Advice please for a confused and worried poss FTBuyer!!

MaggieMoon_3

I live in a property that is rent free and goes with my job. I have saved some money and have been left some, I dont have a pension, (I am 34) and I thought that I should be buying a property and letting it out in the hope that I would be on the property ladder and that I would be making some money in the process - on the rental and also on the property appreciating. However, I have been reading as many postings as I can and I feel concerned and confused now as to what I should do, and if I dont buy a house or flat - what do I do with my 60 K? If I lose the money, there is no more coming .... and so I need to be so careful. Thank you in anticipation. PS I was told by m advisor to get an interest only mortgage - and also the property that I could afford to buy now would not be the sort of property I would want to live in in later years. Also I would need to work from home and rent a room in order to afford the mortgage! Help!!

[Deleted User]

I was in the same position as you a few years ago, I bought a 3 bed ex-council house and rented out the 2 spare rooms, after 5 years I sold it and bought a beautiful flat in the centre of town exactly where I wanted to be and I am loving it.
You need to make sacrifices to get on the property ladder and your first house/flat is not usually the one you spenmd the rest of your life in, so be open minded about it, it will pay off in the long run. But whatever you do, do not go for an interest only mortgage, advisors get a bigger commission when they sell endowment mortgages! Repayment is SAFER - always go for repayment! Make sure it's portable and interests calculated daily. With the extra money you earn from renting out your spare room, you'll pay off your mortgage quicker. Good luck!

Iona_Penny

If you are going to buy somewhere you dont live in you will need to get a buy-to-le mortgage and need to look at these (do you need your advisor? ) Also be careful to choose a property that is an the area where it will rent easily ie near a hospital/uni and not necessarily where you want to live.

What size mortgage are you going to need? Are you going to be able to pay if the house is empty given that you don't pay for your accomodation?

There are real knowledgeable people on this forum who I am sure can help you, but it does seem to be a great opportunity to get on the propery ladder.

meanmachine_2

Van1971 wrote:

I was in the same position as you a few years ago, I bought a 3 bed ex-council house and rented out the 2 spare rooms, after 5 years I sold it and bought a beautiful flat in the centre of town exactly where I wanted to be and I am loving it.
You need to make sacrifices to get on the property ladder

That's because you've coincidentally benefited from the biggest boom in house prices ever.

Imagine if the guy had invested that 60K and the property drops by 60K over 5 years.

Would he now be on this site crowing about his lost equity?

The OP is concerned about not losing his money. Well, if he doesn't want to lose the money and is a non-risk taker then I suggest they put it in an ISA/on line account then see where we're at after any "correction", should it happen.

If they're not so bothered about losing that money then yes, use it as a deposit then try not to keep an eye on the market, in case it does keep falling.

But buying at peak, or just after peak is the surest way to lose that cash.

[Deleted User]

in the hope that I would be on the property ladder and that I would be making some money in the process - on the rental and also on the property appreciating

This wasn't in the original post, so my answer would have been different. I though your only interest was of getting onto the property ladder, if you're asking how to invest your money the best possible way, then meanmachine is right in saying that it may not be the best time to buy a property.

MaggieMoon_3

Thank you all very much for reading my question and then for answering. I am sorry that the last bit did not appear in message - I am new to this!! (What does OP mean please??) Anyway - what you have all said has made me think .... I know that this is really quite the worst time for a while to buy a house and if I had to live in it - then buying would be different - I would have to, but for the next few years my home is provided with my job, but I did not want to waste this £60k that I have got and as I said - only once will I have it and I simply cannot afford to lose it on the property market. Basically what you are telling is not to buy yet?? Could you also tell me why people are saying that from next April, little houses costing about 150k will be snapped up by investors - SIPPS - and is that a reason why I should buy, rent out and know that for the next few years I am not making any capital appreciiation?? Also at present, if I geta mortgage for 120k, I could cover that from my wages if the house did not rent .... but it would be tight.

Now is really not a good time is it???

Thanks again

Maggie Moon

lush_walrus

Iona_Penny wrote:

If you are going to buy somewhere you dont live in you will need to get a buy-to-le mortgage and need to look at these (do you need your advisor? ) Also be careful to choose a property that is an the area where it will rent easily ie near a hospital/uni and not necessarily where you want to live.

