UK Landlord Forum / Life

Hi in the process of buying a small 2 bed flat. Nearly complete going to pay cash. My question is have I made a mistake in not getting a btl mortgage on the property? Is it possible to get an interest only mortgage on the property later?

Mistake?  Hard to tell as I don't know your circumstances. 

As a cash buyer I'd be going in for the kill and getting a discounted price for a quick sale or buying at auction. 

You intend to rent this place out?  Do you plan to get more properties?

You can 'remortgage' at a later date (usually 6 months with a lot of lenders) to whatever LTV you decide.

Unless you've lots of properties whereby you can offset the interest against your income or unless you are expecting an income that is far in excess of your allowances then why would you want to do that.
Interest payments that can't be utilised are just a cost burden.
But to answer your question, yes you can mortgage it later if you want that would free you up to use the cash again for another purchase. 

Thanks for replies, yes got it at a good price and do intend to let it out. This is my first buy to let and would like to invest in 1 or 2 more. Think I was a bit hasty not organising a btl mortgage first but happened so quick so cash flow would be tied up in this flat. That's why I thought maybe I could get a interest only mortgage on this property at a later date. I already own my home which is mortgage free. Many thanks brian

seems like you have two properties that you can raise money on to begin to build an empire - go for it.

lol cheers  gls may have left it a bit late in life though at 58. Just a steady income would be nice.

Never too late - i'm 102

First buy to let you must know backwards and inside out;

What you have to do to get the best tenants in the property
What the routes are for getting the tenants out of the property
Deposit protection and the issuing of prescribed information - very very important from a financial point of view
6 month ASTs only then let them go periodic
Amazing inventories
Deposit protection

Join RLA or similar.

If I reach 102 reckon I could be a millionaire lol. Lots to think about thanks for taking an interest everyone

I very much doubt at 58 you could get much more than a 10 year deal, an interest only plan would also be a mistake in my opinion. At 68 do you want the hassle of having to pay it back?

Maths

Flat Cost £100k.
Interest 4%
Rent £10k p.a.

With Mortgage(50%) Profit £8,000, Tax at 20% £1600, net £6400
Without Profit £10,000 plus Interest on ISa at 2%, £1000, Tax £2000 net £9,000

Over 10 years your £27,000 better off doing it the way you have done it.

Boboff is on the money there.  The only thing that you could also factor in if you buy well is the growth in value over time.

Many thanks boboff  take that on board. Just thinking the interest payment would be offset against tax. And hopefully the sale of the flat in ten years time would pay off the loan with may be some equity.  Regards brian

Yes, you are right Brian all interest payment will be offset against tax so is a factor.

Yep that's why in hindsight think might of been better put half down had interest only mortgage on the rest. The other half woud of been available as a down payment on another purchase or left in an isa.  Maybe I should of thought it through a bit more.

Nope, you got it right 100%.

See previous example ( showing my workings)

I know, I know, I know.... But i have this pet thing about people thinking its better to spend on interest as it can be off set against tax.... YES it does, BUT only some of it, you are still "wasting" between 60 & 80% of what you are spending on it.

10 years is not a long time in property rental terms, what if the market has just dropped then and you are forced to sell to repay an interest only debt??

You have flexibility, and as I said you will make £27,000 in saved interest over the 10 years in my example.

Many thanks for you advice boboff  appreciate it. The flat was £66000 the one below went for £72000 last year might need to spend a bit on mine to get up to scratch. I suppose time will tell if I made the right decision.

Well got the keys today so now I suppose the hard work starts. Going to take a few weeks to get it ready for tenants. Its a ex local authority flat so the building insurance is covered by them What other insurance would you recommend while I am getting it ready? Do I need any till tenants are in?