House Plan Advice

Hudson1984

Hi all, i'm after a little advice.

I'm looking to buy my first house at the start of next year (in a position at the moment that I can save large amounts of money so i'm not wanting to rush)

But I really want to make the right choice to set myself up for later life - and who doesn't dream of retiring early!

I'm lucky enough to live in an area where my salary is very high in comparison to the cost of houses.

so onto my queries (sorry if this is asked in a roundabout way or is a boring question)

I've got a choice of how to spend my money, I can afford to buy a house on a 5 year mortgage and be done with it but the house at that end of the scale isn't something I want to spend five years in really as i'm at the point in my life where 5 years can see many life changing events, potentially weddings, children etc and I don't want to over commit.

So I was thinking of the rental route. The same house on a 25 year mortgage is a very cheap proposition that would allow me to put £1000 a month into savings meaning I could put a sizeable deposit onto house number two. The issue here is renting the thing out! yes I can afford the deposit and the mortgage if it doesn't rent but am I missing a trick here? if I left the second house empty can I buy it on a residential mortgage and spread the payments over a longer period? i'm not looking to get rich off my investment or to bump up my monthly income it's merely a long term investment.

by doing this i'd still be paying alot less on mortgages than I would if I was renting one out it's just the house would be empty.

are there implications of doing this? or am I better off investing my £12k/yr another way? I had previously thought that renting houses would be a very good way to secure a good pension income and grow assets over time but with all the fee's and extra work involved i'm not sure anymore (I work away from home alot so being on call for tenants might be tricky)

So to sum up a poorly worded query -

1/ am I better to have a 5 year mortgage and get the thing paid off as quick as I can

or

2/ Have a longer mortgage allowing me to buy multiple properties

or

3/ Have a longer mortgage but invest my money elsewhere.

Any advice would be fantastic as i'm rather eager not to make a stupid decision and regret it as soon as I move

Dave_the_Ginger_Cat

The option which will give you the most flexibility is to have a longer mortgage but to put it on a rate which allows overpayments to a reasonable value. Many discount rates are capped at an overpayment of 10% per year.

I would establish yourself in one house first, and then do some detailed research on the rental market in your area. You'll need a decent deposit to but a second property if you wanted a BTL, and surplus income could be saved for this in the future. This way you can go down any of the routes you suggest in due course, but are not committed to any one.

I would also take this time to weigh up your attitude to risk. Are you willing to invest in a property which may not be let all the time? Are you willing to invest capital in an asset which may not hold its value? And if you are, what level of both would you be willing to risk? And ultimately is property the right investment for you? There's plenty else out there.

You can only have one residential mortgage, so you would always need subsequent ones to be on a commercial basis

Hudson1984

Dave_the_Ginger_Cat wrote: »

You can only have one residential mortgage, so you would always need subsequent ones to be on a commercial basis

this is the main point I was after really.

I think that's the best way - long mortgage and save in a conventional way for a few years and reassess at the time.

I'll certainly look for a overpayment mortgage and see what the options are there.

I don't mind risk to an extent. i'm not looking to sell the houses they will be kept as rentals and if all went perfectly in life i'd say pass them down the line when I kick the bucket but who knows what the future holds properties in my area my shoot up in price and i'd be daft not to sell. Who knows.