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Hi I'm new to the property hub and I am looking to start my first investment next year in Norwich. I just wanted to know if the majority of investors use interest only mortgages for buy to let property's? And also if I could get an example of how you would eventually pay off an interest only mortgage in a buy to let. Many thanks look forward to hearing from you! Scott

Hi, I'm Mike! I'm renting rooms, parking, music studios and developing commercial property, laying plans for BTLs in 2016. What you've done in property so far: Developed 2 Music studio spaces in Zone 1 London (Commercial Lease) Rent out 2 rooms in London Fields Rent out parking in London Fields What areas you invest in (or want to invest in): Elephant & Castle, Hackney, Acton What your plans are for the future: My 7 year interest only mortgage on my 2 bed flat on London Fields ends April 2016. Being Self employed, I am looking investigate all options, projected to owe £170k at this time and may be forced to sell. (Current Valuation £500k by Foxtons). At this time i'd like to move out of London, buying a home PLUS 1 or 2 BTL properties. I am starting now commercial viewings to develop (1500 sq ft) artists studios, which I plan to get a 25 year lease. Any skills or knowledge you've got that other members might benefit from: Setting up sound/music facilities . Good listener ;-)

I’d like to start a conversation about macro-economics and the effects that it might have on property investing. In particular, I’m going to challenge the notion that house prices always go up and highlight that the price rises which have been enjoyed by property investors for the past generation have been largely due to the steady decline in interest rates. Ultimately I’d like to find clarity on the question of whether property investment is still a good idea today and if so then is the same formula that worked previously still the best approach. I’ve tried to research this topic thoroughly but please do disagree with me and offer alternative ideas. What I say relates mostly to buy-to-let (BTL) investments that involve a mortgage. A) Let’s start with some fundamentals: property investors generate profit from two sources: rental income and capital growth. With rental yields where they are today (around 4-6% gross) it typically works out that the rental income is similar to the running cost of the property, and so the investor relies on capital growth to actually make profit. If you knew house prices were going to stay still for the next 30 years, would you still be interesting in BTL? B ) Having established that capital growth is important, let’s examine what causes it. For people to pay more for houses they have to be able to afford to pay more and this generally means one of two things: either they are earning more (wage growth) or they can access cheaper mortgages (interest rates falling). Rob & Rob have often talked about affordability on their podcast and explain how it’s this combination of wage and interest rate that determines what people can pay, not just how much they earn. Interest rates have been falling reasonably steadily now for several decades, meaning that year on year buyers have been able to afford bigger mortgages, pushing up house prices. This is demonstrated by the fact that, over this time, the house price-to-income ratio has increased substantially but the mortgage payment-to-income ratio has been relatively unchanged. A research paper by Victoria Monro of the Bank of England [1] estimated that over the past three decades about half of the housing price growth was due to wage growth and the rest due to falling interest rates. Therefore, if interest rates had not fallen, we would have seen half the price growth over the past three decades. C) So what happens next? Assuming interest rates will not go negative, two things can happen: either rates stay low or rates go up, and surely they will eventually go up. This means that investors will be relying on wage growth alone to push property prices higher and when rates do rise this will have an opposing effect as buyers are faced with higher mortgage payments. If rates slowly rise over the three decades back to the point they were 30 years ago, might we expect the roughly equal contributions of interest rate changes and wage growth to cancel out and house prices stay flat. D) Does this present risk to property investors? I’d really like to hear some opinions from you all. In my eyes there are some significant risks: If I were to purchase a BTL today and house prices stay flat, I might make a small or zero profit on the rental income. But this scenario is likely to occur as a result of interest rate rises, in which case my costs are going to go up and I could find myself in a scenario where I’m making a loss each year on running the property and there are no price rises to bail me out. If rates rise especially fast then house prices could even go down, but I’d be surprised if central banks would allow this to a significant extent. Any thoughts? E) Is there a particular strategy that could be safer? Please do make some suggestions. I for one have been wondering whether the era of capital growth is coming to and end and instead investors should be seeking to maximise rental income rather than capital growth. This would sustain a larger proportion of returns when the growth stops and give a stronger cushion as interest rates rise and increase the mortgage payments. Conclusion I’m proposing that rising interest rates over the coming years are likely to counter the effects of inflation and leave house prices standing still. This means that property investors no longer be able to rely on capital growth as part of their strategy. Furthermore, investors face a risk that their portfolios will no longer be viable with higher mortgage payments. Contrary to popular recommendation, higher income (lower capital growth potential) investments might be a safer bet for the next generation of investors. Ultimately, the central banks have control of the interest rate lever, will their decisions be likely to help or hinder investors? But what about the 18 Year Property Cycle?!? Aren’t we entering the boom phase?? Well I’ll be honest, I’m not sure I believe in the 18 year property cycle... it’s often easy to pick out a pattern when you go looking for one, that doesn’t mean it means anything. Perhaps the 18 year cycle has some validity resulting from human psychology and it certainly seems like people are expecting house prices to go up right now. But I believe there are larger forces at play – these people need to be able to afford it at the end of the day. We might see some more growth still, I’m not predicting a crash; new 95% mortgages could push the market a bit higher still as could wage growth. But otherwise the economic levers that inflate house prices don’t go any further, and eventually will start going back the other way. This won’t necessarily result in prices going down, if central banks decide to avoid that. But it could mean prices staying flat and costs going up, potentially rendering traditional BTL strategies unviable. Please feel free to agree, disagree and generally offer your thoughts on these fundamental issues. [1] Read abstract and see Table 3 from https://www.economic-policy.org/wp-content/uploads/2020/10/9100_UK-House-Prices-and-Decline-in-Risk-Free-Real-Interest.pdf

