I'm meant to be signing a buy to let mortgage next week and am getting cold feet

[GalaxyInMyPants]

I inherited half a house recently and am in the process of buying my sibling out. First of all we were going to sell it and I arranged valuations, etc. then I decided I'd buy it.

I need a 70k BTL mortgage which the bank has said I'll get no problem.

I have a tenant lined up, someone I know. And I do trust that she'll look after it.

But I know that long term she won't stay there....maybe two years. After that I'd be looking for tenants. I keep hearing horror stories on here and in real life of nightmare tenants, or just the general expense, etc of a BTL.

My mortgage repayments would be £470 a month and rent £600. So after tax, insurance there's not a lot of money to save each month for repairs, new carpets, etc.

so short term I think it might at times cost me money and that's not even thinking about empty periods.

Long term I'd have the benefit of someone else paying my mortgage off. In 15 years I'd be mortgage free and could maybe think about retiring earlier than 67.

I worry if I don't buy this house that I will be working till 67. But then it would be nice to have some money now and enjoy life a bit more rather than having to be careful all the time.

If I don't buy the house I now feel I'd be letting down my friend who's excited about moving in and also my brother who's waiting for his money. Though he'd get it after we sold the house I guess.

Interest rates are meant to be rising. So that worries me a bit about the mortgage. If we sold the house I'd end up with about 70k cash, which I could try and save most of it I guess so I might be able to retire at 60 if I've got good savings still. And rising interest rates may help grow the money.

Then I think well I could try the buy to let and if it doesn't work out I could sell it down the line.......

Thanks for all the advice. It really helped.

That's a brave move Galaxy, you sound confident about your decision, look forward to hearing about your travels.

Good luck with the sale. Funny how sometimes a few circumstances can shape a decision.

Good luck!

I am glad you found the thread helpful, even though you did not get the outcome you hoped for. If you want to put your mind at rest, just re-read the thread. I am sure you are doing the right thing.

If you do get second thoughts, you could always ask the agent to advice on lettings, with a view to having the agent source and vet your tenant. Some times you see properties that are both for sale and rent, and the owner go with whatever offer comes first, a sale or a tenant!

Well I believe 12/18 months from now you will be saying to yourself "that was a close one"

www.telegraph.co.uk/finance/economics/10982357/UK-deficit-widens-as-government-fails-to-reduce-borrowing.html

UK Income tax in the first three months of this tax year was 3.5pc lower than in the first three months of the 2013/14 tax year.

The public sector finances, excluding financial sector interventions, showed a deficit of £11.37bn in June, the Office for National Statistics said on Tuesday. This is up from £7.59bn in June 2013 and well above analyst forecasts of a deficit of £10.7bn

Creating jobs that require the state to support them via a myriad of benefits is hardly a mark of success

It gets worse in the last quarter in the USA there have been over 100 billion sub prime car loans given out

What’s the betting that it will start another chain reaction. It’s been bundled up and a lot of it sold to pension funds and insurance companies

2007 the rerun

Should read 100 billion dollars worth of sub prime car loans USA

For people reading this thread, please remember to pay tax on your BTL rental income.

You can set off various costs, including agents fees and repairs (but not repairs needed to get the property in a let-able state, only repairs once it is let) and mortgage interest.

HMRC are very hot on BTL mortgages, now. The ask the lender for details of who has taken one out, then they check if you are declaring it.

The government will probably end up having to requisition the whole buy to let ponzi scheme properties.

Never in my lifetime have I seen such bad management of the basic necessity, a roof over your head by the people we elected

It will end badly for many who invested in buy to let

Think on it , if the banks go down again,war time requisition steps may have to be implemented.

I got hounded off a forum in 2005/6 when I predicted the 2007 crash. Gave em the month too. Even named 2 of the first banks to go down.

A couple of posters did name me the seer, So all those buy to let landlords out there , don't put me down as a crank pensioner

I have been round the block a few times and the mirage economy ain't stable.

While your advice might be sound, long term though, BTL landlords can ride out the ups and downs. It depends on how much they're in debt for of course and if the banks start calling in their loans.

We're accidental landlords, well, we planned to keep the house really when we moved abroad, and bought my PILs also. We're in it for the long game as part of a retirement plan. Even if the house is only worth half of what we bought it for in 15yrs, it doesn't matter to me, I still have an asset which can generate some income. I would think differently if I had a portfolio of 500 houses and owed millions in mortgages though.

I think in your circumstances you've done the right thing. Mortgage rates are going up, predicted back up to 7-8 percent within a couple of years. You'd also have paid income tax on your rental income which would have meant that it didn't actually cover your mortgage payments. People also forget that when you sell a BTL property you pay capital gains tax on the proceeds (unless you've only had it for a very short period of time or else you've lived there as your primary residence - which seems unlikely in your situation)

Plus to be honest (sorry) if you don't trust yourself to be disciplined enough with an interest only mortgage then investing in property is not the game for you.

We sold both of our second properties (we each had a property which we kept when we met and rented out and we bought together), made a smallish profit of about 20k on each and used the money. As a result our own mortgage on our family home is now much smaller than it would have been.

