Buying a House - To Save For a House ?

Rom

After just speaking with my landlady, who is selling our current rental house.
She has advised 'If I were you'

To buy a house or flat, with the 10k I currently have saved as deposit. In an area that I can afford, purely to rent, as an investment. Saying I will never save as fast as prices rise, and thus my needed deposit rises. Which I think is accurate.

Does this make sense to anyone more knowledgeable on these things? Its something I hadnt considered. Just been plodding away, saving for a house for ourselves. Until this year, have only been saving £200 a month. This year, we are debt free, and saving £400-£600 a month. (rent and childcare takes a lot of other income)

My partner has no credit history, we have just got her a phone, and credit card to start building this up. Score (usless I know) was 800 ish. But not a single entry on her file.
I can only at best, borrow about £120-130k on my own, thats just off a calculator.

We were told last week she is selling. So had planned to build her credit while we saved another £10k, hopefully in the next 18 months.
We are now re renting, with the aim of continuing this plan.

Just she gave me something to think about. It seems investing, and renting, is the smart thing to do. House prices in Bristol are rising fast as always. But no clue if this is a feasible, or wise idea.

Any thoughts and input would be much appreciated.

slopemaster

Its difficult to get a BTL mortgage if you aren't already a homeowner.
Also difficult to get a BTL mortgage for over 75% of value.
Also difficult to get a mortgage for a small amount like 30 000

So, probably wouldn't be possible...

hcb42

I am not sure I understand the question?

Do you want to buy a house for yourselves or a BTL?

Why you would do the latter when you don't have the former, is confusing also

Rom

Thank you for the replies

In my mind, this also seems counter intuitive. Buying a house that we wont live in, while trying to save for a house we will live in.

But my landlady has said that trying to save a 20% deposit, when house prices are rising so fast, is a always moving goal post.
Say we need another 10k to save now...by the time we save that, 20% wont be 20k anymore, it will be maybe 25k. And by the time we save the other 5k, it will be 27k etc. We cant save as fast as house prices move is her point.

My rental house now, is on for 30-35k more, than the same size house, that had a garage aswell, that went on in December (in my cul de sac) It sold in a week. I cant imagine it was just decor that makes that difference, when the other was semi, with a garage, and mines terraced without

Her suggestion, is to get a residential mortgage, not a BTL. That is the only way it would be feasible, as said here. BTL wouldnt cover the value.

Her point is, if i were to buy a house, which i rent out. Im making a little from the rent. And the house price will move with the market for which ever area it is. So my lets say, 100k purchase, could in a few years, sell for 110k or whatever. Plus its being paid for by the tenants rent. So costing me very little.
For the same money in Bristol, Id get a 1 bed flat at a push, mostly its bedsits, in not nice areas.

Not meaning to waste anyones time here, just after more experienced opinions. I can see her logic (I know doing this via a residential mortgage is not the right way) but it just seems polar opposite to the plan I had in my head. Which is just plod along, saving as much as we can, until we have 20k plus. Trying to keep up with the increasing deposit amount is the issue.

questionss

So her suggestion is to commit mortgage fraud?

Even ignoring that...
areas where you can buy a property for 100k are less likely to be areas where you will experience a lot of capital growth. Don't forget fees to sell etc too - agent & solicitor. If you save £500 a month as you suggested, that's £6000 a year; you're talking about selling a £100k property for 110k in a few years, call it 3yrs, take off 1000 for fees, £3000 a year if it works smoothly.
Rent usually is 125% of the monthly payment on a 75% interest only BTL mortgage... You'd have a 90% repayment mortgage so may need to top up for monthly mortgage payments

You'd be responsible for the mortgage, house maintainance and your rent, what about any gaps in tenancies etc... You may also have to pay council tax in tenancy voids.

Keep saving! Start help to buy ISA. Consider other schemes. Speak to a broker to see if you'd get a 95% mortgage if you're desperate to buy sooner.

Zoology_Dragon

And if you get a tenant who causes £20,000 of damage (this happened to us)? We're fine because it's a long term investment but short term and that would have been a disaster.