First-time buyer: getting a mortgage or buying outright

SM99

Hi,

I'm in the process of looking for a property to purchase, with the aim to buy within the next 3 months, before I go to university. Fortunately, I have come into a large sum of money(£100k), and intend to buy a 3 or 4 bedroom house at approx. £100-125k, thereafter renting out 2 or 3 rooms to supplement me while I study.

Should I purchase a property outright, get an interest only or a capital repayment mortgage? A mortgage may be difficult though, as I am currently unemployed, and I wish to buy a house first before finding a part-time job. My brother may also wish to invest maybe 20-30% into the property I purchase, in order to receive a proportion of the rental income.

libf

It's virtually impossible to get an interest only residential mortgage these days, and even if you could it would be a bad idea.

SM99

Well, that's one of the three choices down. Do you think getting a mortgage or buying outright would be wiser? I'd want to leave myself with around £15-20k, for any future emergencies and for decorating the property, if need be.

RichardTheComic

TBH even with a really healthy deposit like you've got, being unemployed would really restrict your mortgage options I believe.

getmore4less

If going in with brother have a very clear exit plan.

Watch out for HMO issues.

SM99

Damn, maybe I'll need a part-time job first. Yea, I've had a look at a property that wasn't HMO certified, I'd hope the certification process wouldn't be too long. By exit plan, do you mean dividing the rental income and/or capital gains fairly if I do decide to sell?

Elsewhere

Unless the rules have changed, if you live in the property I think you can take up to two lodgers without it being classed as an HMO.

MandM90

Have you factored in costs for moving, solicitors fees and surveys? Is there a parent who could lend you a 10k contingency fund to cover these and any updating the property might need?

Pixie5740

Even with a part time job, that might not be enough to secure a mortgage. If somehow you did manage to get a mortgage then your brother couldn't invest money in your home.

With having more than one lodger you should look into possible capital gains tax issues when you come to sell.

maninthestreet

Does your brother have a job?

SM99

I guess buying outright is the only way to go then. No, my brother may be working by September though. I would at least leave myself around £10k to cover any future costs. In any case, I was hoping to move into a house with very little, if any, improvements needed. Does income from lodgers over, say 10 years get added to taxable capital gains as well then?