zak100 Posted October 9, 2011 Report Share Posted October 9, 2011 Hi. I want to buy a property for £249k in East London. I need to borrow £125k Currently I pay £380 on mortgage with only £7000 outstanding on the loan. If I remortgage, then the repayment will become £565 and the possible rent income is £1200 Will this work. Thanks Link to comment Share on other sites More sharing options...
Richlist Posted October 10, 2011 Report Share Posted October 10, 2011 Will this work. Your numbers don't add up. You say you will borrow £125,000 and the repayments will be another £185 per month. That equals 1.77% on an interest only basis which seems rather low at todays silly mortgage rates. Who is going to be your lender ? Link to comment Share on other sites More sharing options...
zak100 Posted October 10, 2011 Author Report Share Posted October 10, 2011 Being a remortgage, the previous mortgage of £380 would be superceded by the new repayment of £565. Anyway, the lender is Natwest at 2.5% fixed for 2yrs. Is this a good deal. No need for BLT mortgage. Link to comment Share on other sites More sharing options...
Richlist Posted October 10, 2011 Report Share Posted October 10, 2011 I still can't give you an answer until I understand the numbers. So, you are borrowing at additional £125K @ 2.5% . Interest only = £3125 per year or an extra £260 per month. BUT thats not the figures you have given us......so it still doesn't make sense. What happens after 2 years ? Whats the interest rate revert to ? What are you fees for arranging this mortgage ? Link to comment Share on other sites More sharing options...
zak100 Posted October 10, 2011 Author Report Share Posted October 10, 2011 After 2 yrs the interest rate becomes 4.5% Mortgage arrangement fee = £0 (as I have an account at the bank) However in order to compenstae for the higher rate after 2 yrs, I will make overpayments to control this. Link to comment Share on other sites More sharing options...
Richlist Posted October 10, 2011 Report Share Posted October 10, 2011 OK so, rough figures as follows: Income: 1200 X12 = £14400 Expenditure after 2 years = * Mortgage of £132000 @ 4.5 % IO = £5940 * Assuming you are paying the other £125000 from savings you will be loosing interest at say 3% = £3750 * Agents costs of 12% (inc VAT) on £14400 = £1728 * Say £1200 for voids (1 month per year) * Say 5% of £14400 for repairs & mainteance = £720 * Insurance = £400 Not making allowances for bad debt, telephone, travel costs, miscellaneous, gas cert, furnishings, deposit protection, inventories, rent guarantee insurance etc etc......that provides a gross profit of £14400 less £13738 = £662 Less Tax at 20% = £132 Profit of £529 Is this a good deal......Answer = No Link to comment Share on other sites More sharing options...
zak100 Posted October 11, 2011 Author Report Share Posted October 11, 2011 ouch; that was painful. I suppose the only other factor which I could consider is that in say 5yrs the price of houses in London would have increased and in 10yrs I can give the place away to my daughter Nevertheless, thanks for the advice. Link to comment Share on other sites More sharing options...
Richlist Posted October 11, 2011 Report Share Posted October 11, 2011 I suppose the only other factor which I could consider is that in say 5yrs the price of houses in London would have increased ..... Who says so ? You might hope prices will have risen, many might be hoping along with you BUT there is no guarantee. We are in unchartered territory, the economic crisis, the problems with Europe, the Euro, the US Dollar, shrinking economies, changing governments, new & unknown tax burdens, changing legislation etc etc who knows. Property prices in Japan haven't gone upwards for 20 years. Hiistorical property price rises in the UK are no indication of future performance. Never make assumptions and only gamble what you can afford to loose. OK, so thats the bad news. The good news is it could al be bollocks and you might be right. Good luck. Link to comment Share on other sites More sharing options...
zak100 Posted December 3, 2011 Author Report Share Posted December 3, 2011 In the end we bought a 2 bedroom house for £225k in sw london. Currently been rented for £1100 but could easily fetch £1200+ Remortgaged borrowing was £97k, which I know can be cleared in less than 4yrs. So, my repayment on the mortgage is £430 per month at 2.5% for 2yrs then will become 4.5%. Surely, this cannot be such a bad deal. The £249k that I wanted to purchase in Ilford we decided not to consider. In fact, I have been going to the area where the house is. There are 3 properties 'to let' and none of them have gone for rent yet for over 8 weeks. Link to comment Share on other sites More sharing options...
Richlist Posted December 3, 2011 Report Share Posted December 3, 2011 Remortgaged borrowing was £97k, which I know can be cleared in less than 4yrs. I very much doubt that......show me the calculations so that I can be proved wrong. So, my repayment on the mortgage is £430 per month at 2.5% for 2yrs then will become 4.5%. But you are assuming base rates will remain at 0.5%.........which I also doubt. You might like to recalculate using a 6.5% mortgage rate. £1100 - £1200 pcm gross rental income on an outlay of £225K is about right. In my area a £110K property fetches £550-£600 so its ratio is the same.....and that applies to most areas of the country. Seems you paid about the right price based on rental yield. Link to comment Share on other sites More sharing options...
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