Can someone please critique my motgage plan. First time Buyer!

Gareth83

Myself and a friend would like to get onto the property ladder but we are both finding it difficult to do it individually.

We came up with a plan of getting a buy to let mortgage and just renting it out, we are able to live with our parents rent free.

However having looked at this we have decided it is not for us as we would need a 15% deposit, certain legal requirements etc. etc.

Having been to see an IFA (also a friend of the family), he has suggested we get a mortgage to buy ourselves.

We have a combined income of 45k and has gave us the all clear for a mortgage of between 120-130k with no problems.

He suggests once we buy the house we "decide not to move in" and so rent out the rooms. Now i don't wish to get into a moral debate as to whether this is morally right etc. or even legal as this isn't my query. He has said that so long as we notify the council we do not wish to move in, then the council tax is not our problem. he has told us where to download tenancy agreements etc, property insurance etc.

He has suggested we go for a Fixed Interest, Interest Only mortgage and then switch to a repayment mortgage at a later date and try to make money on house prices going up and through decorating etc. etc.

I don't wish to discuss what tenants to have etc. etc. as for the moment we are looking to "buy to move in"

We have had a rough figure of between £500-£600 tops per month for the mortgage and the houses we are looking at have renting potential of £475-£575 (according to a friend of the family estate agent)

So is the fixed interest, interset only beneficial to our situation of getting onto the property ladder??

Gareth83

Forgot to mention we are looking for a 100% mortgage as our deposit (£5000) would be better off used to pay the initila fees, renovation work etc. due to the rate we could get.

I am also a graduate.

Mr_helpful

I think its a case of "Is My IFA a Crook" change word order and end up with the definitive. There are a few other things to think about like landlords insurance, fire regulations etc. What happens when tenants trash the house?

wymondham

Sounds like your IFA friend is not as good a friend as you think they are....

Gareth83

like I said I don't wish to discuss the moral obligations etc.

The IFA is a family friend for many years. This isn't what he has "advised us to do".

he has suggested this as a possibility. Who's to say me and my mate don't have an argument and decide not to move in together so rent it out?

I just want to know if the Fixed Interest, Interest only suits us?

Gareth83

surely someone can help?

hostie

You could get the mortgage with the view to living in the property and change it to a buy to let mortgage (which would not have such a favourable interest rate but would keep things legal) after six months.

For the first six months one of you would put your name on the council tax and electoral register etc. If the property has more than one room then you could keep one room aside for you to live in and rent out the other rooms.
Of course you would still be free to stay at your parents as much as you like as long as you spend some time in your new home. I don't think the mortgage people will check how often you have slept in your bed! It isn't as good as renting out the whole property from day 1 but it is only six months and of course, if you have renovations to do, it might work out well. Of course if you are looking at a one bedroom house or studio then this information is useless!


I am not a financial advisor, I just write this as my partner and I are in a similar situation. We bought a flat for me to live in and with rooms to rent out. Now I have realised that I don't want to live with tenants and so after six months we are considering changing the mortgage to buy to let so that we can rent out the whole flat including my room.
Once you have changed your mortgage to buy to let, depending on your financial situation you can think of getting ANOTHER mortgage for a property to live in...
hope that is helpful.

Gareth83

thanks for that.

we have our eyes on a few properties at the mo. been to view 2 today.