BTL - how much deposit should I put in.
Discussion
I am aboutto go for a BTL mortgage. The property in question is valued at 120K, I have already paid 15% (18K) deposit. I have a potential 20K that I could put into this property, however my mortgage advisor tells me that I need only put in another 10% to meet the mortgage requirements.
the question is, Should I put as much as i can afford into this BTL property, or should I put the bare minimum thereby minimising taxation on any potential profit...and then maybe use the extra to payoff my main mortgage.
Hope this makes some sense. Any advise from experienced Landlords would be appreciated..
the question is, Should I put as much as i can afford into this BTL property, or should I put the bare minimum thereby minimising taxation on any potential profit...and then maybe use the extra to payoff my main mortgage.
Hope this makes some sense. Any advise from experienced Landlords would be appreciated..
I'm not a landlord but my view is this:
You should only put enough into one property so that the mortgage is covered and you have enough to put by into a contingency fund (for repairs, voids and insurance etc).
If you then have some left over use that to save for the next deposit on your next property.
If that's not your plan (ie more than one buy to let) then sink everything into the mortgage so that the rent received starts to pay the mortgage off sooner (overpaying).
What's your plan?
You should only put enough into one property so that the mortgage is covered and you have enough to put by into a contingency fund (for repairs, voids and insurance etc).
If you then have some left over use that to save for the next deposit on your next property.
If that's not your plan (ie more than one buy to let) then sink everything into the mortgage so that the rent received starts to pay the mortgage off sooner (overpaying).
What's your plan?
If I were you I would maximise the equity in the property you live in. I assume that the property you live in is worth more than your buy to let, so the interest that you'll be paying over the term of your mortgage will be far more. If you can afford to make over payments then that's where they should go in my opinion.
[quote=Oi_Oi_Savaloy]I'm not a landlord but my view is this:
You should only put enough into one property so that the mortgage is covered and you have enough to put by into a contingency fund (for repairs, voids and insurance etc).
If you then have some left over use that to save for the next deposit on your next property.
If that's not your plan (ie more than one buy to let) then sink everything into the mortgage so that the rent received starts to pay the mortgage off sooner (overpaying).quote
Yes very good advice. Myself I tend to go for an Offset style mortgage, so the more I pay off my mortgage, the less interest I get charged. Then if I see another property/BTL that I want to buy, I can simply just draw down on that mortgage, saving the need to having to arrange another mortgage.
You should only put enough into one property so that the mortgage is covered and you have enough to put by into a contingency fund (for repairs, voids and insurance etc).
If you then have some left over use that to save for the next deposit on your next property.
If that's not your plan (ie more than one buy to let) then sink everything into the mortgage so that the rent received starts to pay the mortgage off sooner (overpaying).quote
Yes very good advice. Myself I tend to go for an Offset style mortgage, so the more I pay off my mortgage, the less interest I get charged. Then if I see another property/BTL that I want to buy, I can simply just draw down on that mortgage, saving the need to having to arrange another mortgage.
Wings
I'm not familiar with off-set mortgages in practice (heard about them of course). I guess it all depends on you financial circumstances and your attitude to risk.
My one big thing about Buy to Let these days is, 'know your area' and don't buy something that is out of your comfort zone, no matter how tempting it is. All because a property is 'cheap' does not necessarily make it viable.
I'm not familiar with off-set mortgages in practice (heard about them of course). I guess it all depends on you financial circumstances and your attitude to risk.
My one big thing about Buy to Let these days is, 'know your area' and don't buy something that is out of your comfort zone, no matter how tempting it is. All because a property is 'cheap' does not necessarily make it viable.
boxster9 said:
I am aboutto go for a BTL mortgage. The property in question is valued at 120K, I have already paid 15% (18K) deposit. I have a potential 20K that I could put into this property, however my mortgage advisor tells me that I need only put in another 10% to meet the mortgage requirements.
the question is, Should I put as much as i can afford into this BTL property, or should I put the bare minimum thereby minimising taxation on any potential profit...and then maybe use the extra to payoff my main mortgage.
Hope this makes some sense. Any advise from experienced Landlords would be appreciated..
When you say "only need to put in another 10% (25%) total to meet mortgage requirement... Why not get a mortgage with 85% LTV rather than the 75% you are talking about? Or have I mis understood? the question is, Should I put as much as i can afford into this BTL property, or should I put the bare minimum thereby minimising taxation on any potential profit...and then maybe use the extra to payoff my main mortgage.
Hope this makes some sense. Any advise from experienced Landlords would be appreciated..
Adam T said:
boxster9 said:
I am aboutto go for a BTL mortgage. The property in question is valued at 120K, I have already paid 15% (18K) deposit. I have a potential 20K that I could put into this property, however my mortgage advisor tells me that I need only put in another 10% to meet the mortgage requirements.
the question is, Should I put as much as i can afford into this BTL property, or should I put the bare minimum thereby minimising taxation on any potential profit...and then maybe use the extra to payoff my main mortgage.
Hope this makes some sense. Any advise from experienced Landlords would be appreciated..
When you say "only need to put in another 10% (25%) total to meet mortgage requirement... Why not get a mortgage with 85% LTV rather than the 75% you are talking about? Or have I mis understood? the question is, Should I put as much as i can afford into this BTL property, or should I put the bare minimum thereby minimising taxation on any potential profit...and then maybe use the extra to payoff my main mortgage.
