Buy to let mortgages

[Tampon]

Me and gf are planing on a few things, let me explain.

We are going traveling for a year or two in april. One year round asia and then back and either a small boat or round the med or a self built camper round Europe.

We have also have a little bit of money ( £60k+ ) and would desperately like to move to dorset on the coast ( her family are all there and I love it ).

Now we were looking at a few places at the weekend around the £150k mark for 2 beds and cheaper for 1 beds.

She will be getting the mortgage due to a poor credit rating on my behalf, the thing is with a largish deposit and borrowings of 90k ( three time her salary ) I am figuring this should be relatively easy.

What about a buy to let mortgage ? as we would be away for so long risking not being found out with a normal mortgage and renting it seems silly if we can get one.

Would 30-40% deposit be enough at the moment to get a buy to let mortgage ? is it worth it, or should we get a "normal" mortgage and then rent it anyway ?

We have never owned a property nor rent one out so we are looking for advise.

Reason we are wanting to buy now is when we come back it could take a while to get steady jobs again ( we are thinking of changing careers when we get back ) and getting the necessary salary slips of 6 months. With the 2 years traveling and then the time to get it mortgage sort and find a property when we get back would mean not being able to buy somewhere for at least three years, which we don;t like the thought of.

Have thought about just leaving the money in a saving account but family are pushing for us to get something down here and are hinting they would chip in to help as well.

My head is spinning at the moment.

[escargot]

Scotal is your man for mortgage advice.

[pmanson]

Tampon,

Not sure what areas you are looking at by my parents live in Mudeford (not far from Christchurch).

The local grapevine is alive with rumours that property developers from Sandbanks have been seen in the area and Gary Rhodes has just opened/is in the process of opening a restuarant there.

Just a suggestions if you're looking for an area to move to.

Cheers,
Phill

[sjg]

Buying a house? In a falling market? To rent out in the hope of a return (presumably left in the hands of an agent to maintain)? With someone you're not married to before embarking on the kind of trip that makes or breaks relationships?

Does any part of this make sense? Keep it in the bank.

[escargot]

Ahh mudeford

I've got fond memories of going crabbing there as a lad. We used to live in Brockenhurst not far away.

[speedychrissie]

Why buy a house and then 6 months later leave the country for 2 years? That just seems a bit odd to me. And how are you planning on keeping up with the repayments on the mortgage if neither of you will be working?

[touching cloth]

It sounds like a sound enough concept in as much as you can raise the mortgage now and as you say that might be trickier when you first return. Personally I would look at a "normal" mortgage and then ask for their permission to let it out when you are ready to do so, worst case they transfer it then onto a BTL rate but they may not even bother.... as above Scotal is your man for this. The only worry I would have is that who will manage stuff whilst you are away and what happens about paying the mortgage if it were suddenly empty for 4-5 months? Obviously you can get a "managed let" which will deal with most trivial stuff whilst you are gone, but it would be nice to have someone local to make decisions, act as a contact for the letting agent and authorise work they may need to do etc - if there is a family member for instance who would be happy with that then it's very doable.

[pmanson]

escargot said:

Ahh mudeford

I've got fond memories of going crabbing there as a lad. We used to live in Brockenhurst not far away.

Brockenhurst is a lovely part of the world as well. Got some family friends there who also moved down from Bucks.

[BoRED S2upid]

30 - 40% is enough.

Get an agent to manange it while your away, you don't want a call about a leaking tap half way around the med.

[maser_spyder]

pmanson said:

escargot said:

Ahh mudeford

I've got fond memories of going crabbing there as a lad. We used to live in Brockenhurst not far away.

Brockenhurst is a lovely part of the world as well. Got some family friends there who also moved down from Bucks.

Yup, nice part of the world indeed.

I'm from Wellow, near Romsey, and have just moved my boat back to Bucklers Hard (near Beaulieu), although we're still in Cheltenham at the moment.

It's been quite odd spending so much time down there over the summer, all so familiar, and very pretty area indeed.

Can't go far wrong with anywhere along the coast down that way, it's all stunning.

[Tampon]

sjg said:

Buying a house? In a falling market? To rent out in the hope of a return (presumably left in the hands of an agent to maintain)? With someone you're not married to before embarking on the kind of trip that makes or breaks relationships?

Does any part of this make sense? Keep it in the bank.

Yeap, but we aren;t buying it as a investment, not expecting a return ( am small one when we get back would be nice but doubt it, pump it back into the property, boiler carpets etc).

Falling market doesn't mean a lot to us, by the time we get back I doubt they will have dropped that much more than now ( they are down nearly 30% at the mo ), and we will be in a much more difficult situation as to getting the finance in place.

