Any Estate Agents or Mortgage lenders out there? Is this a crazy plan, or could it work?

[hmmwhoknows]

I live with my parents at the moment, as following divorce I had no choice really. I have two children and I have about 30k saved.

I was looking at very ordinary small 3 bed houses near me, and some are up for about 280, probably could get them for 230 at them moment.

If I used HALF of my savings as a deposit, I could then pay the mortgage for at least a year and hopefully get people to rent it out until I'd saved some more and could afford to move into it.

I just ran this past my Dad and he said 'no, that wouldn't work, what if you couldn't rent it out?'. I said, well, I'd make sure the rent was attractive to renters, JUST enough to cover mortgage repayments...

He said NO. You'll end up with no savings and no house. Is he right? Not gonna help me.

Am I naive? I really want to own a house. I am 38 and it upsets me that I don't own a house.

[hmmwhoknows]

I would find living here less depressing if I knew that I did actually own a house. So the rent would only need to cover the mortgage..

I have two young children and I don't work, so I would NEED my Dad to put his name to the paperwork. He has to think it's a good plan.

[artichokes]

I do feel your pain but can I ask how are planning to save enough to pay future mortgage payments (after that first year) if you are not working? In one year could you really save enough to pay the next year's mortgage?

[QuintessentialShadow]

You would have to enquire about a buy to let mortgage, the rent would cover the mortgage. You will see it solely as an investment opportunity for now. Maybe one day, when you have a better paid job, you would be able to move in yourself and cover the mortgage payments.

[HeavyweightChampion]

half your savings (15k) would maybe not be enough to put down as a deposit on a house at 230k,

you would need at least 10% to get a half decent interest rate,

and your dad would need to declare his earnings as enought to cover the loan,

it is so depressing at the moment,

[hmmwhoknows]

Well, it would never be enough to live on, but have 2 'little jobs' not careery jobs iyswim. When children are asleep, I work in a supermarket, parents babysit, so no charge there, and I look after my neice and nephew in their house from 3-6 everyday. It's ok for me as I get to make children tea together and they live nearby... suits us all. Pay not fabulous, but I am happy and they are happy.. I now save about 500 every month. Thanks to the fact that my parents won't take rent from me and they buy loads of things for the children. (and I don't go out very much and I don't waste money).

I'm a bit obsessed I s'pose.

It will be at least 3 yrs before I can get a better paid job I think. My children small. And there is a ...... complication with one of my own children which makes it harder to work.

I wouldn't see it as an investment!!! I would see it as a HOME that I could move in to ONE day.

Ok. am I still mad?

[SenoraPostrophe]

There is no way you'd get a buy to let mortgage at the moment with only 15k deposit on a 230k house. I think the max most lenders will lend on them is 75% (i.e. you'd need a deposit of 60 odd k). In fact most lenders currently require that sort of deposit on a normal mortgage.

Also, if the rent would only just cover the mortgage, what would you do if the boiler needed fixing? or the tenants defaulted on rent for a month?

I'm afraid I think it's a mad plan. I'd be looking further afield or at a smaller house

[hmmwhoknows]

I know that a mortgage lender would laugh at my two little jobs, so that is what I meant when I said I don't work. I'm run ragged working, I don't have a salary that's what I mean.

[QuintessentialShadow]

"I wouldn't see it as an investment!!! I would see it as a HOME that I could move in to ONE day."

Look, I am giving you a strategy which might work, but you have to play it smart and not go dilly dallying to the bank about the unfairness of not owning a home.

So, you cant tell the bank that, if you apply for a buy to let mortgage. The only way to bypass your SALARY (usual they lend 3x monthly salary, it does not matter how much you are able to save every month) is to buy it as an investment property.

A few years down the line you can approach the bank and say, "I want to convert it to a regular mortgage, as I am planning to move into the house myself".

[KiwiKat]

the problem with putting in such a small deposit is the amount of equity you'd have in the house if the value dropped - you could end up with a mortgage greater than the value of the house. And tenants are unpredictable - I've had some right ones! And you're also responsible for maintenance on the property. But I know how frustrated you must feel, when you just want to start getting ahead that tiny little bit. Hmm ... dunno.