Hope this makes some sense. Any advise from experienced Landlords would be appreciated..
Adam T said:
boxster9 said:
I am aboutto go for a BTL mortgage. The property in question is valued at 120K, I have already paid 15% (18K) deposit. I have a potential 20K that I could put into this property, however my mortgage advisor tells me that I need only put in another 10% to meet the mortgage requirements.
the question is, Should I put as much as i can afford into this BTL property, or should I put the bare minimum thereby minimising taxation on any potential profit...and then maybe use the extra to payoff my main mortgage.
Hope this makes some sense. Any advise from experienced Landlords would be appreciated..
When you say "only need to put in another 10% (25%) total to meet mortgage requirement... Why not get a mortgage with 85% LTV rather than the 75% you are talking about? Or have I mis understood? the question is, Should I put as much as i can afford into this BTL property, or should I put the bare minimum thereby minimising taxation on any potential profit...and then maybe use the extra to payoff my main mortgage.
Hope this makes some sense. Any advise from experienced Landlords would be appreciated..
Make sure you know exactly what the HLC (Higher Lending Charge) is or sometimes called MIG (Mortgage indem guarantee)
This will kick in at a certain level the norm is 75% LTV but varies dependant on lender.
It is an insurance policy you pay for. Used by the lender to safeguard against default.
It can be a large amount sometimes several percent which is added to the loan.
The KFI (Key facts illustration) supplied by your Mortgage advisor will show a break down of all the costs and fees and should show the HLC or MIG.
If you are unsure and want a bit more advice drop me a pm and i will give you my mobile for a chat.
Regards
Scotty B
This will kick in at a certain level the norm is 75% LTV but varies dependant on lender.
It is an insurance policy you pay for. Used by the lender to safeguard against default.
It can be a large amount sometimes several percent which is added to the loan.
The KFI (Key facts illustration) supplied by your Mortgage advisor will show a break down of all the costs and fees and should show the HLC or MIG.
If you are unsure and want a bit more advice drop me a pm and i will give you my mobile for a chat.
Regards
Scotty B
Scotty CSL said:
Make sure you know exactly what the HLC (Higher Lending Charge) is or sometimes called MIG (Mortgage indem guarantee)
This will kick in at a certain level the norm is 75% LTV but varies dependant on lender.
It is an insurance policy you pay for. Used by the lender to safeguard against default.
It can be a large amount sometimes several percent which is added to the loan.
The KFI (Key facts illustration) supplied by your Mortgage advisor will show a break down of all the costs and fees and should show the HLC or MIG.
If you are unsure and want a bit more advice drop me a pm and i will give you my mobile for a chat.
Regards
Scotty B
??? HLC's kick in at 75%??? This will kick in at a certain level the norm is 75% LTV but varies dependant on lender.
It is an insurance policy you pay for. Used by the lender to safeguard against default.
It can be a large amount sometimes several percent which is added to the loan.
The KFI (Key facts illustration) supplied by your Mortgage advisor will show a break down of all the costs and fees and should show the HLC or MIG.
If you are unsure and want a bit more advice drop me a pm and i will give you my mobile for a chat.
Regards
Scotty B
You're kidding. They usually kick in at 90% but maybe charged on balances above 75%... and if his Mortgage advisor has got the guy at BTL mortgage with HLC's on it he's using the wrong advisor.....
Thanks for all the advice.
I have checked with the key facts illustration my advisor sent me, and there is no extra MIG or HLC attached to the particular mortgage I will be going for. At present with just a 75% loan needed.. I meet all the lenders criteria in terms of % of rental achieved etc...so the mortgage side of things are fine.
What I was wondering was whether any BTL investors out there put in more that the minimum amount required by the ender (be it 25%, 15% or whatever)....thereby generating a bit more of a rental profit . Or would I be wiser to use that cash to pay off my existing house mortgage?
I have checked with the key facts illustration my advisor sent me, and there is no extra MIG or HLC attached to the particular mortgage I will be going for. At present with just a 75% loan needed.. I meet all the lenders criteria in terms of % of rental achieved etc...so the mortgage side of things are fine.
What I was wondering was whether any BTL investors out there put in more that the minimum amount required by the ender (be it 25%, 15% or whatever)....thereby generating a bit more of a rental profit . Or would I be wiser to use that cash to pay off my existing house mortgage?
Assuming you've worked out that the 75% mortgage etc for the property you have in mind gives you a 7%+ return (any less and you might as well stick your money in the bank for a safer return) my view is that any surplus cash that you might have should be used to fund the next property so that you get another 7%+ return.
If the surplus cash is not great enough at the moment to do so you can lump it into the bank and add to it (or put it into the existing mortgage as long as you're able to remove it without penalty at a later date once it's large enough for your next deposit).
It's about making that money work hardest for you at a given moment. If you can quantify that putting the surplus into the current mortgage is better than funding your next property purchase, then do that; if not crack on with finding the next property.
If the surplus cash is not great enough at the moment to do so you can lump it into the bank and add to it (or put it into the existing mortgage as long as you're able to remove it without penalty at a later date once it's large enough for your next deposit).
It's about making that money work hardest for you at a given moment. If you can quantify that putting the surplus into the current mortgage is better than funding your next property purchase, then do that; if not crack on with finding the next property.
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