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First time buyer entry strategy


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Hi All,

I'm 31 with a steady salary, and am living in rented accommodation. I have a 3 year saving plan towards a deposit for a house, but I want to buy an investment, not a place to live in. My longer goal would be to eventually buy a residential mortgage for myself, paid for by rental income from assets.

My questions are:

Am I realistically going to get a buy to let without having a mortgage of my own?

Is it unheard of to have a small property portfolio whilst living in rented accommodation? I.e. does it not make financial sense for any reason?

Does anyone have experience with trying to build a portfolio from scratch?

I feel that buying my own house will delay my investment strategy for a 3 years, but, am I trying to run before I can walk?

Any advice on my entry strategy would be appreciated.

Alex

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Hi Alex,

I too am a property investor who rents my own home. I believe it's quite common.

There will be less mortgages available to you as some providers / deals demand you own our house. I would advise working with a good mortgage broker as they will know the requirements of each lender and what products suit your needs.

Hope this helps?

Pete

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Hi Pete,

Thanks for your feedback. It's good to know that other investors aren't so quick to own their own house, if it isn't practical to do so from the outset.

Interesting point about the mortgage rates being higher, so it doesn't seem a long term strategy. But so long as a lender will let me get up and running with buy to lets, I can look towards a residential mortgage at a later date.

Thanks

Alex

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I had an estate agent out to value my house last weekend, and he was telling me that they've changed the rules for BTL mortgages, and they are only available for home owners now as they are considered a luxury. 

 

I've not looked into it myself, but I would double check that things haven't changed recently

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see this article from the money advice service

 

https://www.moneyadviceservice.org.uk/en/articles/buy-to-let-mortgages

 

It is definitely harder o borrow BTL if you dont own but not impossible - a good broker will know who to approach and who might lend - bearing in mind all the usual Mortgage Market Review stuff and affordability tests - and the fact that you are not an experienced investor.  Someone in my mastermind group had exactly this issue - I can't remember the legal term for it  but their worry is that you are actually potentially buying it to live in and getting a better (ie as in  lower monthly payments interest  only) mortgage deal.

 

I'd be interested in knowing the numbers you are looking at

 

Someone will lend eventually if you are persistent

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Thanks all for your input. From the advice, it seems it is possible, but won't make life easy. My best option is to approach a mortgage broker and discus my plans with them, weighing up the downsides of not having a residential mortgage in the short term, against the downsides of having one

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BTL lenders lend only to someone who already owns at least one property but they do not have to be living in the property; they do not lend to someone who does not already own at least one property Alex.

Why have BTL lenders stopped lending to first time buyers? to prevent them fraudulently obtaining a BTL mortgage, then living in it themselves instead of renting it out.

 

Why would people do that? because it is tougher to get a main res mortgage now and peoples income is insufficient to get a big enough mortgage, with BTL you only need to earn £25k, so it is a great way to get a mortgage by the back door for a property that you could not afford to buy on a main res mortgage basis...except it isn't because BTL lenders have sussed that one and decided the easiest way to close that loophole is just to not lend to first time buyers.

 

There is only one BTL lender left in this market; Nat West. They underwrite FTB BTL mortgages differently to make sure you are not trying to get a mortgage for a property you intend to live in by the back door. They rental income is ignored and they underwrite it by the provable income you can declare i.e. if it wouldn't stack on your income, you aint getting a BTL mortgage on it either.

Kevin Wright

Positive Property Finance

Telephone: 01206 586586

Email: inspireme@thinkpositively.co.uk

Brokerage website: www.positivepropertyfinance.co.uk

Workshop website: www.ninjainvestorprogramme.co.uk

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Thanks Kevin. Whilst it may not be the response I wanted, it certainly prevents me from walking blindly into a strategy for 3 years and having a shock at crunch time. With your input, I can now re-model my strategy from an early stage, and look towards a residential mortgage. I still very much want to make a profit before I take out a mortgage for my own house, so I will now explore the buy to sell route, and make capital that way. This way I can take out a residential mortgage first time buyer mortgage instead, albeit without living there, and begin to turn my cash around through renovations. My advantage is that I have time on my side, so either strategy ought to be well researched and planned, I just want to make sure I take the correct route. 

 

This raises an immediate question: If I was in the habit of buying and selling, then buying again, whilst not owning my house, technically each time I buy, would I be classed as a first time buyer? And if so, am I doing myself a disservice? i.e paying a higher interest rate, or needing a higher deposit each time, or eventually getting refused because of my strategy?

 

Thanks

Alex

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