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Advice Needed Please

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Advice needed please....

A bit of background first should help with your pearls of wisdom.... The misses and I are getting married in December and are looking to start a family (god willing) early next year. We are looking to buy June/ July 2010 with a single 3x mortgage.

Now.... the misses has a flat that we are currently renting out, details: £180k mortgage (“worth†235k) current rental income £1350 pcm. Although they’ve now gone onto periodic so are expecting them to move out soon. Mortgage Halifax SVR 3.5% paying circa £550 pm.

Do we sell? Extra 40k odd to reduce the new mortgage or wait to see what happens with IR’s as we’re getting a good yield at the moment? I know we may miss the opportunity to sell and hit the next dip. We probably won’t get a good mortgage rate if we have to fix.. Ok maybe I’ve just answered my own question? Or is the risk worth it long term?

Even with an Interest only 7%+ we would cover the mortgage (interest part) we plan to have a buffer of around £30k but with the misses wanting to no doubt feather the nest and the cost of rug rats... The flat is 10 mins walk to Clapham South tube (London) new build. In 10/20 years will I regret selling it when no doubt history will have repeated itself? Do I need to work out the saving on my new mortgage (the £40k) v long term average HPI – expenses? Arrrhhhhhhh!!!!!

Rich

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So your £55K equity is earning you a 17.5% pa yield. That says keep the flat - you won't get anything like in another savings product and it won't cost 17.5% to borrow £55K for your new place.

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Advice needed please....

A bit of background first should help with your pearls of wisdom.... The misses and I are getting married in December..

Don't do it!

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if your valuation is accurate then your yield is extremely good. you would remain cash flow positive even following a pretty monumental hike in interest rates. is your mortgage repayment or IO? sounds like you should hang on to it anyway.

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if your valuation is accurate then your yield is extremely good. you would remain cash flow positive even following a pretty monumental hike in interest rates. is your mortgage repayment or IO? sounds like you should hang on to it anyway.

IO - Also should we look at going repayment or using the surplus to pay down more quickly the family home mortgage? The later sounds most prudent?

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IO - Also should we look at going repayment or using the surplus to pay down more quickly the family home mortgage? The later sounds most prudent?

i'd keep equity in the clapham flat as that is the one you'll want to sell if things go wrong for any reason.

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Crikey, turning to HPC forum for advice....

Still, it makes more sense than going through the sums with an IFA... ;)

You haven’t met my IFA. Best mate but financially not very savvy......

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IO - Also should we look at going repayment or using the surplus to pay down more quickly the family home mortgage? The later sounds most prudent?

BTL Business man has no clue about money. see it here in TROLL weekly.

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You haven’t met my IFA. Best mate but financially not very savvy......

what a pair.

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So your £55K equity is earning you a 17.5% pa yield. That says keep the flat - you won't get anything like in another savings product and it won't cost 17.5% to borrow £55K for your new place.

Rubbish. Yield must be added to future capital fluctuations (gain or loss) before deciding what to do. And capital fluctuations will affect the whole flat - not only the equity. If the flat is worth 235k, then just a 4% annual fall in the flat value (-£9,600) will wipe out all the yield.

Properties will crash, sooner or later, depending on government policy, between 2010 and 1014. (Sterling will also crash, but IN-dependently of government wishes...) . Anyone with a property should sell now, invest the equity (not in sterling - invest either in commodities or in foreign currencies), and rent for a few years.

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That is an almost unbelieveably high rent. :blink:

I pay ~900 for a taty, but lovely 4 bed house in the best part of town that would sell for 300 in a flash and would prob get a valuation of more like 350 ( and that is not some fanciful value, I'm a bear and I rent it .) and the owner probably thinks it's worth close to 400.

If your yield is actually that good then hell hang on to it but surely at some point the tennant is going to wonder why they are living in a 200k flat for the sort of rent that gets them a 500-600k house.

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Rubbish. Yield must be added to future capital fluctuations (gain or loss) before deciding what to do. And capital fluctuations will affect the whole flat - not only the equity. If the flat is worth 235k, then just a 4% annual fall in the flat value (-£9,600) will wipe out all the yield.

Properties will crash, sooner or later, depending on government policy, between 2010 and 1014. (Sterling will also crash, but IN-dependently of government wishes...) . Anyone with a property should sell now, invest the equity (not in sterling - invest either in commodities or in foreign currencies), and rent for a few years.

Provided he can continue letting it for £800 pcm more than he's paying in mortgage costs he'll be alright whatever happens to capital values.

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That is an almost unbelieveably high rent.

These yields are happening in London, right now, as the prices of flats fell already, but rents didn't fall as much yet.

But stocks of flats to let doubled in the last 12 months (data from primelocation). So, rents will soon fall as well.

Edited by Tired of waiting

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That is an almost unbelieveably high rent. :blink:

I pay ~900 for a taty, but lovely 4 bed house in the best part of town that would sell for 300 in a flash and would prob get a valuation of more like 350 ( and that is not some fanciful value, I'm a bear and I rent it .) and the owner probably thinks it's worth close to 400.

If your yield is actually that good then hell hang on to it but surely at some point the tennant is going to wonder why they are living in a 200k flat for the sort of rent that gets them a 500-600k house.

Funny you should say that.... I noticed the other day similar flats in the block going for £1100. It’s quite ridiculous parents property in small village in Kent valued £425k yet you can rent it for £1250 pcm...?

Although I would say you'd look at paying more like £1700 rent for a £450k property in London..

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Funny you should say that.... I noticed the other day similar flats in the block going for £1100. It’s quite ridiculous parents property in small village in Kent valued £425k yet you can rent it for £1250 pcm...?

Although I would say you'd look at paying more like £1700 rent for a £450k property in London..

London is different from "a small village in Kent", it's a lot more expensive.

Outer London is cheaper, but once you're on the tube network rents basically double.

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Provided he can continue letting it for £800 pcm more than he's paying in mortgage costs he'll be alright whatever happens to capital values.

Please don't listen to this, it is terrible, terrible advice. Money is made by buying low and selling high, houses have a long way to fall still, that means sell now if you can before the general public wakes up to the HPI lie.

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Advice needed please....

Dont want to p1ss on your happy life but did you sign pre-nup before getting married? :ph34r:

The ownership of who owns what in a marriage often becomes blurred when (if) people split.

Many men end up walking away from the wife and kids and house with a suitcase of clothes and have to pay for them to live in the sole (joint) property, with the man having to rent whatever hellhole they can afford.

Perhaps it might be better to keep the flat so that you can both have a some sort of property if your marriage hits the rocks.

:(

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BTL Business man has no clue about money. see it here in TROLL weekly.

Indeed.

Must be one mutha of a flat for that rent. Does it come with its own staff? And roof top pool? And daily freshly cut flowers for the missus?

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Provided he can continue letting it for £800 pcm more than he's paying in mortgage costs he'll be alright whatever happens to capital values.

In the next years: (1) Rents will go down; (2) Interest rates will go up; and (3) Property prices will crash.

To keep a Buy To Let will be a lose-lose-lose proposition.

(And all this is very obvious. It does boggle the mind that someone can't see this.)

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London is different from "a small village in Kent", it's a lot more expensive.

Outer London is cheaper, but once you're on the tube network rents basically double.

I know – I was highlighting that why would you lumber yourself paying £1800+ on a mortgage when it’s much cheaper just to rent it.

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