Shopping around for a mortgage? Taking financial responsibility into your own hands

Rear view show Jeremy Redfern; Shutterstock Subletting is not for the faint of heart, and you might think going it alone is easier, or cheaper. Don’t forget that the market is driven not only…

Shopping around for a mortgage? Taking financial responsibility into your own hands

Rear view show

Jeremy Redfern; Shutterstock

Subletting is not for the faint of heart, and you might think going it alone is easier, or cheaper. Don’t forget that the market is driven not only by available properties, but by owners that don’t want to attract renters by listing their homes.

This means you need to understand the market and what might work for you.

Buying a property for yourself gives you a long-term view

The key is that you’re buying the property for yourself.

If you want to sell, then you’ll need to do so after the end of the tenancy, usually six months. If you want to move into the property, you’ll need to work out a long-term lease arrangement, and hopefully find a tenant for a minimum of four years, which can be a bit tricky if you don’t have a family of your own.

After that, if you want to sell, you’re best off buying a new property, rather than renting out your current one.

If you’re buying a property that you can move into after you’ve spent thousands on improvements, you could make a profit with a short-term let. However, if you’re renting for more than 12 months, you should always be looking to sell your property when you want to, as you shouldn’t expect your investment to make a healthy profit, unless the market is in your favour.

It’s a good idea to ask what sort of market conditions are required for you to make a profit from your house. In markets where you’ve done a lot of work, you could consider renting through a third party. This has the potential to turn a profit if you sell before you leave, but the condition might be different depending on the sector you’re dealing with, and some landlords who rent out on a contract basis to protect themselves against capital depreciation will offer free damage and maintenance services.

If you’re renting through the broker/agent, you may be asked for a 1% stamp duty valuation to a private investor, which will cost you on top of the rent. These are tax-deductible, if you’re still using your current existing home as your main home and not planning to buy another property.

You will most likely need to apply for mortgage finance, and it’s important to know your borrowing parameters in advance. Without having this knowledge, you could be way over-leveraged, which will make it difficult to avoid early repayment penalties when you come to sell your home.

The best buyer for your property could be someone from out of your area, who may be interested in providing extra maintenance and seeking a higher rental income.

Whichever method you choose, it’s important to understand what’s relevant for you and to look at the repercussions of each choice. There will be compromises in each option, and while the options are far from equal, if you do research properly, you should end up with an acceptable answer that suits your circumstances.

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