Not strictly true BTL mortgages are not necessary unless you already have a mortgage which you dont, avoid BTL mortgages unless you really have to get one as they are always higher interest rates.

Get a mortgage against your earnings, and as long as your earnings are proportional to the amount you need to borrow you will be ok.

MrBen_4

MaggieMoon wrote:

Thank you all very much for reading my question and then for answering. I am sorry that the last bit did not appear in message - I am new to this!! (What does OP mean please??) Anyway - what you have all said has made me think .... I know that this is really quite the worst time for a while to buy a house and if I had to live in it - then buying would be different - I would have to, but for the next few years my home is provided with my job, but I did not want to waste this £60k that I have got and as I said - only once will I have it and I simply cannot afford to lose it on the property market. Basically what you are telling is not to buy yet?? Could you also tell me why people are saying that from next April, little houses costing about 150k will be snapped up by investors - SIPPS - and is that a reason why I should buy, rent out and know that for the next few years I am not making any capital appreciiation?? Also at present, if I geta mortgage for 120k, I could cover that from my wages if the house did not rent .... but it would be tight.

Now is really not a good time is it???

Thanks again

Maggie Moon

You can read up a bit about SIPPS here:

http://www.housepricecrash.co.uk/forum/index.php?showtopic=16605

Nick_C_4

What does OP mean please??

OP = Original Poster

I would say now is a decent time to have this opportunity. You can put your cash in the bank to earn some interest while you do some research about buying and renting, in the knowledge that you're not being left behind by rampant house price inflation in the mean time.

Remember that since this will be your only house, even if you buy and then house prices crash, then if you need to sell to buy your own place, the price of the place you'll be buying will be lower too. Yes, if there's a house price crash then you'd be better putting your cash in the bank until it's hit rock bottom, but not everyone thinks there's going to be a crash, and no-one can predict the future. You sound like you wouldn't be over-extending yourself by buying and renting it out, so by buying you're on the ladder whichever way the market goes. I would second the thoughts about interest-only mortgages: BTL landlords take these because they assume that capital growth will pay back the loan with a profit. This is an uncertain proposition at the moment, IMHO.

As for your question re: SIPPs. SIPP = Self-Invested Personal Pension. As of April 6th 2006, you'll be able to hold a residential property inside a SIPP, if you've got enough money in your SIPP to buy one. There are many who think that this will cause a rush of small buy-to-let properties being bought by a SIPP, or being transferred in. Why this should stop prices rising I don't know, if it happened they would be more likely to rise at least briefly. But, again, no-one knows for sure if this will happen - pension providers haven't finalised their offerings yet, so no-one knows fully what the costs will be.

GDB2222

MaggieMoon wrote:

Thank you all very much for reading my question and then for answering. I am sorry that the last bit did not appear in message - I am new to this!! (What does OP mean please??) Anyway - what you have all said has made me think .... I know that this is really quite the worst time for a while to buy a house and if I had to live in it - then buying would be different - I would have to, but for the next few years my home is provided with my job, but I did not want to waste this £60k that I have got and as I said - only once will I have it and I simply cannot afford to lose it on the property market. Basically what you are telling is not to buy yet?? Could you also tell me why people are saying that from next April, little houses costing about 150k will be snapped up by investors - SIPPS - and is that a reason why I should buy, rent out and know that for the next few years I am not making any capital appreciiation?? Also at present, if I geta mortgage for 120k, I could cover that from my wages if the house did not rent .... but it would be tight.

Now is really not a good time is it???

Thanks again

Maggie Moon

OP means original poster. That's you!

If you bought a house, it would be on a Buy To Let basis (BTL). The general concensus here seems to be that this is not a good time to go into BTL.

You should think about some long-term investment for the money. Don't just leave it in the bank.

eurows

PS I was told by m advisor to get an interest only mortgage

Take that step if you want to make the biggest mistake of your life. Buy a house at the top of a bubble with an IO mortgage is tant amount to suicide.

Absolutely pathetic advice. Keep the money in a savings account and wait. The prices will come down and boy will you be glad you did.