If we buy our family home 10% less than its best price and live in in til we have a second child ( 7-8 years after we get back), that will be 10 years since we bought it so not affected as much. Never the wrong time to buy a home, only wwrong time to buy a investment.

Presumed wrong, it is in Swanage, with 7 ( 8 if you count a aging grandmother ) family members in the same town, one who build his own house in france and another who did his own house up from wreak and ruin and another who is a plumber. Maybe use a agent to find a tenant, but due to the family living there for 3 generations quite likely we will find someone ourselves on the village grapevine.

Not Married? what, is this the 1940's ? but just for the record we bought a engagement ring at the weekend.

Bank is offering 4.45% if we lock it in for three years, doesn;t sound that appealing really, not when we could get our foot on the property ladder without stretching ourselves.

As for what happens if we have it empty for a while, 1st idea would be because we have a sizable deposit our mortgage won't be as high as most, and therefore the rent needed to cover it whilst we were away wouldn't need to be at max achievable, rather have someone in 365 days a year and be 10% cheaper, even consider having the rent at lower than mortgage and put in our own to supplement. We would leave with a few k in the bank as a "house fund".

It is having a home to return to, bought when prices were lower, rates were low and builders were available, in an area we adore.

Mortgage would be around £600-650 a month, and rent for a very cheap one bedroom place ( which kicks you out for summer rentals ) is £590, we would have a 2 bedroom place.

I think it is a sound idea, numbers seem to make sense, just wondered about the buy to let thing.

Edited by Tampon on Thursday 24th September 14:58

[Tampon]

speedychrissie said:

Why buy a house and then 6 months later leave the country for 2 years? That just seems a bit odd to me. And how are you planning on keeping up with the repayments on the mortgage if neither of you will be working?

Becuase we have the money and access to credit, no chain, property is relatively cheap at the moment.

rent would cover the payments due to a large deposit, meaning the cost of the place per month should be covered easily even at cheap rental prices ( helps keep it occupied ).

if we travel and come back, we don;t know the situation with house prices, credit, our financial situation ( worst case we come back and can't afford to live by ourselves we could rent a room, or just live with family til we we secure and rent the place out still.)

we are buying the place to live in, just renting it out til we get the chance to live in it. We wouldn't sell for years ( family outgrew it )

[JQ]

Tampon said:

Yeap, but we aren;t buying it as a investment, not expecting a return ( am small one when we get back would be nice but doubt it, pump it back into the property, boiler carpets etc).

Falling market doesn't mean a lot to us, by the time we get back I doubt they will have dropped that much more than now ( they are down nearly 30% at the mo ), and we will be in a much more difficult situation as to getting the finance in place.

But you are treating it as an investment. You're buying it now because you think the market is at it's bottom and getting it cheap - you don't actually need a home at the moment.

"by the time we get back I doubt they will have dropped that much more than now" - you obviously know something I don't. There are plenty of reasons why values will drop further - interest rates, vast drops in government spending after the election, rising unemployment, lack of finance. I can't say they will go down in value, but if I'd managed to save £60k I wouldn't be gambling on property at the moment. A 30% drop from the peak is nothing in comparison to the rises over the past 10 years.

[sjg]

If you're not expecting a return, is there any point in doing it?

That 60k in the bank at that rate will give you over £5k more in interest when you get back. Plugging some values into moneysupermarket (assuming you're not going to get shafted with a BTL rate) and rightmove means an optimistic £180 a month between what you pay to service the mortgage and what you're likely to get renting it. That's much closer to £4k, assuming no empty months, no fees, no repairs or improvements needed. Essentially paying a minimum of a grand for someone else to live in "your" house for two years.

And this is assuming house prices stay static. Everything is very much looking downwards at the moment - and last time round it took a few years past the initial big drop before values finally bottomed out, do you think it's more positive this time round?

It seems a very large commitment for no benefit - especially as you say that you're not sure what you'll want to do career-wise when you get back. You might have hit on a much better use for that money when you get back - you might be itching to start a business, for example - which would mean all kinds of hassle and extra fees to liquidate again.

As I say, just really struggling to see what you gain here for tying up your cash for a couple of years. Dorset will still be full of houses to buy, and if anything, banks will be more willing to grant mortgages again in cases that are less-than-ideal.

[Tampon]

I understand what your saying, but I am not looking to buy the cheapest house there is, i am looking to securing my future, 4k verses 5k over two years is £500 a year or £250 each a year. that 1k isn't going to make buying a place any easier or accessible than it is now.

I would happily pay that to know that whilst i am traveling around the world in a financial downturn I have a roof over my head that I own when I come back.

Especially when we don;t know what the situation of getting mortgages will be when we get back. Going from working in london to working in rural dorset will have a affect as to how we are looked at by the banks.

