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Mortgage advice
- Thread starter IvanDobskey
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Associate
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That reminds me of when Jeremy Clarkson though it was safe to give out his bank details in the paper. What he didn't plan on was people giving out his details to the charity collection workers that ask you to set up a direct debit in the street.
I can confirm that these bank details are not real. Sort code is invalid.
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Shouldn't be hard to get a joint mortgage of that value between the both of you without having to sell your property. Best option is sit down with a mortgage advisor and financial advisor to get the best options.
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The aim is to have as small a mortgage as possible. Girlfriend has some money saved up.
This is exactly what we did when I bought a house with the missus. We left 25% equity in each of our houses and used the rest as a deposit on a bigger house with both our wages on the mortgage.
Caporegime
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IMO you would be making a mistake selling it.
£200K with her deposit and both your wages and the rental income would be easy to get anyone sign off on.
I imagine the rent would pay for your £200K home on a 35 year mortgage on it's own. Therefore your mortgage would be zero. Your other home would pay for this one.
Just make sure you vet the tenants personally. Make sure they work in decent jobs or have worked for a long time with the same employer, etc. Ask for proof. Should have no issues then.
I thought most lenders don't consider rental income when evaluating mortgage affordability?
If he doesn't sell the old house then he'll effectively be paying a mortgage on the value. He'll need to borrow £140k more against the new house than if he'd sold the old house. That's going to be a much higher LTV and therefor have higher interest rates.
He needs to balance up how much he'd get from the rental income (after paying tax on it and maintenance costs, etc) against having a cheaper mortgage and which would give him a lower overall cost. It's not as straight forward as saying "it's a mistake to sell it". It may well work out better off keeping it and renting it, but without knowing all the details, it's impossible to tell.
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she has savings. he effectively has no mortgage @ £40 per month. so he should have ample opportunity to save too. rather than paying the £5K or so that is left I would just pay the £40 a month and stick that £5K on top of her deposit.
as for rental income it may well be disallowed but he could use it as security. it will likely depend on the lenders. 2 of them working should be able to get a £200K mortgage with wages below the average UK salary. as long as they are earning over £40K a year combined they should be fine. with his £5K and her savings. I'm assuming her savings are at around £15K here. so £20K+ deposit.
if need be he could even release £10K of equity from his current place to help with deposit and stick it up as security. he has so much equity £10K will make no difference to the bank but it will their new mortgage and interest rates.
Yep, it may well be possible for him to get a mortgage on the new house but my point is that it may not be the best option.
Let's assume his gf has 10k deposit.
He sells his old house and puts the 140k towards the new house.
The 200K house with 50k mortgage over 20 years at 1% gives £230 per month*
If he doesnt sell his house, and they only have the 10k deposit from his gf:
the 200k house with 190k mortgage at 2.49% gives £1006 per month*
So does the rental income (-tax, -maintenance of old house, -months when house is not rented) make up the difference and, considering the total value of assets at the end, is that the most effective way to invest his money?
*used best rates I could see for the LTV values.
Let's assume his gf has 10k deposit.
He sells his old house and puts the 140k towards the new house.
The 200K house with 50k mortgage over 20 years at 1% gives £230 per month*
If he doesnt sell his house, and they only have the 10k deposit from his gf:
the 200k house with 190k mortgage at 2.49% gives £1006 per month*
So does the rental income (-tax, -maintenance of old house, -months when house is not rented) make up the difference and, considering the total value of assets at the end, is that the most effective way to invest his money?
*used best rates I could see for the LTV values.
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So £776 a month more to have £340K of assets instead of £200K.
of which the £140K asset should bring in rent of around £600-£700 a month of rent.
Let's say worst case scenario £600, maintenance will be small bills of £1K every 5 years when a bathroom, boiler or kitchen needs refreshed remember it's a small property. roof being the only big issue but they should last 40 years and be £15K on a small property. let's call it £600 a year maintenance to average it all out. take 15% off the £600 a month for additional insurances and management costs.
(600 * 0.85 * 12) - 600 = 5520 a year
£4416 net after 20% tax
£368 a month
So £408 a month more means he has 2 properties instead of the 1 with value of £340K vs £200K.
He will make over £52K by keeping it assuming house prices don't increase at all. This is over a 20 year period too.
If he goes for 35 year mortgage it's likely he won't be paying any more on his second mortgage. So essentially he gets £140K house for free after 35 years. Which again is assuming it doesn't increase in value in that time. If it does he is laughing.
I'll ignore your maintenance costs which I think you have vastly underestimated as well as the fact that you've budgeted on having the house rented out every single month for the 20 year period.
If he sold the flat and invested the £408 per month instead, he'd only need 3.4% return to make up that £140k difference.
If he sold the flat and invested the £408 per month instead, he'd only need 3.4% return to make up that £140k difference.
Caporegime
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assuming house prices don't increase at all. they could increase 2% every year easily and then there is nothing he could invest in with as much ease to make that sort of return apart from commercial property.
That's possible. It's also possible that it doesn't increase at all or drops in value.
The 3.4% return I mentioned was the minimum required to make up the £140k difference. Realistically, you can get a lot more than that.
I'm not saying that he would be better off if he sold the house, just that it's not as clear-cut as some people make out.
"ease" is not a word I would use to describe investing in rental property.
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If the sums work it's worth doing, but yeh, ease is definitely not a word I would use unless you go fully managed which then eats into profits quite a bit.
Ha, 1000x this.
Its easy most of the time, when it goes wrong its not simple. And if you get it wrong it can COST!
Budget on it being rented 10 months out of every 12.
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Lots of interesting thoughts, cheers guys 
At the moment I'm just concentrating on getting the mortgage right down.
One of my big problems at the moment is job stability. Chances are I could be out of work by the end of the year
But if that happens I'll be walking away with a huge payout having been there 27 years.
At the moment I'm just concentrating on getting the mortgage right down.
One of my big problems at the moment is job stability. Chances are I could be out of work by the end of the year
But if that happens I'll be walking away with a huge payout having been there 27 years.
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Lots of interesting thoughts, cheers guys
At the moment I'm just concentrating on getting the mortgage right down.
One of my big problems at the moment is job stability. Chances are I could be out of work by the end of the year
But if that happens I'll be walking away with a huge payout having been there 27 years.
If your expecting a big pay out for redundancy then don't let it worry you to much. Statuary redundancy pay is capped at £14670 (£15k in N.I) and obviously depending on the company they might pay a good bit more than that. So worst case scenario the redundancy could keep you going 6-12months (depending on your current lifestyle/salary) which would give you plenty of time to get back into employment and then any remaining amount could be used as an overpayment to reduce mortgage repayments or keep it aside for "work" as and when required at both properties
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Thanks for the encouragement
The plan is to get the mortgage paid off before September and cut back on my monthly outgoings as much as possible.
I will start looking for something else a couple of months before any potential leave date.
I have a pretty good idea what sort of settlement I'd be leaving with and it's pretty healthy. So I'm sure I'll be ok.
Anything left over when I'm back in employment will be put into property.
A lot of potential upheaval to come though and it is unnerving having never been in this situation before.