Hi All, I'm looking for some advice if anyone can help me I currently own a BTL in Nottingham with 61% LTV. The deal I currently have is a 2.58% repayment mortgage until the 31-12-2023. To exit the current agreement I believe it’s between a £3000-£4000 exit fee given that I originally got the deal on a 5-year fixed. My goal however is to change to an interest only mortgage and I’m looking for some advice on whether this is first and foremost sensible and whether it makes sense financially to do so given what’s available in the market? Because of the corona virus, is there anyway I could have some bargaining power with my current lender and reduce the exit fee if I remortgage with them?If anyone knows any lenders or advisors or has personal experience that could help with this, I'd really appreciate your help. Stay safe everyone. Fabs

Hi everyone. I'm new here but listened to Rob and Rob's podcast for quite a while. I'm hoping someone can help me. This is the first year I've had to do tax returns (I own one BTL since January 2019). There is plenty of advice online about section 24 and I'm aware 50% of it can be offset for the tax year 2018-2019. But I can't find anything about what the tax rules are for interest on other financing. I remortgaged my residential property to pay the deposit for my BTL property. Can I claim the interest I pay on that as an expense for tax purposes? Also what about if I borrow the money for the deposit from a bank or relative and pay interest on that? Is that tax deductable? Anyone's help would be much appreciated as I imagine this is quite a common situation. Thank you

Hi Experts, I just wanted to get an idea if I can claim the "Interest on loan" as an expenses while preparing annual accounts of the Company considering that the loan is taken in my personal name instead of Company's name. Thanks

I will give a short summary and eager to hear your thoughts about how to be smart about how to fund my company. I am a Swedish citizen (living in Sweden) setting up my UK LTD and have understood that expeses can be deductible even if the occured prior to the launch of my company. BUT if I have had eligable and deductible expeses of 1000 pounds (personal and taxed money), that 1000 can only be deducted against revenues to reduce my corporation tax. Which means I "save" 19% (190 pounds). Still that 190 pounds will have to be taxed (personal income or similar based on our Swedish rules) prior to being cash in my pocket = my 1000 pounds spent on my company will only be paid back at around 10-20% (bummer..). Am I missing something here? After realising this I want to keep my expenses to a minimum whilst funding the company in an efficient way. Question: Can I make a directors loan on the day of incorporation charging NO interest and then pay back that money (potentially when selling a property in the future or when refinancing using a mortgage) without having to report anything to the HMRC relating to the directors loan (form CT61) as there is nothing to report because I do not charge any interest? I of course have to do my accounting, annual reporting etc as per the requirements. The idea is of course to fund the company but also try to make sure I can get my already taxed money back.. Would really appreciate your comments and If I am completely wrong here or if there is a better way? Also, if it is not a directors loan but I am borrowing from other investors, I would not need to fill in the CT61 or anything else even if paying interest, is that correctly understood? (Again, just do the accounting correctly). Appreciate your comments and thoughts! Best Regards, Jakob

Hi everyone, I have a 50% share or a property I jointly own as 'Tenants in Common' with one other owner. I would like to sell my share to a third party (the second party is not able to buy). I don't live there. I am not really interest in partitioning, or letting my share. Does anyone have experience, advice, or interest in this type of situation??? Many thanks

Hi fellow hubbers, I'm currently reading 'Using a Property Company to Save Tax 17/18' and on page 195 it says: What are the cases where this isn't possible? My understanding of this is that I've taken out a bank loan, which I've then invested into my company as a director's loan, I am able to claim the interest relief when completing my Self-Assessment Tax Return? If this is the case, what boxes/parts of the SA Tax Return form would be completed to account for this?? Thanks for any help in advance!

