After documenting the success of my first project (the very project which is the foundation and cause of this website, To Buy A Property And Become A Landlord), I’ve decided to set off on another property/landlord related mission. Like most great ideas, they’re triggered by random acts of fate, or destiny if you will. Sir Isaac Newton witnessed a random, stupid apple fall off a tree, and suddenly he thought of the Universal Law of Gravitation. I had a similar moment like that, only my moment was better.
I was in the shower, cleaning the sweat off my soft bollocks that I accumulated whilst at the gym. As I went to pick up the empty bottle of shower gel, I had a profound thought, “wouldn’t it be great if my mortgage debt was this empty” Like I said, profound.
Currently, I have a mortgage debt of about £150k on one particular property (excuse me while I violently vomit). The mortgage policy I have on my property is interest-only, so I’m not actually paying off any of the debt, I’m just paying interest on the debt (excuse me while I vomit even more violently).
I initially wanted a repayment mortgage, but because my rental income wouldn’t have covered the monthly mortgage payments I opted for the interest-only policy. I can’t say I really take a liking to that particular strategy. I prefer the idea of reducing debt on a month by month basis, and not entirely relying on inflation (increase of house prices) to bail me out in the future.
As I understand, most high profile landlords don’t actually get repayment mortgages, purely because in theory, it’s more profitable to spread money across multiple properties, as opposed to putting large amounts into one or two properties. Putting a large deposit into one property means it’s more likely the rent will cover the repayments because the debt is a lot smaller, consequently there is less interest to pay.
So here we are, embarking upon a new adventure, which entails me having to actively try and raise 15k in the next 6 months to help reduce my mortgage by enough for me to switch to a repayment policy. I figure, if I raise about £15k, and reduce my loan to approximately £135k, I can change the interest-only policy to repayment. The monthly costs for a repayment mortgage should drop significantly, and my rental income should cover it. Makes sense, right? Right.
Ultimately, I COULD use the £15k as a deposit for another investment, but I think I want to get more experience first, and then maybe look into increasing my portfolio.
Mortgage lenders generally don’t mind if borrowers switch mortgage types, especially when switching from an interest-only to a repayment. You don’t need to get an entirely new policy with your current lender. I know this because I’ve switched mortgage types when I first applied for a mortgage- you can read about that process, changing mortgage repayment method.
I already have a few ideas in the pipeline to help raise some cash. The plan is to document my savings for the next few months. I’m hoping, and estimating, that it will take me a maximum of 5-6 months. And believe me, I’m not rich, nor do I have a lot of disposable income. If that were the case, I wouldn’t even bother with this project. Saving that amount of money won’t be easy, so I’ll have to think of some money making ideas.
Wish me luck all!
Oh, and if any of you wonderful people actually want to donate some money to this worth cause, don’t feel shy. HOLLA!