Buy to Let or Help to Buy??

josh1924

Hi all,

Looking for some general advice and I'm hoping you can help me out.

In about three months time I'm looking at buying my first property with money I've saved. For a while now my plan has been to purchase a buy to let investment and start early.

With the recent introduction of the help to buy ISA I'm now wondering if perhaps there may be a better alternative. For example take advantage of the Help to Buy ISA whilst I can and maybe buy a property (I think it has to be for me to live in). Then when I've saved up some more money again go for a Buy to Let after this.

My main worry is if I delay it then it will take me a whole lot longer to buy another...

Any help will be great!

Thanks

Sillalewies

I will go for help to buy instead of buy to let...

This is only my opinion

Buy to let you only own a part of the property but will still be renting.

If you help to Buy the property is yours but the Help to buy ISA / government will be giving in you an interest free (for the first 5 years) loan towards your property. After the 5 years you start to pay interest on it BUT you can pay off the loan before or at the 5 year mark which is exactly what I am doing in one lump some.

so with anything there is a catch - lets say for example they give you %30 towards your mortgage. If you don't pay back the 30% the ISA given to you back within the 5 years and start paying interest on it and it comes to selling your property you will have to give back 30% of the selling price of your property. more than was given to you.

If you can continue to save then that is a great option

OR

There is an option where a family member or friend can help by investing a set amount towards your mortgage when they will not loose any money but they will get their money back after 3 years with intrest and it will help keep your mortgage down for a while.

Hope this helps

colsten

Sillalewies wrote: »

If you help to Buy the property is yours but the Help to buy ISA / government will be giving in you an interest free (for the first 5 years) loan towards your property.

There is some confusion here - the Help To Buy ISA does not provide you with any interest free loan. There are a number Help To Buy schemes, some of which can be combined. Full details: https://www.helptobuy.gov.uk/

josh1924

Thanks for the responses.

From what you have said you may be a little confused as to what exactly it was that I was asking.

Basically what I'm asking is do I spend my money I have saved now and get a buy to let property. Or do I save it for a bit longer, get a Help to Buy ISA and then buy a house for myself first of all.

After that I can save again to get a buy to let.

I'm just not sure on what the best way is to go about this!

Thanks again

eskbanker

Personally I wouldn't be too influenced by HTB ISAs if you're already close to stepping onto the property ladder - yes, you can get a few hundred quid but is that a financial game-changer in your calculations, given the overall cost of buying (not just deposit but transaction costs, furnishing, etc), together with what property prices might do in the time it takes to accumulate the full £3K bonus?

Why would you want a BTL before owning your own home anyway?

josh1924

eskbanker wrote: »

Personally I wouldn't be too influenced by HTB ISAs if you're already close to stepping onto the property ladder - yes, you can get a few hundred quid but is that a financial game-changer in your calculations, given the overall cost of buying (not just deposit but transaction costs, furnishing, etc), together with what property prices might do in the time it takes to accumulate the full £3K bonus?

Why would you want a BTL before owning your own home anyway?

All good points and worth considering thanks.

Why would I want a BTL? Because it has better returns than most savings and will mean I can buy more at a faster pace...

darkidoe

josh1924 wrote: »

All good points and worth considering thanks.

Why would I want a BTL? Because it has better returns than most savings and will mean I can buy more at a faster pace...

On the other hand if you go the HTB route and buy your own property first, you can save on paying rent which will also help you save up to buy the second property at a faster pace..

bigadaj

I think you might struggle to get a mortgage on a buy to let if you aren't a homeowner in the first place, it's often a condition.

BarleyGB

The I'm confused, asking about HTB ISA impiies you don't hace the cash for a purchase? For BTL you need a 25% deposit, sinking fund for voids and repairs, after April there is a +3% stamp duty premium for BTL purchases.

bowlhead99

So in three months you will have enough money for a deposit on a buy to let property plus a repairs and maintenance fund plus enough money to pay the mortgage in any period when you don't have tenants.

And you are wondering whether you should instead buy a house to live in.

You haven't told us your current living arrangements. Presumably renting or living with family. So we have nothing to go on.

One is a relatively risky single-asset investment. The other is somewhere to live which provides tax-free exposure to the property market while either (depending on current living arrangements) eliminating your existing rental cost or letting you move away from your family and have your own life.

So the question is, do you want an investment, or do you want somewhere to live.

- Buying an investment should be compared against other investment opportunities.
- Buying a house should be compared against other living arrangements. - It seems strange to compare one against the other.

Either way, you can open a HTB ISA today. If you keep it without buying a residential property you will still get a decent interest tax free interest rate. If you keep dripping small amounts of money into it for five years without buying a property, you can eventually qualify to get a bonus of £3000 from the government (although the cost of buying the property may well have increased by more than £3000 over that timeframe).

josh1924

Thanks for all of the responses.

I don't pay rent for the time being and won't be for the foreseeable future. Buying a house to live in is far from a priority.

I'm not really asking for the two to be compared so to speak. I'm more asking if the HTB ISA is too good to miss out on?

In a couple of months time I will have enough for a buy to let. What I'm trying to work out is whether I should go ahead with that purchase and forget the HTB ISA or if I should get the HTB ISA and acquire a buy to let in a few more years?

Thanks again everyone