Say we end up earning a total of 18k between us as we retrain, or go back to uni, no bank will lend us the money to buy a 150k+ pad( as was said we don;t know what will happen, could go up making it harder), so we are left with a pile of money and no home.

This way we secure the loan, buy the house, have 2 years of mortgage paid off, and when we get back if that is the case income wise we could rent a room and have our own house.

Of course it could go the other way and we could have still got the place but this way we know for sure and are 2 years closer to paying the mortgage off.

I am taking the uncertainty out, I know we can afford it now, the rent will be able to cover the mortgage ( large deposit ) and we will definitely own in the area we want to settle down in when we get back, and worst case job wise we can afford to live there and pay the mortgage.

I am not claiming to know the future markets or values, the opposite, I can afford now so why take the punt and hope for even better circumstances in two years ? It is pretty good now. It might be worst and then I can't get want I want or the size I want now ?

This way I know whats happening and what will happen, even worst case if the values of the place drops another 30%, it doesn;t bother us as we still want the place, nd want to live init for the next decade and have such a large deposit we wouldn't be in negative equity.

[Tampon]

JQ said:

Tampon said:

Yeap, but we aren;t buying it as a investment, not expecting a return ( am small one when we get back would be nice but doubt it, pump it back into the property, boiler carpets etc).

Falling market doesn't mean a lot to us, by the time we get back I doubt they will have dropped that much more than now ( they are down nearly 30% at the mo ), and we will be in a much more difficult situation as to getting the finance in place.

But you are treating it as an investment. You're buying it now because you think the market is at it's bottom and getting it cheap - you don't actually need a home at the moment.

"by the time we get back I doubt they will have dropped that much more than now" - you obviously know something I don't. There are plenty of reasons why values will drop further - interest rates, vast drops in government spending after the election, rising unemployment, lack of finance. I can't say they will go down in value, but if I'd managed to save £60k I wouldn't be gambling on property at the moment. A 30% drop from the peak is nothing in comparison to the rises over the past 10 years.

I am buying it now because I am traveling soon and can't nip back in a 9 months if the situation get even better for us.

I don;t mind if they dropped 30%, it wouldn't affect us, we aren't selling and we wouldn't be in negative equity unless they dropped something cronic ( 50% + from now ) and then we would have a lot more types of worries anyway.

Buying a home is never a gamble, if you need a home you need a home, we will need a home in 2 years and can afford to put ourselves in a secure position to have a home in two years by buying now. Definitives now, not wing and a pray hopes of market falls and great job later, that seems risky and a gamble to me.

[Tampon]

sjg said:

If you're not expecting a return, is there any point in doing it?

Yes so we know what our future holds and where we are going to be, it isn;t all about money, that what got people into this mess, treating all house purchases as investments as opposed to secure a stable home.

sjg said:

That 60k in the bank at that rate will give you over £5k more in interest when you get back. Plugging some values into moneysupermarket (assuming you're not going to get shafted with a BTL rate) and rightmove means an optimistic £180 a month between what you pay to service the mortgage and what you're likely to get renting it. That's much closer to £4k, assuming no empty months, no fees, no repairs or improvements needed. Essentially paying a minimum of a grand for someone else to live in "your" house for two years.

And having two years of mortgage paid off, if the bank said to you, you could reduce your mortgage term by 2 years for a extra bag of sand you would say no ?

sjg said:

And this is assuming house prices stay static. Everything is very much looking downwards at the moment - and last time round it took a few years past the initial big drop before values finally bottomed out, do you think it's more positive this time round?

it not going to be more positive for us than it is right now, earning london money and buy in the country. Not something we want to do when we come back. Price drops don't have to be bad, we could upsize if we got good job and save more on the larger house ( not a likely senario but a extreme point to prove drops aren't always bad for everyone ) even if not, we aren't buying it to sell it, we are buying it to live there, lower value doesn't affect us living in it.

sjg said:

It seems a very large commitment for no benefit - especially as you say that you're not sure what you'll want to do career-wise when you get back. You might have hit on a much better use for that money when you get back - you might be itching to start a business, for example - which would mean all kinds of hassle and extra fees to liquidate again.

I already run my own business and would keep all the tools necessary to start it up down there if needed ( hopefully wouldn;t have to unless necessary )

sjg said:

As I say, just really struggling to see what you gain here for tying up your cash for a couple of years. Dorset will still be full of houses to buy, and if anything, banks will be more willing to grant mortgages again in cases that are less-than-ideal.

True but they might go up which would be bad for us, and banks will be more reluctant to lean to us as we hadn;t had steady jobs for two years, and weren;t earning enough to borrow a large enough sum even with a large deposit even though it would be serviceable. That is the gain for us, we get security, definite home in a area we love guaranteed when we get back.

