fast. Agents fees will vary but suspect the 8% mentioned earlier is 8% plus VAT. In our experience you also need to factor in change of tenant roughtly every 3 years which leads to at least 2 months without rental income as you do some of the maintanence that's hard to do with someone in the property.
Not something I'd want to take on in retirement
Factor in new bathroom and kitchen every 5-7 years and the 'profit' goes fast. Agents fees will vary but suspect the 8% mentioned earlier is 8% plus VAT. In our experience you also need to factor in change of tenant roughtly every 3 years which leads to at least 2 months without rental income as you do some of the maintanence that's hard to do with someone in the property.
Not something I'd want to take on in retirement
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