[hmmwhoknows]

right........ I suppose I'll just carrying on saving for another couple of years.

In September 2012 I will be able to work full time and I have a plan about that (that's a different thread).

Will house prices have gone back up by then?!

Even though I'll have more saved, house prices may have gone back up again in 3 yrs!! That's why I feel I should try and act now...

But I am listening to you all. Mad plan. Mad plan. I get it!

[hmmwhoknows]

unfortunately, as my children are a boy and a girl, I really have to have three bedrooms! I don't know which of them I'd send back and swap but if I'd had two of the same sex I could be thinking abotu 2 bed houses which are of course cheaper.

[SenoraPostrophe]

I don't think they'll go up fast for a couple of years (but they might go up a bit). I'm not an estate agent btw - if I was I'd probably say they'll go up...

if you just want your own place, you could look at renting yourself?

[SenoraPostrophe]

boys and girls can still share a room until they're about 7 - ds and dd used to share

[HeavyweightChampion]

shared ownership might be worth a look in to

[Quattrocento]

I'm sorry but I don't think that your plan is a goer, for the following reasons:

1. You need a deposit of 25% for buy to let nowadays.
2. As a buy-to-letter myself, I can tell you that you need to have sufficient cash reserves to cover void periods (in between tenancies) repairs, renovations and tenants who default on their payments and against whom you have to take proceedings to recover your own property. As a rough rule of thumb, for the property to break even financially, you need to have equity of around 40%-50%.
3. You haven't thought about the tax implications. Only interest payments are deductible against rental income. The capital repayments are not deductible. So this means that if your rental income exceeds your mortgage interest (plus any other deductions) you will end up paying tax on it.
4. You have no clear plan as to how you are planning to build up a career to enable you actually to live in the property so you need to think of the property itself as a long term investment.
5. You haven't thought about all the fire safety etc checks you need to have done to the property before you are able to let it
6. And this is the biggy - your dad doesn't want to do it, and essentially he's the one who is going to have to foot the bill so you shouldn't put pressure on him.

Sorry, but really hope this helps

[hmmwhoknows]

I suppose I just need to be patient. I mean, if I'm thinking about this in a couple of years with 45k saved, and a decent salary, then it'll all be easier SO LONG as house prices haven't gone back up again!!!

My dad says, no they won't no they won't not for ages not for ages, but he is a retired geography teacher...

Get out the chrystal balls.... how long til house prices start rising again?!

[hmmwhoknows]

thanks everybody by the way. I'm only thinking out loud. or, thinking on mumsnet...

[hmmwhoknows]

Thanks quattrocento.

I'm parking the idea for a while. Wow, a 25% deposit fo buy to let. Wow.

Senorapostrophe, I'd hate to rent. I'd feel I were moving backwards, not saving, probably using up savings. I'm not UNhappy with my mum and dad, they're great, honestly, this house is gorgeous too, why on earth do I want to go and live in a shack!!?? I do feel a bit stifled from time to time, but on the whole, I know what side my bread is buttered on and would rather stay with my mum and dad 'til I can buy a place.

[saggyhairyarse]

What about buying a cheaper house but one that has the option of having a loft conversion in the future for an extra bedroom?

And, what about using a letting agent that offers a garunteed letting scheme:

[hmmwhoknows]

mrsjammi, practical suggestions. Tvm. I will have to think like that when time comes.

[hmmwhoknows]

mrsjammi, I will do something like that one day!!! come back and say "I've bought an apartment!".

My m&d wanted to move to a house with a basement flat and their plan was for me to live there, you know forever! And that wouldn't be awful I know, but imagine your mum and dad knowing instantly if you had a new boyfriend or whatever. I really respect my parents but I don't want to live so near them we can smell eachother for the rest of our lives!!

[whereeverIlaymyhat]

Wait three years it'll be the best thing that ever happened to you, massive price reductions and you'll have a bigger deposit.