Buy-To-Let Mortgages

[Elton]

Has anyone got experience of buy to let mortgages?

 

It's just pie in the sky right now, but the place I work is up for sale, along with a house and a couple of acres. I can't afford it, but was wondering about the possibility of renting the house out.

 

Seems to me, though, that it's a bad time to be buying property and I'd probably struggle to get the loan.

 

I'll do some research into the feasibility, but wondered if anyone else had ever done this and whether they got a mortgage, or a business loan.

[chevin]

I don't know what it is like in the UK mate, but there is one thing of which you can be certain - you will have to put up your present home as security on the loan and probably a pretty hefty deposit too! The banks always make sure that if things go pearshaped they are the ones who come out hurting the least. They can take everything off you and still leave you facing a bill.

 

Take some pretty serious advice before you get into anything like that.

[Elton]

I spoke to a very well-off business man about it today. He advised against it.

 

Basically, as he said, it seems that it's easier for those who have money (or security) to get money.

 

So bloody hard to try to get a foot on the ladder over here

[chevin]

It is anywhere mate. I know that when I bought my business I had to put everything and every penny I owned against the loan - and I also had to go to the only bank that would entertain "first timers" which, obviously, charged the highest fees by far!

 

I was fortunate, I succeeded, but I saw others fail and saw no sympathy from the banks concerned.

[Ken Davison South Wales]

It is possible if you own your own home with a good percentage of unencumbered equity.

 

You have to sure you have a sound business plan and always be conservative with your projected income. Over stating leads to problems.

 

If it does not add up give it a miss, to many pad figures to acheive their aims and come unstuck.

 

I stuck my life savings into our garden centre and a hovel that I already owned which is now our home.

 

It has taken five years to establish a good turnover in order to redevelop the garden centre and during the first two years beans on toast was a banquet.

[awaaar]

Elton - dunno much about them myself, but I wish I did....a lot of my asain friends in Preston and the surrounding areas know lots about them....

 

Thats why they all drive bentleys and ferraris when they're 28 yrs old....think we missed a trick with those

 

Think they mentioned something about having to live in the property for twelve months before you can let it out..

 

[ 22. June 2005, 11:32 AM: Message edited by: awaaar ]

[FearTheHands]

quote:

---

I don't know what it is like in the UK mate, but there is one thing of which you can be certain - you will have to put up your present home as security on the loan and probably a pretty hefty deposit too!

---

Not true. For 'buy to lets' you can get what's called a 'non status mortgage'. This means you are borrowing against the income that will be generated from your tenants. If you failed to pay the mortgage & the mortgage lenders were to foreclose they would repossess the buildings/land.

 

No lender is going to lend out money that they are not going to see back if everything goes wrong. i.e. They would not lend you 200k to buy somewhere that they could only get 175k back on.

 

It's only the same as buying a house for yourself with a 100% mortgage. Lenders don't expect you to put your parents house up as collateral as well.

 

You need to prove income in order to pay back the loan, this can be done by proving your rental income at least covers the mortgage repayments.

 

I'm not advising one way or the other that you should do it or not, I'm simply pointing out your options.

[chevin]

FearTheHands:

quote:

---

I don't know what it is like in the UK mate, but there is one thing of which you can be certain - you will have to put up your present home as security on the loan and probably a pretty hefty deposit too!

---

Not true. For 'buy to lets' you can get what's called a 'non status mortgage'.

I gathered that there was a fair bit more involved than just the house. From what Elton said I assumed that there was another building plus a couple of acres of land, but the only envisaged income mentioned in his querie was the income generated by renting out the house. I have lost track of building and land values in the UK, but I would have assumed that the rental from the house would fall short of servicing a loan big enough to secure the package.

[Ken Davison South Wales]

Most commercial lenders will do 70% of the value and that is quite often lower than the proposed purchase price.

 

This is why they are looking for extra security.

 

As the one Elton mentioned had a rentable house this would assist greatly.

 

Income to be generated from a commercial venture is very important because despite what people say banks do not like having to fore close on properties.

[poledark]

Elton, if you bought the property would you own the place where you now pay rent (your business)?

 

If so then all you would need to do is rent the house out and end up owning the freehold of your business and a house for rent!!

 

Sounds good to me,more a case of "can you aaford to let someone else snap it up"

 

Den