Should I waint for a few months?

quarry_men

Hi, I am in the process of looking for my first house, I have spoken to a few mortgage advisor's to see what I should be able to borrow on my salary and it is a bit less than I thought.. I currently bring in £1791 a month before tax and they seem to think I could borrow upto £100,000 IF my credit score is top notch, which I know it isnt..

Now my question is... I am soon be starting some freelance work after work and weekends which should bring in around £4000 to £5000 over 8 to 10 weeks. What I was thinking I should do is pay my loan off with that money and I would probably have £1000 left over. Would you recommend waiting until I have finished the freelance and got all the payments through before I get a mortgage agreed? This way they should lend me more and also if I pay my loan off than they should be happier to lend to me?

Thanks

carolt

Yes.

In a few months' time house prices will be lower and your financial situation will be much better.

Don't even think of buying, if possible till after next April when lots of buy-to-let landlords put their properties on the market as a result of the new Capital Gains Tax rules kicking in then.

It would be lunacy to buy now, especially in your position.

motch

Seconded

My views top of the market has happened. Sentiment changing. massive uncertainty in the financial markets which could result in banks tightening mortgages and loans (much more than is starting to happen now) take away peoples ability to overstretch themselves financially and prices come down.

See how the credit crunch turns out over christmas and spring, this in my opinion is key to future houseprices.

motch

The bigger deposit you can save up the better, especially if lending tightens.

quarry_men

Wow! Some good answers there, Thank you..

I would like to read-up on this Capital Gains Tax rule change and how it could affect things.. Can anyone lead me to any information?

I also forgot to mention that I have a deposit secured, my father is helping me out with that so there is 10 to 15% of the property I decide to go for..

I am really starting to think that it is definitely going to be better to wait until next year to buy.. Are there any other reasons why its probably a better idea to wait until after xmas?

Many Thanks.

Lavendyr

Basically, CGT used to be at different rates depending on profit made. Now Alastair Darling has changed it to be a flat 18% for all, regardless of profit (effective from April 08). Generally this is a bad thing for small businesses as those who make less profit will now find themselves having to pay more tax than previously. However, for those who make more profit will find themselves paying far less tax than before.

Owning property which is let out for rental is a business venture and as such, landlords are, after a certain time (3 years perhaps? must check) liable to pay capital gains tax on any gains made in value when they sell the house which they were letting out. So consequently, when this new rule kicks in, it's expected that several landlords will be selling up come April 08. This is because house prices have gone up for so many since they bought, because the market is believed to have reached a peak, and because rental yields are now pretty poor, so it is a good way for landlords to cash in and minimise their CGT.

Have a look at this link from The Guardian for more info:

http://property.timesonline.co.uk/tol/life_and_style/property/investment/article2637864.ece

That's a bit of a basic summary but hope that helps