I have engaged an accountant for the first time to prepare my 2016/2017 tax returns and I am not 100% convinced that their advice is correct on a particular aspect. The situation is this: 1. When I remortgaged my home, I borrowed an additional sum to invest in my first BTL. You could say that the total loan comprised two parts: Part A - the part needed to repay the existing mortgage on my home; and Part B - the additional borrowing to fund the BTL. Part A is about three time larger than Part B. All of Part B is being used to fund the rental property business. 2. It is a fixed rate repayment mortgage at 3% (give or take). I pay the same amount each month which comprises interest (X) and capital (Y). Clearly, as I repay the capital, each repayment comprises a slightly bigger Y compared to the X. 3. The question is how much of the interest is deductible from the rental income. Clearly it is only interest on the Part B borrowing and not the Part A borrowing. 4. My accountant has taken the total amount of interest paid on the mortgage (i.e. the total of X throughout the tax year) and apportioned that between Part A and Part B and is telling me I can deduct the amount of X apportioned to Part B. As a formula I think it looks like this: Deductible interest = (X * Part A)/(Part A + Part B). 5. But is this correct? Can I not say that the Y (capital) payments are going to repay Part A first, and that all I am paying in respect of Part B is interest? On this basis, until Part A gets to a certain level, I would be able to deduct 3% * Part B from my rental profits which gives a higher deduction. The accountant seems to think that this would count as income on my "personal" account which would be taxable but I cannot see how that is. Is my interpretation reasonable/acceptable? Apologies, this is a bit complicated, but if there are any tax techies who understand what I am getting at and can answer the question, I would be very grateful. I doubt I am the first person for whom this is relevant! Many thanks.

Hi, My dad had bought a house in 2006 on a interest only basis, he had tragically passed away few years later in 2009. The house had automatically transferred to my mums name as she was named the next of kin. However, does that mean the house is fully paid off cos she still make payments to the mortgage company. He had insurance which means it should have covered the mortgage right or does it mean the interest has been paid but we have to start paying the actual money for the house ?

Please read and share the following articles, the campaign against the Budget changes has hit the national press, we must do our share to continue it's momentum, write to local MP's, educate fellow landlords who have not yet realised what will hit them in 2020, use any useful contacts in the media to get the word out. http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816726/Buy-to-let-tax-My-five-properties-were-my-pension-now-my-tax-bill-will-jump-38pc.html?fb_ref=Default http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816720/Death-of-buy-to-let-landlords-wake-up-to-Osbornes-150pc-tax.html?fb_ref=Default http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816733/Alice-in-Wonderland-buy-to-let-tax-sets-a-new-benchmark-in-absurdity.html?fb_ref=Default At the very least please sign and share the petition- https://petition.parliament.uk/petitions/104880

Hi all! I recently discovered this article that suggests buying a house now, whether it's residential or BTL, is a terrible idea. I would be interested to know what your thoughts. Matt https://www.linkedin.com/pulse/fallacy-home-ownership-siam-kidd?trk=prof-post

Hi, Having completed my first HMO for cash and let it out, I am now looking at refinancing using commercial lending to get my money out for the next project. There are a number of options on offer and the issue I have is whether to select interest only or a repayment mortgage, as there are pros and cons of each which I see as follows: Repayment Pros Repaying the capital creating more equity over time Additional equity can then be released at a later date to re-invest generating more cashflow No personal guarantees are required 20 year term Forthcoming Interest rate rises do not impact repayments as much as interest only, as the capital balance is being repaid Lower interest rate than interest only Cons Repayment 25% higher than interest only reducing cashflow Maximum lending is 70% LTV Interest only Pros Lower repayments thereby maximising cashflow Maximum lending 75% LTV Cons 10 year term No capital repaid so less equity at end of agreement Personal guarantees will be required 100% of base rate rises will be applied to repayment Linked to 3 month LIBOR rather than Bank of England base Higher rates than repayment option My dilemma is that the main objective for doing an HMO is cashflow and whilst the cashflow on both option is better than for a single-let, the interest only option will maximise that cashflow. However, this seems to be the only advantage vs. a repayment mortgage. I would appreciate any views on this that anyone may have and indeed to see if people think that I am looking at this correctly? Thanks, Simon