Trying to buy a house in this area is near impossible

[hpsaucey]

I really empathise with anyone trying to buy around here. We managed to get a shared ownership place about a year ago and I'm so thankful everytime I think about it. We have to rely on one part-time wage (mine ) for various reasons and have two kids (at local schools) so frankly, if we hadn't got the flat when we did we too would have been unable to buy or rent around here and would have been scooting off out of London.

Crazy prices .....

[PN33]

My girlfriend and I have been trying to think out of the box a bit, as we don't just want to give up on the property ladder but realise we can't buy in this area with our *measly* budget of ?250000!

We are considering buying somewhere in an area we're not overly keen on living in just yet (we're 26 and still have partying to do!), such as Penge, Bromley etc and renting it out. If we could get a place to pay for itself we would at least have our savings invested in bricks and mortar and have it growing whilst we continue to rent somewhere in zone 2.

Can anyone advise what's specifically different about a buy-to-let mortgage, and whether they actually need to know?

And also, am I right in thinking we would be taxed on the rental income?

Thanks in advance

[Jeremy]

PN33 - for a BTL, first of all you'll possibly need a slightly larger deposit. Then you need to satisfy the bank that either a) you can cover the repayments yourself from your earnings or b) the rental income will cover the mortgage + agent fees + an extra comfort margin.

[eclectic]

What size property are you after? There are a few 1 beds that come on below 250k. For a buy to let mortgage they usual ask for the rent to cover the mortgage plus an extra 25%.

[PN33]

Jeremy Wrote:

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> PN33 - for a BTL, first of all you'll possibly

> need a slightly larger deposit. Then you need to

> satisfy the bank that either a) you can cover the

> repayments yourself from your earnings or b) the

> rental income will cover the mortgage + agent fees

> + an extra comfort margin.

Thanks for that. What sort of size deposit are you suggesting? We already have a 20% deposit, would that cover it?

I don't really understand why they need to know? Say we bought somewhere that needed work on a standard mortgage, spent 12 months doing it up and then rented out... would we be expected to switch our mortgage at that point?

Eclectic- we are looking for either a 2 bed, or a one bed with a basement. We also need a garden becasue of our cat

[tllm2]

You do also have to pay tax on the profit from the rental income, usually via self-assessment.

[PN33]

ahh, just looked, they expect a 30/35% deposit

[KidKruger]

"Can anyone advise what's specifically different about a buy-to-let mortgage, and whether they actually need to know?

And also, am I right in thinking we would be taxed on the rental income? "

BTL is a specific vehicle to service those renting out properties by intention, predicatably the banks set it up so they can make more profit off you than a usual mortgage rate in my experience. The increased deposit gives them additional assurance, too.

Tax - you'll be taxed on the profit which = Rental Income - (interest proportion of mortgage repayments + agency fees + repairs and materials and labour + building insurance + legal or other costs related to the letting activity).

There is a rule that you cannot claim improvements against tax, only repairs/maintenance. ie. if you upgrade to double glazing or change from lino to carpets while the property is let it's not necessarily a claim you can make against the let. IMO.

ETA: if you get a straight mortgage and let out the property without telling the lender you risk having the mortgage withdrawn, insurance pay-out issues (if you haven't told the insurer), worst case also prosecution. IMO

[tllm2]

There are mortgage deals you can get with a lesser deposit, but the bigger the deposit the better deal/interest rate you get.

[Penguin68]

There is a rule that you cannot claim improvements against tax, only repairs/maintenance

I believe that capital expenditure undertaken for improvement (including refurbishment costs) is taken into account when the property is sold and can be offset against any capital gains. It is important therefore to keep a record of any such payments.

You may also claim e.g. for furnished or partly furnished properties a 10% per annum allowance for wear-and-tear (i.e. depreciation of installations, including carpets and curtains).

[Otta]

PN33, Getting a place in Penge only means another 15 minutes on the Night 176, it's not the edge of the world!

Plus much better links to trendy East London.

[Loz]

PN33 Wrote:

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> ahh, just looked, they expect a 30/35% deposit

Talk to a broker - you can get them at 25%, though 30% is more likely.

[Saila]

So... Osbourne to announce a tax on foreign property investors.

Hmmmm

[Loz]

Saila Wrote:

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> So... Osbourne to announce a tax on foreign

> property investors.

>

> Hmmmm

Well, he's announced that CGT should apply to foreign investors. Seems obvious to me. Must be some reason it has never been implemented before.

