Best way to mortgage house

[valtraman]

Needing to buy a house for older generation here. Currently have a mortgage on the farm we own . What’s best way to do this ? Could we just add cost of house into farm mortgage ? Or best to get separate mortgage . Would be putting some money down to house but mortgage the bulk of the cost . I have asked the bank awaiting there reply just wanted some opinions on best thing to do .

 

[d williams]

Needing to buy a house for older generation here. Currently have a mortgage on the farm we own . What’s best way to do this ? Could we just add cost of house into farm mortgage ? Or best to get separate mortgage . Would be putting some money down to house but mortgage the bulk of the cost . I have asked the bank awaiting there reply just wanted some opinions on best thing to do .

If you have cash sitting around not earning anything a off set mortgage is a really good way to save interest

 

[valtraman]

If you have cash sitting around not earning anything a off set mortgage is a really good way to save interest

What do u mean an off set mortgage ?

 

[Loftyrules]

Not sure what the rules are where you live but in Wales the stamp duty (welsh land tax) for buying a "second home" is horrendous

 

[d williams]

What do u mean an off set mortgage ?

Any spare cash can be off set against against the borrowings it’s calculated daily so for example
£100k morgatge
£100k in bank
No interest to pay

 

[nelly55]

Go to a broker for the best deal.

 

[Boysground]

Or a repayment business loan that happens to be paying for a house. I have one that is almost paid off. It’s with amc but the property is not mentioned on the loan. Was a competitive rate at the time, few years ago so may not be as good option now.

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[Cowabunga]

Get a buy to let mortgage in the younger generation's names and charge a small rent to the oldies. That will require some 10 to 15% down in cash on the property which you can raise from the farm finances.

Do not get an interest only mortgage. I know that a lot of very expansionist farms are expanding on interest only loans, but the capital has to be paid at some point or the property sold to pay the debt.

 

[Boysground]

Would you be able to make use of the 1st time buyer scheme?

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[fgc325j]

Get a buy to let mortgage in the younger generation's names and charge a small rent to the oldies. That will require some 10 to 15% down in cash on the property which you can raise from the farm finances.

Do not get an interest only mortgage. I know that a lot of very expansionist farms are expanding on interest only loans, but the capital has to be paid at some point or the property sold to pay the debt.

Yes - that is the problem, people think that as long as they pay the interest on the loan, everything is fine.
What they don't realise is, just paying the interest is like paying the rent on a house - you can pay rent on
a house for 20 years, but you don't own a brick of the property at all. If you were to borrow 100k @ 5%
and paid the 5k interest every year for 20 years, you would have paid out 100k in interest payments BUT
you would still owe the original 100k you borrowed. Interest payments and mortgage payments are two
different things. A rule of thumb which a bank manager told me he used, and this was 35+ years ago,
was that he expected the borrower to pay back a pound on top of every pound in interest, so that the
borrower would be on top of his borrowings.
Ps - this was back in the early 80's and interest on loans then were mid to high teens !!!

 

[Exfarmer]

A long time ago, nearly in another universe, interest only made a lot of sense, since the inflationary factor on houses particularly, meant if you could just pay off the interest, in 20 years the initial capital was now peanuts.
However this has changed dramatically with inflation being on the floor as is interest.
It makes no sense at all only paying the interest portion today, since the rates are so low. A huge danger is, in a few years you may be facing 10% interest and nothing been paid off the loan!

 

[Cowabunga]

I have some distant relatives of my wife's, so no relatives of mine who are coming to the end of the mortgage period on a new build house. An interest only mortgage. Their circumstances have changed and he has been taken ill and no longer works and they suddenly realise that they are coming up to retirement age and they own nothing and will find it almost impossible to remortgage in their circumstances. They will probably, almost certainly lose the house that they built and be left penniless. For some reason this has come as a bit of a shock to them. If only they had repaid 5000 per year on top of the interest, they would own a house now worth about £80,000 more than their total capital outlay and be worth £200,000 in total. Instead they have nothing. Not a pot to pee in.

 

[Steevo]

Personally I'd ensure the borrowing was linked to the property purchased, rather than tacking it onto an existing arrangement.

 

[Donkey Oaty]

Get a buy to let mortgage in the younger generation's names and charge a small rent to the oldies. That will require some 10 to 15% down in cash on the property which you can raise from the farm finances.

Do not get an interest only mortgage. I know that a lot of very expansionist farms are expanding on interest only loans, but the capital has to be paid at some point or the property sold to pay the debt.

Great Idea!!
But which lender offers 10% deposit BTL mortgages with family members as tenants?
As a Mortgage Broker, I'd love to know!

 

[Cowabunga]

Great Idea!!
But which lender offers 10% deposit BTL mortgages with family members as tenants?
As a Mortgage Broker, I'd love to know!

They would probably want 15%.

I have had several such mortgages over the years, although now mostly cleared. My daughter lives in one of them now.

I have a friend who owns most of over 70 properties. Bought mostly on a rising market and using revaluations to raise the next deposit and on and on. Hasn't worked like that for a few years now of course, and he sold a number, could be up to 20, to clear mortgages on the remainder. Started from next to nothing some 30 years ago.

 

[Agrivator]

Not sure what the rules are where you live but in Wales the stamp duty (welsh land tax) for buying a "second home" is horrendous

Maybe it depends on who owns the current Farmhouse. Is it owned by both of the older generation, or is it owned by a partnership.

Can the parents transfer any share they might have in the Farmhouse to one or more of the younger generation, whether or not they are partners.

It's sometimes difficult to get good sound advice from Brokers, Accountants or Solicitors, particularly those who seem to be working for HMRC.

 

[Agrivator]

They would probably want 15%.

I have had several such mortgages over the years, although now mostly cleared. My daughter lives in one of them now.

I have a friend who owns most of over 70 properties. Bought mostly on a rising market and using revaluations to raise the next deposit and on and on. Hasn't worked like that for a few years now of course, and he sold a number, could be up to 20, to clear mortgages on the remainder. Started from next to nothing some 30 years ago.

Started from next to nothing some 30 years ago. And still has most of it left.

 

[Cowabunga]

Started from next to nothing some 30 years ago. And still has most of it left.

Not a farmer, this one. In fact he started by buying a farm but had to do two other jobs at least on top of the farm work to pay his mortgage so gave it up to buy property. He is now undoubtedly a multi-multi millionaire. He also has shops all over the place, some rented out and others run by his son as a chain of takeaway restaurants. He's still expanding, but slower after the consolidation.

 

[fgc325j]

I have some distant relatives of my wife's, so no relatives of mine who are coming to the end of the mortgage period on a new build house. An interest only mortgage. Their circumstances have changed and he has been taken ill and no longer works and they suddenly realise that they are coming up to retirement age and they own nothing and will find it almost impossible to remortgage in their circumstances. They will probably, almost certainly lose the house that they built and be left penniless. For some reason this has come as a bit of a shock to them. If only they had repaid 5000 per year on top of the interest, they would own a house now worth about £80,000 more than their total outlay. Instead they have nothing.

Fudge it - that's bad

 

[Cowabunga]

Fudge it - that's bad

It is commonplace. Even some farms have expanded in this way with some of them having everything on finance, machinery, cows, buildings, milking parlour, everything. Lots of the machinery with massive balloon payments. They actually own almost nothing and are just farming to pay the interest payments, including on the Range Rover Sport etc. Its all in the shop front, as it were.