Apr 26 2007 |
My New Property Investment ProjectCategory: Property Diary- Project 2- Reduce Mortgage |
10th September 2007 UPDATE : I’m happy to say that this project has now been complete. I raised just over 15k. You can read about it here, I Raised My 15k (Plus More)
Ok, folks, I’ve actually come up with a new project. Actually, it’s more of a sub-project. I thought of this sub-project while I was in the shower; cleaning the sweat off my soft buttocks, that I had accumulated whilst at the gym (yes, I workout). The idea was influenced by another blogger, which I read on a regular basis, nev’s blog. I’m sure he’ll be flattered that I thought of an idea based on his influence while cleansing my arse. His blog is basically about him raising money to reach financial success.So, here’s my plan…
Currently, I have a mortgage of about 150k (I want to kill myself every time I remind myself). However, the mortgage policy I have on my property is interest-only, so I’m not actually paying off any of the loan, I’m just paying off the interest on the loan. The reason why I never actually went for a repayment mortgage (where I chip away at the loan amount every month) was because my rental income wouldn’t have covered the monthly mortgage payments, so I would have had to pay out of my own pocket. I initially wanted a repayment mortgage, but due to financial circumstances, as just explained, I opted for the interest-only policy. Currently, the only way I will make any money on my property is if the property value increases (which it has, since I purchased it). I want that all to change. If I had a repayment mortgage, I would essentially be making money each month, as my tenant would be paying off my mortgage, and when it comes to selling property, I would cash in! CHA-CHING!
As I understand, most high profile landlords don’t actually get repayment mortgages, purely because it’s more financially viable to get interest-only policies, as I just explained. But I’m going to be different. I COULD save for another property, instead of submitting myself to this sub-project, but I think I want to get more experience first, and then maybe look for another property investment next year.
I figure, if I raise about 15k, and reduce my loan to approximately £135k, I can change the interest-only policy to a repayment mortgage. By reducing the loan amount by 15k, the monthly costs for a repayment mortgage should drop significantly, and my rental income should cover it. Makes sense, right? It’s a brilliant plan!! Of course, I’ll have to discuss this with my mortgage broker, but it should be fine. Mortgage lenders generally don’t mind if you switch mortgage types, as long as you still use them as your lender. I know this because I switched mortgage types when I first applied for a mortgage- you can read about that switching from a repayment policy to a interest only policy here.
I already have a few ideas in the pipeline that will help me raise some cash. The plan is to document my “project savings†for the next few months. I’m hoping, and estimating, that it will take me a maximum of 5 months. I think I’m being realistic. No, really! And believe me, saving that amount of money won’t be easy, so i’ll have to think of some hairbrain schemes (all of which I’ll document).
I’m going to set up a separate bank account this week, so I can keep a thorough track of the balance. However, as it stands:
Current balance: £0.00
I’ve come across another blogger, Steven Aitchison, that’s doing something similar to what I am. However, he’s trying to completely pay off his mortgage so he can become a full-time blogger. Good for him, and good luck to him. Although, I think it’s a rather risky business, but I won’t get into that.
Wish me luck all! Oh, if any of you wonderful people actually want to donate me some money, to help aid this project, just HOLLA! Don’t feel shy.
You can follow the full project here Property Diary- Project-2
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"I initially started this website as a complete property idiot;
the plan was to document my every step from property idiot to
property landlord (mission accomplished), in hope that people would
find my site and help me along the way (they did!). Read
about my journey from A-B in my
(2007-05-08 08:53:40)
[…] Property Investment Property Investment Project Start date: 13th November 2006. Current Duration Of Project: 11 Days Current Stage: I’m starting a new property project. Read more here […]
(2007-08-22 11:09:54)
Excellent idea, good luck with it. I am sure you could of avoided the shower scene in your blog!