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  • Mortgages & Finance

    Interest only mortgages elephant in the room



    I was looking at my Mortgages yesterday after I revived my Mortgage Statements from Mortgage Express

    I have around 7 years before I need to do one of two things

    Remortgage out to another lender

    or sell to my Company

    For me it will be a mixture of the two

    Property that has seen little gain in value will be sold to my Company

    Property which has high gains will stay in my personal control

    I personally took the decision to pay down my mortgages in my company with Capital and Repayment

    The properties I now have in my company are doing well and its a good to see the Mortgage amounts falling slowly but over a 10 year period my mortgages will be a third less then when they started so even without any capital growth company mortgages will be around 50% LTV

    I really think Landlords should think hard about what they are going to do when interest only deals come to an end

    Who knows - there may not be interest only mortgages in 10 years ...

    I think early planning is vital and an exit plan one way or another is a must

    I grabbed the nettle over 3 years ago and started using Capital and Repayment and its working well

    What are your plans as your term ends ?

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    I agree with the sentiment debt fuelled leverage is great when asset prices are inflating but a quick death in a recessionary environment a lot of younger investors have only ever seen prices go up

    personally as interest rates are so low rather than pay interest and capital I pay I interest  only but reinvest the rental income and compound it until the interest only term is due for remortgage - with rates so low I only need to achieve 2-3% growth to beat the mortgage repayment option and have comfortably been achieving 6-7% those investments will be used to pay down the capital on remortgage - slightly higher risk yes but a better compounded return

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    As a novice an outline scenario that comes to mind is, with property doubling every 10 years, if someone was to buy 4 properties (lets say 100% LTV for simplicity) on a 20 year interested only term, for £100,000 each, owing the bank £400,000, over 20 years the property price would have quadrupled. This would mean by selling just 1 of the 4 properties the total debt could be paid back. If it was a 30 year mortgage then 1 property could cover the mortgage for 8. Is there anything wrong with that?

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    Yes.  1) Capital gains tax would mean you wouldn't get the whole of the money from selling the property and 2) The property value might not double in ten years.

    I bought a property in North Yorkshire in 2005 and it's barely moved in value.  A friend bought one in 2005 that's actually decreased in value by more than half what he paid for it.  Surely that's the point of the OP?

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    Yes property prices don't double every 10 years.

    What has happened in the last 10 years?

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    Your so right there

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    I bought some in the last 10 years and some of those have doubled in value

    It depends where you invest and what in

    NE no 

    SE yes

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    Jonathan Clarke. http://www.buytoletmk.com

    You have to understand the the NE has not been a lose lose situation

    Landlord who purchased between 2004 and 2007 will have been caught out with the crash

    If you purchased from 1982 to 2003 you will have done very well

    again if you purchased after the crash say 2008 to 2019 you would have done well again

    I purchased three bed houses in 2008 for 60k and today value is between 100k and 110k  so its done ok

    the same property yields around 10% and more  so dont knock what you dont know JC

    what you lose on the swings you can gain elsewhere if fund a pension and get 40% Tax relief

    or sell to your company to fight another day as long as yields are high property is not a loser

    and with cash flow I intend to buy 20 properties with a good 25% deposit with a yeild over 8%

    its not over until the fat lady sings






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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    I was going on your figs DL  in previous posts where you said prices in the NE had not recovered since the crash where they went down 40%   and were now still at about 75%   of 2007 values

    so 100K unit to 60K to now 75K + 10% yield - Problems if one had an 80% IO LTV mortgage

    Mine were more like 125K down to 100K to now 200K + 10% yield

    So my IO 80% LTV on the 125K I bought was 100K loan went down to nervous territory of being only worth 100K post 2007 but now has 100K equity . So even an unlikely  30% crash now would only put it back to 140K so a comfortable 40K cushion on the 100K loan

    So CG allays the fears of having an IO mortgage quite a bit in the SE not so much in the NE

    You have done well as you been in it 37 years yes but a more typical NE investor who has been in maybe 5/10/15 years will quite rightly be concerned about having an IO strategy and ignoring the elephant

    I`m glad you are getting back in now and buying 20 even though its a remarkable turnaround in your strategy

    I hope the NE recovers strongly for you

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    Jonathan Clarke. http://www.buytoletmk.com


    Hi DL

    I too intend to keep buying, out of interest are you buying in a Ltd company ?

    Cheers

    Jamie

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