Jemma Forte: Okay, Paul. This person says, “I’m looking for some advice on the best course of action to pursue. I am looking to buy my first house or flat but the aim is to rent it out so a buy to let mortgage is what I need to look at getting. I have a tied cottage with my job so we’ll not be living in the property, so this is why it will be rented out. What’s the best option to go on because I know banks don’t like giving a first time buyer a buy to let mortgage? I am aware of the other regulations around the different types of mortgages and that least a 25% deposit is required which I have the savings for to cover this large deposit.”
Paul Mahoney: Okay. I think there’s a couple passes at that question. The mention about buying the first property and whether that becomes a buy to let because of the tied cottage or whether they’re buying a buy to let anyway is something that needs to be determined there I suppose from a property perspective. On the mortgage side there isn’t really, there’s just the option of the first home buyer mortgages, isn’t there? They are a first time buyer. They said there that lenders don’t like lending to first time buyers, that’s not necessarily true. Different lenders have different criteria.
Some lenders just won’t lend to first time buyers whereas others will. Some lenders will look solely at the property and the rent that property generates and not so much at the person who’s buying and others want to look very much at the person who’s buying. There’s a very broad criteria out there from a mortgage perspective. There would likely be options available to this person, especially given they’ve said they’ve got the 25% deposit. There would quite likely be options available depending on their financial position and the property they’re planning to buy.
So far as other options what they should buy, so far as from the property perspective will be determined, I think, by whether they plan to use that for personal use in the future.
Jemma Forte: In the future, yeah.
Paul Mahoney: Or whether this is solely just an investment.
Jemma Forte: Yes, okay. It sounds like it. It is going to be their first house or flat but they’re just not in the position at the moment, at least this is what I glean from this, to live there. There’s no point at the moment.
Paul Mahoney: Well they have the tied cottage so it doesn’t make much sense. If that’s the case, if they’re buying the place to live then that’s a personal decision. They’re going to buy somewhere that they like that they’re comfortable, all those sorts of things which doesn’t necessarily transfer to what makes sense as a buy to let, because that’s nothing to do with what they like. It’s about what the target market likes and wants. The first is obviously very emotional whereas investing should be very much commercially minded, unemotional, so they need to make that decision.
Jemma Forte: Okay. They could get a buy to let mortgage though?
Paul Mahoney: Quite likely. There’s limited information there.
Jemma Forte: Not impossible, yes.
Paul Mahoney: It’s certainly not impossible for a first time buyer to get a buy to let mortgage. There are quite a lot of lenders that will do it but there’s a range of other criteria that comes into play, for example their income. Some lenders will look at the property, where it is, what it is, the value of the property.
Jemma Forte: And their personal situation is. This is the thing that always amazes me about this show is there are so many unique situations that come up. This is why we never run out of questions because are like “This is my situation.” I guess that’s where you’ve just got to go and go, “This is it. Tell me, and just be honest.”
Paul Mahoney: Yeah, and it can be kind of a minefield. What they shouldn’t do is just go down to their local bank or the bank they’ve currently dealt with because they have one set of criteria.
Jemma Forte: Yes, I remember doing that. I went to my bank and then it was sort of like, ewww. Then you go to a broker and you’re like, “Wow.”
Paul Mahoney: And maybe that would work. Maybe they’d be extremely lucky and their bank would work but there’s over 1,000 buy for let products in the market.
Jemma Forte: Yeah, these two have spoke.
Paul Mahoney: Half of them are only available to intermediate sort of brokers so you’re limiting yourself very much by trying to go out and navigating that mine field yourself.
Jemma Forte: Yes, yes. I loved with I saw a broker also because they could just break it down for you. It’s not an idiot’s guide but it’s kind of here is the clear information that need to know. I’ve got all the kind of complex issues at the back.
Paul Mahoney: It’s like being sick and Googling your systems. They usually lead you down the wrong path, isn’t it, whereas if you go to the doctor you find out what’s wrong with you.
Jemma Forte: And this is why my partner thought he had pleurisy but he didn’t. He just slightly hurt his rip. That’ another story. Okay, thank you so much guys.