Mortgage query - how do I work this one?
Discussion
I've gotten to the ripe old age of 20, which means I really need to start thinking about moving out of the 'rents house over the next 2 or 3 years.
My other half and me have talked about getting a mortgage and moving out together - our combined salaries would be more than enough, however at 20 we feel this is a pretty big commitment. I am however still keen to get on the property ladder sharpish.
Problem is, I would really struggle to get a mortgage on my salary alone. I've squirreled away enough to put down a 15-20% deposit, but obviously that's not much use on it's own.
Cue idea from my dad the other day. We've both always liked the idea of renovating/letting property, so he suggested the possibility of buying somewhere between us that needs a bit of attention, renovating it to modern standards then letting it for a year or 2 until I can afford to take on the house myself/move in with the o/h. We're aware that BTL mortgages will attract higher rates, but strictly speaking, the property won't be solely BTL. If need be, TC Snr can add to the deposit fund, but this would need to be paid back.
Is this a good idea, and if so, how should I go about it?
My other half and me have talked about getting a mortgage and moving out together - our combined salaries would be more than enough, however at 20 we feel this is a pretty big commitment. I am however still keen to get on the property ladder sharpish.
Problem is, I would really struggle to get a mortgage on my salary alone. I've squirreled away enough to put down a 15-20% deposit, but obviously that's not much use on it's own.
Cue idea from my dad the other day. We've both always liked the idea of renovating/letting property, so he suggested the possibility of buying somewhere between us that needs a bit of attention, renovating it to modern standards then letting it for a year or 2 until I can afford to take on the house myself/move in with the o/h. We're aware that BTL mortgages will attract higher rates, but strictly speaking, the property won't be solely BTL. If need be, TC Snr can add to the deposit fund, but this would need to be paid back.
Is this a good idea, and if so, how should I go about it?
The amount of deposit reqiuired will depend on the condition of the property you buy. If the property needs major 'undating' the lender may make a retention i.e. part of ther monies held back until certain works have been done. The valuer for the mortgage lender will also assess the rental income based on the present condition not when works have been done. Therefore you may need at least 25% or even 30% deposit. Also, some BTL lenders have minimum age of 21.
Will you be doing the work (or a majority) yourselves? If not the costs for proper trades people can spiral out of control and soon eat up any potential profits if the property isnt quite right or not as profitable as it seems.
Do the maths. Then do them again. And again.
Then add a good amount of contingency.
If it still makes sense financially then go for it. If it doesnt or its on the cusp, its probably not worth the risk.
If you have some friendly contacts in the industry it will help.
Do the maths. Then do them again. And again.
Then add a good amount of contingency.
If it still makes sense financially then go for it. If it doesnt or its on the cusp, its probably not worth the risk.
If you have some friendly contacts in the industry it will help.
How much equity does he have in his house? He may be able to release some so you get residential mortgage rates instead of BTL rates.
Also, do the HMRC paperwork to put the rental income in the name of the lowest earner to optimise your tax position. If this is you, not sure how securing the loan against your old man's property will go down though. Eric could advise.
Also, do the HMRC paperwork to put the rental income in the name of the lowest earner to optimise your tax position. If this is you, not sure how securing the loan against your old man's property will go down though. Eric could advise.
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