Considering my first Mortgage

DireEmblem

Hey there all,

As the title suggests I am considering my first mortgage as I will be in a situation in January where I have a sizeable deposit.

I was originally thinking of holding off for a few years - I like having minimal ties as I might be moving to Sydney for work in the next 6 months, however my parents have talked me into considering buying a flat to rent. I have found a couple of 3 bedroom places, which would require me to borrow 2x my salary. The monthly repayments will be ~ the same as what I both currently save/pay in rent for a 1 bedroomed flat, so this would seem sensible.

Is borrowing 2x my salary sensible for my first mortgage? Searches online appear to suggest that you can borrow up to 3-5x your salary. The pros/cons to borrowing more as far as I am concerned is that a bigger mortgage could provide a greater return longterm, but would also be riskier to myself due to carrying larger monthly repayments.

I plan to visit a couple of mortgage brokers early january to confirm how much I can borrow, find somewhere and put down an offer. I will initially move in, stop renting and IF I move to Sydney, rent out the flat for a small income. I would take out a 'long term' mortgage, but ideally I would work to pay this off/gain a second deposit as quickly as possible.

I think I would be best to consider an 'offset' morgage - is this correct? This should allow me to contribute more to reduce the mortgage interest, and leave access to cash incase of emergencies.

I have only started looking into this - does it sound like I am taking a sensible approach?

Beckyy

Honestly, not a sensible approach from my point of view.

There is a big difference between buying a property for yourself with a residential mortgage and buying a property to let out which requires a buy to let (BTL) mortgage.

You can purchase a property with a residential mortgage, and request 'consent to let' (CTL) from your mortgage provider to let the property out, however there may be charges associated with this and there is no guarantee they will agree - it is less likely if you haven't had the property for long as it may look like an attempt to get a BTL mortgage on a lower residential interest rate. If you do not apply for CTL and try to let the property out you will be in breach of your mortgage conditions and invalidate any insurance policy you have.

You are highly unlikely to be able to get a BTL mortgage in itself for a property if you don't already own another one. There is usually a requirement to be a home owner, and ern over a certain amount to qualify for many of them. If you did get one, you would then need a sizeable deposit (40%+) to get a half decent interest rate.

Becoming a landlord is a massive responsibility, not something to be taken likely. I would 100% avoid taking on this responsibility if you are likely to be moving 9,000 miles away. As a LL myself I can tell you that the mortgage is just the easy bit, then the hard work starts. I appreciate from your parents point of view it would be a good investment for you, however I don't think it's viable or a sensible thing to do if you will be travelling.

Also, it's a lot less about your salary and more about how much of a deposit you have on both accounts.

I would wait until you know if you're going to Australia, if you are then save up for when you're back and if you're not then buy somewhere now for yourself.

DireEmblem

Thanks for the response - yes I will have a sizable deposit - 35% in January, and 60% around June for the properties I am looking at. There are a couple of places of interest to me, which on a FTB mortgage would be bigger and cheaper than my current rent payments. On a BTL mortgage, the rental payments should be ~ £300 more than the repayments monthly, however this does not take into consideration how much I would be taxed etc.

Buying definately seems the way to go - the safest of investments I can find would only return 4% per annum. Do you think I should consider somewhere smaller - so that come June I would own 100% of the property? My thoughts were even on a BTL mortgage, I should be able to meet the repayments myself through what I normally save on a monthly basis.

Beckyy

Most BTL mortgages are quite affordable assuming they're interest only, but the requirements to qualify for one aren't so easy. There is also the running costs to take into account, repairs, agent fees if applicable, maintenance, insurance. They're tax deductible but can be expensive in themselves, even routine things.

If you don't get a good tenant then you can end up with some massive problems, and stress/bills to accompany them. So whilst looking at mortgage figures it will seem like a great return it isn't guaranteed income at all. A bad tenant followed by a void could leave you in the red, rather than with a return.

Why not buy somewhere yourself then assuming the mortgage repayments are pretty low you can save and look to buy a BTL property in the future?

I'm not trying to talk you out of becoming a LL, but just trying to make it as clear as I can that it isn't a safe income, and is a lot of work and responsibility to take on. Personally, I don't think I would have been ready to be a LL before being a homeowner myself and having the security of owning the roof over my own head before the one over someone else's.

Best of luck

ourcornercottage

I would agree with the above I don't have a btl myself but my dad has 3 and from time to time all of them cause very time consuming issues. You couldn't rent out and move to oz without either 1. Paying someone to manage it for you at significant cost or 2. Putting it On someone like your parents which could end up being very unfair.

What I would personally do is put you money in an account getting the best rate you can, wait til you know if you are going to oz then buy if not. If you do go to oz, You might end up wanting to stay in oz (I know several people who stayed after work trips) and will appreciate the money you have saved then. The last thing you would want is it in a property here causing you problems.

It's just my opinion and experience of btl, I'm definitely not against btl as I plan to do it myself one day but you need to think of it as a job that requires your time. Good luck