Will this be the most surprising property trend of 2018? By Emma Hall, Head of Sales at GWlegal
First-time buyers and buy-to-let.
Will this be the most interesting property trend of 2018?
I believe so.
What am I talking about?
Major and smaller lenders alike are beginning to encourage FTBs to jump onto the property ladder, as landlords. They have never done so before.
Barclays recently became the first major lender to allow FTBs to secure a range of mortgages as investment property owners.
Under Barclays’ new offer, buyers will be able to apply for buy-to-let mortgages even if they don’t currently own property, or have never owned property before.
Previously, such mortgages were not offered by the big bank. Only those who already owned property could take up a buy-to-let mortgage deal.
Deposits required for these buy-to-let mortgage offers are usually set at 25%. The lowest offer on the market current among major lenders is 20% (Clydesdale Bank, Ecology Building Society).
This means you would have to take out a loan worth 75% of the value of the property you’re buying with Barclays. It is a hefty amount.
Other lenders offering mortgage products for FTBs opting for buy-to-let include NatWest, Royal Bank of Scotland and HSBC. I would advise conducting your own price comparison or enlisting the assistance of a good mortgage advisor before deciding on anything.
Why are FTBs deciding to become landlords as opposed to purchasing a property to live in themselves?
It all comes down to price.
In London, many young buyers cannot afford to purchase property in the areas they’d actually like to live in. As such, they continue to rent in a more desirable location, while making income as landlords. With demand for housing at an all-time high, this is a model that can very well work in the capital (and possibly other cities and regional areas), if you’re smart about it. It is necessary to balance the price required to purchase the property (taking into consider stamp duty and all the other fees that add up), ongoing landlord expenses, your current and future income and the price you pay for your own rent.
If you live in a highly expensive area, and you fully understand the costs you’ll face as a landlord, a buy-to-let property may be a way to buy more quickly and cheaply.
Again though, I must emphasise the need to weigh up and pros and cons, with the assistance of a professional advisor.
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Content correct at time of publication.