Should I sell or take a Lifetime BTL mortgage ?

by Readers Question

7:40 AM, 2nd August 2019
About 4 months ago

Should I sell or take a Lifetime BTL mortgage ?

Make Text Bigger
Should I sell or take a Lifetime BTL mortgage ?

I am a 65 year old single female, no children and my only incomes are state pension, carers allowance and rental income from my former home in London. The property is worth around £1.3 million and rents for £3,000 a month. I now live with my Mother in the North East as her long term carer. The arrangement works well for us both.

I have a £300,000 mortgage secured against the London property, which comes to the end of its interest only term next year. I don’t think I could remortgage due to my age, credit status and my income position. In recent years I’ve spent a lot of money on the London property, which has kept my tax bill right down, but it has left me very short of cash and with very little profit to show to lenders to enable me to secure another mortgage. To cut a long story short, I made the mistake a few years ago of renting to a person who turned out to be a tenant from hell. I trusted my instincts instead of having them professionally referenced – never again! My savings are all but depleted as a result of that naive mistake and I cannot afford to make another, hence this post.

What I need most is more income, but replenishing my financial reserves would be good too.

Until I read the article yesterday about Lifetime BTL mortgages I thought my only option was to sell up. Whilst that would produce a large amount of capital it would also leave me with no income other than my state pension and carers allowance, the latter of which will not go on forever sadly. I would also have a huge CGT bill to pay given that I have been letting the house for 12 years and I only lived there for just over a year before I moved in to help my Mother.

I have reconciled myself to the reality that I will never be able to afford to live in my London property again.

The Lifetime BTL mortgage option appears to solve several problems for me. I could pay off my existing mortgage, retain my rental income, make no further monthly mortgage payments and never have to worry about money again.

I have already obtained a quote and I do qualify for this Lifetime BTL mortgage subject to valuation. If the value comes out at £1.3 million I can raise enough to pay off the existing mortgage and have an additional £77,000 left over. The lenders maximum LTV is 29% for my age.

I’m quite keen on this but felt I should put my thoughts into writing and ask the Property118 community to comment.

What would you do if you were me?

Thanks

Anonymous Retiree

Show Form to get a Lifetime BTL Mortgage Quote


Comments

Mark Alexander

12:30 PM, 11th August 2019
About 4 months ago

A further thought to support the original posters thoughts.

The mortgage balance will grow quickly if interest is rolled up, but if property values follow a similar growth trajectory as they have historically the equity in the property will grow faster. This is because the property appreciation will apply to the whole value of the property whereas the compounding effect of the rolled up interest will only apply to the debt. I appreciate one factor is guaranteed and the other isn’t.

The tax relief on the accruing mortgage interest mustn’t be overlooked either. This will have the effect of actually improving the net cashflow, even now that tax relief on finance costs are restricted to 20%.

H B

18:47 PM, 13th August 2019
About 4 months ago

Sell up. Buy one or two cheaper and higher yielding properties in the North East. Enjoy the surplus.
Given that you can't take it with you, how much do you want to leave unspent when you die?
Also, remember your expected mortality - average of 90 for a 65 year-old, so you should probably think of making it to 95+.

1 4 5

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

5 Reasons why a Boris Tory win is great news for property investors

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More