Buy-to-Let now? Or Buy-to-Live later?

ambassador_spock

Hi everyone, long-time lurker first-time poster. I am very keen to get on the property ladder but I'm not sure the best way to go about it due to some unique circumstances. I have been living in the UK for 5+ years and intend on living here permanently. I work for a US company who 1) provides a generous housing allowance but 2) stipulates it cannot be used for a mortgage (only rent)... There are rumours that this annoying stipulation might change in the future, but nothing concrete. For the time being however, while I could technically afford to buy for myself (~£30k cash for deposit+fees and £82k salary, more than enough to qualify for the ~£300k houses I'd be looking at here in the East Midlands), by doing so I would forfeit the housing allowance currently covering my £1,650 rent and £470 utilities. The maths say I should continue renting and set aside enough so that if the rules ever do change I can buy immediately. However, I just turned 37, hope to retire at 57, and I refuse to retire with a mortgage, meaning timing is important.

The way I see it, my options are: 1) keep setting aside money for a bigger deposit and shorter mortgage term while hoping the dumb "no allowance for mortgage" rule changes in the near-term, 2) forfeit the generous allowance and get myself on the property ladder now, giving myself 20 full years to pay it off, or 3) find a cheap rental/holiday property and do a buy-to-let mortgage to start building equity while continuing to receive the allowance for the rental property I live in.

I feel option #2 would just be bad money management, though saying "screw the allowance" and buying a house is attractive for other reasons... #1 wouldn't be terrible except I expect the market to stagnate/crash short-term so I don't see my money growing significantly and I really don't want to wait 10-15+ years to buy. #3 is doable, but due to the significantly higher deposit requirements I would be looking around the £100k range, which doesn't get you much. Theoretically #3 would at least let me start building some equity and, if the rules do get changed, I could then sell the BTL property and use the money as a deposit on my own place. That might depend on not getting bad tenants, which is risky.

Other possibly relevant info:

• My eventual plan is to retire somewhere up North, where views are better, prices are lower, and people are friendlier
• I owned a house (but sold it) in the States before I moved here, so I can't use any FTB help
• My goal is to retire at 57 owning a house with no mortgage, I'm not looking to get rich off property

I would greatly appreciate the forum's thoughts on my situation - am I missing anything that I need to account for?

steve866

How long do you plan to stay at this company? Option 2 doesn’t seem logical. I would consider a buy to let, or investing in tracker funds

ambassador_spock

steve866 said:

How long do you plan to stay at this company? Option 2 doesn’t seem logical. I would consider a buy to let, or investing in tracker funds

Hopefully until the day I retire, 20 years from now. Almost definitely for at least six years from now. If not at this company, likely at a similar one doing a similar job (toss-up whether a different company would have a similar housing allowance or not).

housebuyer143

I would probably get a BTL. Maybe you choose not to live in it in the future and that's fine, but at least you can sell it and then use that equity to fund where you want to in future, taking into account property growth. 

MFWannabe

Personally I’d save as much as I can so you get as big a deposit and small a mortgage as possible when you do get to buy.  82k salary you should be able to save a hefty amount 
hopefully the mad rule will change for you 🤞

SiliconChip

The problem you may well have with option 3 is that many lenders require you to be a property owner in order to borrow for a BTL, and as you aren't your options for getting the BTL mortgage could be very limited.

ambassador_spock

SiliconChip said:

The problem you may well have with option 3 is that many lenders require you to be a property owner in order to borrow for a BTL, and as you aren't your options for getting the BTL mortgage could be very limited.

I didn't know that, are there lenders who don't require property ownership for a BTL mortgage?

Schwarzwald

I would save the purchase/selling transaction costs of the BTL and probably put most towards REITs/trackers, ideally within tax efficient wrapper such as ISA until you are ready to buy that forever home for retirement

housebuyer143

ambassador_spock said:

SiliconChip said:

The problem you may well have with option 3 is that many lenders require you to be a property owner in order to borrow for a BTL, and as you aren't your options for getting the BTL mortgage could be very limited.

I didn't know that, are there lenders who don't require property ownership for a BTL mortgage?

There are a good number, you will probably need a broker though to access them.

dimbo61

Most if not all BTL mortgages can only be taken out via a broker 
Can you save more into your pension ?
Will your employer match your extra contributions  ? 
You can also save £20,000 a year into Stocks and shares ISA,
Regulare savers, premium  bonds , 
Maybe buy a nice property up North in a big city which you can rent out via a limited company and have a Home/ Base in the North of England for when you do retire.
House rather than flat
Freehold rather than leasehold 
Only my view