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Q&A » Mortgages
we currently owe £122,000 on our current house. It is worth an estimated £140,000.
We would like to rent it out and buy another house for £200,000.
We only have enough for a 5% deposit. anyone think this is even remotely possible?
Currently missing the days Northern Rock would offer me £260,000 even though at the time I could never have made the first payment!!!!
Joint income of £67,000
Am I just dreaming??
Potter
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878Those days have gone, fortunately, and hopefully will not return. There could be some relaxation from the present regime in specific cases.
To rent and buy a new property, you would need a Buy-to-Let mortgage, except in a few short-term instances. That would require at least a 20% deposit, which would mop up what you have said might be available for a new purchase. You would then need at least 10% deposit on the new property (£20,000). That appears to be a non-starter.
On top of that, you would fall foul of the income multiple which is now about 3, so you would be about £100,000 short, less 2 x net rent.
Sorry.
Mike
Posted on 05 September 2012 |
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90Am I just dreaming??
maybe, or maybe just mental?
Posted on 05 September 2012 | Love 0 loves
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57potter638
If you did what you are talking about, you would be a victim of the Chinese curse 'May you get what you wish for'.
Jobs are unstable. The UK economy is possibly the worst in the world. Huge Banking sector relative to manufacturing and most of it ' at risk'. Huge government debts. Hidden government debt 'off the books' PFI liabilities etc. State Pension Ponzi scheme.
Baby Boomer generation retiring and expecting to draw their pensions. Europe teetering on the brink of financial contagion. Note most mortgage lenders are offering quite short loan periods. If you got into negative equity on the new property...almost guaranteed with a 5% deposit, you would have to renew at the SVR on the day your now 105% or higher mortgage was due for renewal. If you have loads of dosh or expect a big salary rise, then go ahead. If you're doing this to make money, you are likely to be very disappointed unless you can buy well below 'market value'. Remember that market value is not what you valuer or surveyor or Bank thinks it is. Market value to you is what you get when you actually sell. It is definitely not what you choose to pay.
We are now in the sandpaper stage of a property downturn. Most folks expectations for a sell price are higher than what they will eventually get. this could go on for decades. Think Japan style property crash.
Posted on 05 September 2012 | Love 1 love
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0Something to consider before you venture down this avenue is would you be able to afford both mortgages for a few months?
You should seriously and honestly consider this answer, as if for what ever reason your tenants decide not to pay (yes there are legal recourses you can take but all are time consuming and expensive) or quiet periods in one set of tenants moving out and a new set moving in.
Also you would need to consider if the current property will need alteration or upcoming repairs that you would then be obligated to carry out.
Even if you then think you want to sell the property you wold still need to keep up with the mortgage payments during conveyancing and the selling process.
Posted on 06 September 2012 | Love 0 loves
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0Hi. Of course you can! Ive just done it. Although I struggle to see why you only have a 5% deposit with a joint income of 67k!...and a mortgage of only 122k (which, if on interest only, cant be much more than £300pm!)
My Wife and I have a sole income of 32k. Mortgage is 132k (£300pm).
I have been able to save 30k in the last 3 years.
Rental value is £750pm.
We just bought a house for 182k.
The only lender we could have was the Halifax and on the condition we had a 15% deposit and the mortgage was repayment.
Its a 2 year fix at 4.69% (£816pm)
I intend to overpay by the 10% maximum allowed..and save like crazy again, so that in 2 years the mortgage outstanding will be about 125k. I hope to be mortgage free (on this property) in about 10 years. If my income was 67k I could halve that to 5 years!
I would suggest leaving it until you have at least a 15% deposit!
Regards,
Neil
Posted on 06 September 2012 | Love 0 loves
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