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tweedlover

Help Please Validating Plan And Suggesting Areas To Search

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Hi there,

I own a 2bed house in East London worth 320k now which I'm lucky enough to have paid off, and unfortunately recently become single so would like to move more centrally closer to my work in Westminster, ideally cycling distance.

THE PLAN

I can scrape together around 100k deposit if I save hard this year, and think I can get 200k remortgage on current property (which I would then rent and write off interest against tax). So I'd pay around 800 pm for 20 years on this remortgage (including tax write off, assuming I can include agent charges in tax write off too).

I think I could then get a 300k mortgage on a central property, which would cost c. 1400 pm and which I could finance through rent on my current property.

This leaves me with a bill of 800pm on a new property worth c 600k, the old property still mine, and not too much risk I think. (might not be able to let old priory consistently so need a buffer but I can save c 1500 pm ok so would have 700pm buffer fund, could also buy mortgage insurance in case of losing my job)

My questions

--Do you see any big issues for my plan?

--Could you recommend any good advisors to discuss with?

--Have you any recommendations for good areas to buy around the 600k mark?

(I like Kennington, elephant, Vauxhall, Angel, Pimlico, would like a nice view, trendy feel and easy to go out from.)

Thanks for reading and really appreciate any help!

TL;DR

I'm looking to buy relatively centrally at 600k. Any recommendations for areas and can you sense check my plan?

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--Do you see any big issues for my plan?

Have you stress-tested your plan if interest rates rise?

Your plan appears to assume a gross rental yield on your property of over 8%. Is this realistic?

Do you mind telling us what you do for a living?

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Thanks for the reply Will,

I hoped like the 700pm buffer was a reasonable way to hedge against interest rate moves for the mortgage. Do you think that is enough?

Also, I pay more tax than the interest on the remortgage so wouldn't be affected by moves on that one.

Rental prices - zoopla tells me that 1400 is in the middle of the range I could expect, and I'm assuming that estate agent rental fees can be claimed against tax (can anyone confirm or deny this ) but you're right I shouldn't assume full utilisation, and I may not be able to achieve that rate which could put pressure on. Is there a rule of thumb on this ?

I work as a civil servant on the top rung below senior civil service, currently earn 55k, paying about 12k tax with around 70k in savings / investments.

This plan does feel like it pushes quite hard, but the place I'm currently living just feels wrong now I'm single, and I'm really motivated to use a new central place as a sort of new lease of life (excuse the pun;)

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I think the next step for you would be to meet with a few banks' or building societies' mortgage advisors. You'll need to find out from them what minimum rent they'll want you to ask for the property you're planning to let out (this is usually a condition of BTL mortgages). You'll also need to inform them that you would like to partially finance your residential mortgage with rental income; this may affect how much they will lend you and at what rate.

After that, get quotes from some letting agents and see how they correspond to your mortgage lenders' minimum rent demands.

This will give you some hard numbers that will help you decide whether to proceed.

Edited by Will!

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Thanks for the constructive response count (!)

Guess that really depends on what happens to rental prices as Will already highlighted and how likely that scenario is, but serve me right for not reading the name of the forum and expecting balanced analysis ;) do you think rent prices would fall as far as buy prices ? When is the crash going to happen btw?

Let's face it, most people with a mortgage will be in trouble if that happened, but you are right, btl-ers would be in more trouble.

How much of a margin would you set aside ?

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Thanks for the reply Will,

I hoped like the 700pm buffer was a reasonable way to hedge against interest rate moves for the mortgage. Do you think that is enough?

Also, I pay more tax than the interest on the remortgage so wouldn't be affected by moves on that one.

Rental prices - zoopla tells me that 1400 is in the middle of the range I could expect, and I'm assuming that estate agent rental fees can be claimed against tax (can anyone confirm or deny this ) but you're right I shouldn't assume full utilisation, and I may not be able to achieve that rate which could put pressure on. Is there a rule of thumb on this ?

I work as a civil servant on the top rung below senior civil service, currently earn 55k, paying about 12k tax with around 70k in savings / investments.

This plan does feel like it pushes quite hard, but the place I'm currently living just feels wrong now I'm single, and I'm really motivated to use a new central place as a sort of new lease of life (excuse the pun;)

The biggest thing on my mind right now, if I was a civil servant that understood money AT ALL was how ******ed the UK finances are and how, when the pound collapses, thousands of civil servants will be sacked without a by your leave.

Now, if you do not see that happening in the next 25 years - call it 15 years if you overpay like mad, fill yer boots.

If you DO see that happening, last thing I would be doing is taking on any sort of sizeable debt.

edit: and I have been a civil servant for an extended period in a past life, so take it form me just how unemployable most of you are in the real world.

Edited by wherebee

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Hi there,

I own a 2bed house in East London worth 320k now which I'm lucky enough to have paid off, and unfortunately recently become single so would like to move more centrally closer to my work in Westminster, ideally cycling distance.

THE PLAN

I can scrape together around 100k deposit if I save hard this year, and think I can get 200k remortgage on current property (which I would then rent and write off interest against tax). So I'd pay around 800 pm for 20 years on this remortgage (including tax write off, assuming I can include agent charges in tax write off too).

I think I could then get a 300k mortgage on a central property, which would cost c. 1400 pm and which I could finance through rent on my current property.

This leaves me with a bill of 800pm on a new property worth c 600k, the old property still mine, and not too much risk I think. (might not be able to let old priory consistently so need a buffer but I can save c 1500 pm ok so would have 700pm buffer fund, could also buy mortgage insurance in case of losing my job)

My questions

--Do you see any big issues for my plan?

--Could you recommend any good advisors to discuss with?

--Have you any recommendations for good areas to buy around the 600k mark?

(I like Kennington, elephant, Vauxhall, Angel, Pimlico, would like a nice view, trendy feel and easy to go out from.)

Thanks for reading and really appreciate any help!

TL;DR

I'm looking to buy relatively centrally at 600k. Any recommendations for areas and can you sense check my plan?

If you're not confident in your own ability to asses the risks and sensitivities of a scheme that involves tying up close to £1m (half of which you will have borrowed) in two highly correlated illiquid assets trading at market topping prices then you really shouldn't be doing it.

As for coming onto a forum called "House Price Crash" and asking other people to do it for you - words fail me. The clue is in the name.

Please tell me you're a troll and not really a civil servant.........

Edited by Exiled Canadian

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If I were you I'd post this on the MSE Forums. A slew of users will be more than happy to tell you do it now before prices rise even further.

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OK, I guess I was hoping for some analysis of whenhow best to structure including things like mortgage insurance to try to hedge the risk of a dip in the market... To get some conservative advice... Assuming lots of you also thinking about buying in this overheated market. But I get the sense this is pretty emotional for a lot of you so I'll stop bothering you!

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OK, I guess I was hoping for some analysis of whenhow best to structure including things like mortgage insurance to try to hedge the risk of a dip in the market... To get some conservative advice... Assuming lots of you also thinking about buying in this overheated market. But I get the sense this is pretty emotional for a lot of you so I'll stop bothering you!

You have 1 home but you want 2 homes in a country without enough decent homes for people to live in.

You can jog on.

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I guess I was hoping for some analysis of whenhow best to structure including things like mortgage insurance to try to hedge the risk of a dip in the market...

Mortgage insurance is usually against losing your job and not being able to make your repayments, not against a dip in the property market. Unless you mean insurance against tenancy voids, which isn't worth much. If you want to hedge against a dip in the property market then you should do something *other* than buy a second property.

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