First time buyer - To mortgage, or not to mortgage.

KingsGambit_2

BitterAndTwisted wrote: »

You might be better off asking this question on the Savings and Investments forum. Oh, how I wish I had this sort of dilemma to be on the horns of. Lucky you. I suppose it's all down to how risk-averse you are.

Perhaps it is worth asking there, although my hope was really to find out anything more about the mortgage/letting/2nd property idea. It is a lucky situation to be in I realise compared with most first-time buyers, but this is a one-off gift from family so I'm trying to take this whole business seriously. My post is because I wanted to explore other options before committing I wish I could do it all on my own but realistically I'd have to save for several more years to have a chance of affording half of what I can with help. I think I'd be a fool if I didn't make the most of this chance!

hazyjo wrote: »

It is a gamble. Depends how long term you're looking. Prices are generally going down still. In two years' time, who knows where they'll be. I remember the last recession - prices even in affluent areas halved within a handful of years. We're not quite there yet, but who knows... buy, sit on it, wait for the market to pick up (could be another decade to get back to where they were - and that might not necessarily be a good thing), and either forget about it and collect the rent, or sell in several years' time and buy something that will make you more rent. Mortgage free with an income can't be bad...

Thanks, this is great advice. While I was casting my eyes long-term my thoughts were more on the income than the investment, though you're quite right that it is something to consider. That is a step beyond how far I'm looking right now though. I'm trying to figure out if it can work and if it can, then the above is certainly something I would need to look into further.

Nuttyneddy wrote: »

Why not just buy one property outright and live in it? That gives you tremendous security against future changes in circumstances as you will always have a roof over your head.

That's a great point and I have considered that. What I've noticed though is that there is a difference between the properties at the £240k end and at the £300-325k end. Larger rooms, better decor, fewer glaring issues, etc and even something as simple between going from a terraced property to a semi-detached. As long as I can afford it, given the choice I think I'd like the extra you get from a more expensive home (who wouldn't?).

nufc_fan wrote: »

Firstly, you are in a very good situation to start with and if I were you I would try to speak to a professional financial advisor, we are all amatuers on here and can only offer opinions on what we would do.

That's actually what I hoped for and all such advice and opinion is welcome.

anselld wrote: »

In terms of the practicallities, yes, you can buy a place outright to live in, raise capital by taking a residential mortgage and then use the capital to fund purchase of BTL. It is a more cost effective way to fund BTL as a residential mortgage is cheaper than BTL.

That is great to know. In your opinion, would a normal, high-street lender offer mortgages along these lines?

KingsGambit_2

anselld wrote: »

Having said all that, surely the main point is what sort of property do you actually want to live in?

Catatonia wrote: »

What extra benefits would getting a £325k property have for you?

poppysarah wrote: »

What do you want to live in?

Do you want to be messing about buying two places?

As I mentioned a little above, I've noticed the difference between houses at the opposite ends of the spectrum. Truth be told, I'd probably be happy with any place as long as it's reasonably respectable, has a driveway, running water and broadband :T My thing is that my heart wants a nice home to live in and my brain says "invest, let, coffee, rent!". I think the heart is gonna win this one.
Looking 20 years ahead is hard work and searching for one house is tough enough. I'm leaning toward forgetting the letting business for the moment and thinking perhaps no more than 5 years ahead. By then, having bought all the furnishings and trappings, perhaps a better job, maybe build up savings again and maybe meeting a nice girl, it would be a good time to rethink things. Unless the housing market crashes my capital will still be there to recoup (I hope! ). And speaking of meeting nice girls...

hellokitty08 wrote: »

Im a nice girl! lol

Well met

anselld

KingsGambit wrote: »

That is great to know. In your opinion, would a normal, high-street lender offer mortgages along these lines?

Yes. So long as all the normal conditions are met, ie loan to value, credit rating, income multiples, etc there is not a problem as you are simply obtaining a normal residential mortgage. The fact that you wish to use the capital to fund a BTL elsewhere should not be relevant to the lender.

FD is certainly a good choice as you have the additional flexibility of offset and you can pay off and draw down capital as required.