There have always been landlords, they did a service for people. No argument with that, but it's gone beyond someone letting out a house auntie left them. Take the Wilsons in Kent 1000 properties leveraged up.
There are millions of landlords , it has smothered the economy driven up the cost of homes.Caused the benefit system to eat us as an economy from the inside out.
The point is , it should never have been allowed to get to the point whereby it could crash the economy. Banks are holding millions of mortgages that would not stand even 2 % interest rate rise

Cause the economy to eat us from the inside out

Good description Roneik, that's how I see it too. Do you know what the public debt is without the bank bailout debt?

I saw a fantastic chart in the Times about two years ago with two bars per country, one government debt, one bank bailout debt. Very telling. Those countries in the worst debt like Spain had high public debt but the UK had high bank bailout debt, far higher than the public spending debt. And when you consider that a large chunk of public spending was on housing benefit and mortgage relief it's almost beyond belief.

I reckon house prices in cities will go down to 2000 prices again, possibly lower.

No, lots of landlords won't ride out the storm.

Most have taken on IO mortages with houses occupied by people on 1 month notice.

Going by the posters outcome, it looks like banks are running away from LLs at the mo, They can expect margin calls as the LTV breaches the loan, and hassle about capital payment.

When interest rates go up it's likely that the banks will repossess and then get big LL investors in to take over while values stabilise. These properties aren't truly owned by the BTL landlord, the capital is owned by the bank.

For every bad investment they will have many good ones which should balance out. If your btl has doubled in value and you've hardly paid off any capital then the bank pockets the profit.

If you're only paying back interest your capital is low, the banks lose very little if they repossess, they retain the capital and the mortgage isn't lost money it's just a lost loan.

I'm not an economist or banker but I think that's how it will pan out.

Currently I think the debt excluding the bailouts is about 90% of GDP and the deficit has risen in the last quarter. I also understand the difference between the deficit and debt. If this carries on much longer we will be caught out like a rabbit in the spotlight. Then watch as it all conspires to ruin us like never before.

What staggers me is that quite a few nobodies on the internet back in 2005/6 could see all this coming , yet the so called chancellor and economists saw nothing. Vince cable did make a bit of noise and seemed to have a grasp, but did nothing to persuade others in power at the time.

What does shock me is the fact that very few people who are landlords can see the big picture regarding whats coming down the line.

There is a weird bunch of pro landlord agitators on mn, I first encountered them recently when they did some tenant bashing on a woman who had been moved 3 times in a year and dared to complain. It was all her fault of course.

It was quite remarkable that anyone would go to the trouble of beating someone when she was down bit i concluded that it some kind of dehumanisation process happens when peoples homes become your bread and butter. They see tenants as a necessary evil.

We signed our mortgage deed yesterday, we are increasing our borrowing significantly and the crash comments are sobering but...

We bought shortly before the last crash in 2005. I didn't realise it was a crash as we have sold just now and values are back at the 2008 peak here, we were still able to add value (70,000) and we paid down nearly 50,000 off the principle. This has allowed us to buy a bigger home as our family has doubled in size. If we had listened to the scare mongers in 2005 correctly predicting a dip we would instead be at square one and down 100,000 in rent over this nine yr period.

I just can't see values dropping to 2000 levels. Even in my West Country location so many cash and foreign investors looking at my family home when it was for sale. There is a shortage of homes and single households are rising and foreign workers keep arriving. People have to live somewhere. Maybe my situation differs from a buy to let one but if values go to 2000 and IR to 8% we will be stuffed.

If you don't need to move the drop in prices means nothing. You sit tight, the cycle continues and you ride out the storm. Its the interest rates that will kill people. Too many people unfortunately are getting used to these astonishingly low rates. If they increase by five percent that's going to have an enormous impact on some.

Why wouldn't they go back to 2000 prices? Wages haven't increased in some sectors for at least 10 years and people need affordable homes. Leaving aside the fallout of over-borrowing individuals, it's a sensible solution.

Because people need houses and we're a small over populated island. Why would they go back to 2000 prices? Its just an arbitrary date thrown out there.

I'm not saying I think the increases will continue at this rate by the way I'm just saying that those hoping for a 2000 level crash are never going to see it IMO. Who in their right mind would sell if they could only recoup half the current value of their house.

We bought at the bottom of the last crash in 2008. We got an amazing deal on our house but that was because the vendors had to move and we'd gone into rented to ride out the storm. There are lots of houses around here up for sale that were up for sale back then. People just sit it out.

Atticus,,where are you getting 5% from? No report I have read has indicated anywhere like a 5% rise. Mark Carney is well documented as saying the 'new norm' will be 2 - 3% interest rates.

To talk of a rise of 5% is scaremongering.

I agree with you about there not being a crash to anywhere near the 2000 house price levels. Unless there is a total Armageddon situation such as WW3.

Its not scaremongering at all because nobody knows. What we do know is that the rates are being kept artificially low at the moment. Certainly 5-7 percent used to be the norm and if you look at the rates over the long term they hover around this mark.

This is interesting (although clearly to be taken with a pinch of salt)

info.moneyweek.com/urgent-bulletins/the-end-of-britain/?infinity=gaw~The%20End%20of%20Britain%2BUK%2BENG%2BINTRT%2BDISPL~Politics%2BIMG~42516756309~www.themoscowtimes.com~c&code2_EI&gclid=CM3C26Hw0L8CFcbJtAodHlMABw