Mortgage as an investment? 30 April 2019 at 8:31AM in Mortgages & endowments 8 replies 917 views

NewUser1873

Say I am able to get a mortgage of £1million which I use to purchase my first property.

I live in it for a few years and the value of the property increase by say £100k.

Would I be able to sell it for £1.1million, use the £1million to pay back the bank plus any interest that is owed and pocket the rest and simply continue to do this for as long as I wish?

I’m speaking hypothetically and if the property price goes up which I am fully aware could very do the opposite but tbh one good thing about London property is it tends to almost always go up at least eventually...

foxy-stoat

If its your one and only residence then yes, that is what would happen.

Obviously you will have to pay the mortgage until you sold it.

Stamp duty on 1 million is £43,500
Estate Agent fees ( if say 1%) on 1.1 million would be £13,200

Good lucks !

davidmcn

You haven't stumbled across some novel investment scheme, what you're describing is generally how the "property ladder" works.

NewUser1873

I’m not or didn’t say at any point I did. I was simply curious as to whether or not this was a good idea and it seems so.

Btw the other person forgot about the interest on the mortgage as a cost which at about 3% would be £30k so not making much money at all really...

foxy-stoat

NewUser1873 wrote: »

I’m not or didn’t say at any point I did. I was simply curious as to whether or not this was a good idea and it seems so.

Btw the other person forgot about the interest on the mortgage as a cost which at about 3% would be £30k so not making much money at all really...

3% a year - but normally folk don't buy a property (home) as an investment, more of a place to live and hope that the property increases in value in the years to come. Actually as the costs of buying and selling are quite high this would make buying a property as an investment for a couple of years a little pointless.

cjv

When I started looking for my first property I didn't think about it from an investment point of view at all, I just wanted a nice place to live.

Now I have done all my research, luckily for me the property looks like a good investment. It is in a long term flag ship regeneration area, prime location, plans for new schools, shops, a huge tech industrial park being built near by, open spaces, commuter town etc. so I think I have made a good investment without even paying much attention!

Be sure to investigate everything in and around any potential purchase, if you are doing it solely as an investment, It is not risk free.

SouthLondonUser

OP, you are forgetting stamp duty, legal costs, taxes on the rent received, cost of maintenance, agency fees when selling the property...

AnotherJoe

The other issue of totalling debits and credits is, is this one million pound house one you'd have bought to live in anyway? If so, you should place on the cost side, what you'd have to pay in rent anyway. Of course, if you'd normally live in (say) a £100k house then you can only offset rent for a £100k house.

Thrugelmir

NewUser1873 wrote: »

use the £1million to pay back the bank plus any interest that is owed

Interest has to be paid every month on the outstanding debt. Rolling up interest isn't an available option.