[LondonMix]

Because its against the rules to tax a primary residence if you live in it. The tax rules already tax capital gains on 2nd homes and homes you rent for profit....

[reren]

You ask why the bank needs to know whether you are renting it out or living in it yourself? It is always worth bearing in mind that when you have a mortgage the bank effectively has the right to take your property away if you dont pay your mortgage (im simplifying but this is the principle at work). If you were to stop paying your mortgage - they have the problem of getting you out / the tenants out and they want to do that as swiftly as possible and get their money back. Since tenancy laws give people different rights - the bank wants to know what its dealing with in the case of non payment of the mortgage. It is also worth being aware is illegal to lie on a mortgage application - so if the bank were to find out you had rented it out without letting them know - there could be vety serious consequences.

[Loz]

LondonMix Wrote:

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> Because its against the rules to tax a primary residence if you live in it. The tax rules

> already tax capital gains on 2nd homes and homes you rent for profit....

No, it a different rule. Je's not looking to change the primary residence rule. But, at the moment, foreign residents selling a property (even if they have rented it out) are not subject to CGT at all.

And 70% of London new builds are bought by foreign investors.

[LondonMix]

Oh wow, I didn't know that. That's crazy and definitely needs addressing. No wonder foreign buyers are so keen to acquire off-plan at a discount.

[jojokahil]

House prices are really crazy as you can rent a nice three bed f or 2k a month but that house will probably worth 700k so yield is ludicrous.

Unfortunately, house price are well above fundamentals and as this year nobel prize Robert shiller has demonstrated they can remain high because of people expectations. When the govt announced the help to buy everyone anticipated a bubble which led to people rushing to buy and sellers upgrading their asking price.Right move said asking prices moved 10% just in October.

There is also the shortage of schools which I cannot believe the govt is ignoring. Nick clegg and cameron do not care as they go to private schools.

Between going to a private school at 10 k a year or paying 100k or more to get a catchment area there isa no brainer. People need a school as much as they need a home.

Who can now afford a 650k house when you think that banks will lend you 4.5 x your salary. You need 150k joint income and if prices go up another 10% you will need 165k. Crazy.

[familyof4]

I agree - it's not fundamentals now - it's sentiment.

if sentiment shifts, ppl will sell

so you may not actually need a material CGT on foreign buyers - just foreign buyers considering their investment has 'government risk' and they may exit

equally rate don't need to go up a material amount, for the 'upward trend' to be there - and ppl may sell

investors who are renting out their homes, aren't renting for yield, they're renting for capital return which far outstrips yield.

If they think the capital return is at risk, or even loss, then they'll sell too

[KidKruger]

"Who can now afford a 650k house when you think that banks will lend you 4.5 x your salary. You need 150k joint income and if prices go up another 10% you will need 165k. Crazy."

surely most people are taking savings or equity from a previous sale into such a purchase, so the borrowing is not so severe ? prices are still ludicrous, but most people I know haven't jumped straight-in with a 3-bed property purchase and no funds.

[Saila]

http://www.bloomberg.com/news/2013-11-06/priciest-london-luxury-homes-lose-shine-as-sellers-aim-too-high.html

interesting article off Bloomberg today

[Oily Telly Tyke]

Voyageur Wrote:

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> Penge has some lovely old housing stock - plus the

> Penge Food Centre for which I am most envious! It

> is turning a corner already as it now has a

> cupcake shop and some lovely cafes. (Awaits

> screams of derision re cupcake shop...).

Sold up my ED flat in the summer and moved to Penge. Best thing I ever did, no matter how much I loved ED, and I did for years. Penge has a massive park, nice pub, amazing transport links, nice new eateries popping up, Penge food Centre, feels very safe, green and leafy, functional high street....i could go on. I admit i couldn't afford to stay in ED but given the option of moving knowing what I know now I just think Ed is taking the piss out of everyone moving in and paying that amount. Fair play if you have it and want what ever it is that Ed offers but you're utterly crackers IMHO.

[KidKruger]

ED is not taking the p!ss out of anybody. It's just a bit of land that some people are adamant they want to live on. People are doing it to themselves surely, in their desire to be there ? So it's self-induced, not enforced. They're not victims, it's a choice.

[Otta]

Exactly KK, how can an area take the p!ss? People have driven the prices up, nothing else. I do agree with Oily that these people are absolutely crackers though.