Edited by Tampon on Friday 25th September 00:32

[drumm23]

Tampon said:

Especially when we don;t know what the situation of getting mortgages will be when we get back.

Always used as an argument for going long property... In reality though, if you come back and credit is significantly tighter, then houses will be significantly further down in price. In other words, if you can't afford it (get credit) with your chunky deposit then who can?
It's like the "buy now or be price out forever" stupidity ... if everyone's priced out - then, uh, who's going to buy?
Also why property will never outperform inflation over the long term.

The right move is to save your money and not get into a large amount of debt in a deflating market and a deflating economy; cash has been king for the last 18 months and I don't doubt that it still will be when you come back. Though I would definitely diversify a chunk of it out of pounds.

[scotal]

Tampon said:

We are going traveling for a year or two in april. One year round asia and then back and either a small boat or round the med or a self built camper round Europe.

Nice, I'm, jealous

Tampon said:

She will be getting the mortgage due to a poor credit rating on my behalf, the thing is with a largish deposit and borrowings of 90k ( three time her salary ) I am figuring this should be relatively easy.

Yes that would be easy.

Tampon said:

What about a buy to let mortgage ? as we would be away for so long risking not being found out with a normal mortgage and renting it seems silly if we can get one.

Pick your lender properly and you wont have any problem getting consent to let on a resimortgage.

Tampon said:

Would 30-40% deposit be enough at the moment to get a buy to let mortgage ? is it worth it, or should we get a "normal" mortgage and then rent it anyway ?

BTL's are tiered at 60 & 75% LTVs' so yes you should be ok with that.

Tampon said:

We have never owned a property nor rent one out so we are looking for advise.

Herein lies the problem with BTL, most lenders will not do a btl for first time buyers. THey assume that an applicant would be getting a mortgage they couldn't afford on a resi basis, and then living in the property.

Tampon said:

Reason we are wanting to buy now is when we come back it could take a while to get steady jobs again ( we are thinking of changing careers when we get back ) and getting the necessary salary slips of 6 months. With the 2 years traveling and then the time to get it mortgage sort and find a property when we get back would mean not being able to buy somewhere for at least three years, which we don;t like the thought of.

There are lenders who will lend when you have only just started a job. Provided the job is permanent. Case of picking the right lender.

Have you considered what you will do if the proeprty is vacant for a period of time, how will you pay the mortgage? Would you have to shorten your trip to come home and look after a property that has suddenly become a millstone?

If its only going to be your OH on the mortgage, you do realise that it will have to be her only on the deeds. IF that's the case, how much of the deposit is yours? and how will you secure that in the event of a split? (It happens)

If you want me to give you chapter and verse on mortgages I'm happy to, drop me a pm.

[Tampon]

drumm23 said:

Tampon said:

Especially when we don;t know what the situation of getting mortgages will be when we get back.

Always used as an argument for going long property... In reality though, if you come back and credit is significantly tighter, then houses will be significantly further down in price. In other words, if you can't afford it (get credit) with your chunky deposit then who can?
It's like the "buy now or be price out forever" stupidity ... if everyone's priced out - then, uh, who's going to buy?
Also why property will never outperform inflation over the long term.

The right move is to save your money and not get into a large amount of debt in a deflating market and a deflating economy; cash has been king for the last 18 months and I don't doubt that it still will be when you come back. Though I would definitely diversify a chunk of it out of pounds.

I don't think I will be priced out forever, but I will be 31 when I get back and I will want a home then, not wait again for x amount of time. I want to be settled after 2 years of perminant transit.

I don't care if others won;t be able to afford housing, it won;t affect me as I will have already had credit and a property. I can afford it now in the situation I am in now, I don;t know the situation when I get back.

cash is king, but if a bank won;t lend me the money to buy a place when I get back because of earnings, then no one will sell me a £150k property for £70k cash. Cash or no cash, best case when I get back I can afford to do what I can do now, worst case I can't.

I am not planning on selling the place when I get back, i don;t care if people are buying or not, if it shoots up in value then great, but I won;t be selling as other places will have risen and I am not going to stretch myself. If it goes down in value fine, I am not selling it. I am not selling, how do i make that clear, values in 2 years don;t matter to me. The only thing that matters is my ability to get a mortgage, unless someone can say to me that I can definitely get a mortgage when I get back then I am being offered advise on something I never asked.

I don;t need to knwo what to do with my 60k I need to know whats the best way to approach what I want to know.

I know for us it is better to buy now, for you, you might like the money in the bank, not us, we want a home when we get back. can you predict whether we can do that ? I can so I am not taking the risk.

If it doesn;t beat inflation fine, it is not a money making enterprise it is buying a home, I want a place I can do what I want to with the security of owning it and being able to landscape the garden, paint my colours, knock down walls etc that renting won;t allow me to do.