Moving out, rent or buy? Also: buy-to-let?

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BigShack
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#1
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#1
Hello,

I will be looking to move out in the next 12 months and just wondering whether it is better to rent or buy a property as my first? I've heard benefits of both, what do you think?

I've also thought about buying-to-let; I understand that can be difficult for a FTB. Your thoughts?

I have a decent income so could save for a suitable deposit of 25% on a buy-to-let if needs be.

Thanks
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claireestelle
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#2
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#2
(Original post by BigShack)
Hello,

I will be looking to move out in the next 12 months and just wondering whether it is better to rent or buy a property as my first? I've heard benefits of both, what do you think?

I've also thought about buying-to-let; I understand that can be difficult for a FTB. Your thoughts?

I have a decent income so could save for a suitable deposit of 25% on a buy-to-let if needs be.

Thanks
If you get a buy to let you lose the stamp duty relief on your next home that you ll actually live in, if you can buy your first home for you now I d do that.
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BigShack
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#3
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(Original post by claireestelle)
If you get a buy to let you lose the stamp duty relief on your next home that you ll actually live in, if you can buy your first home for you now I d do that.
That's 3-5% stamp duty on my second home depending on how much I pay for it. Is that 3-5% on the LTV amount? so, say, £150,000 would actually mean a £154,500 mortgage? Or does it include the deposit?

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claireestelle
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#4
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(Original post by BigShack)
That's 3-5% stamp duty on my second home depending on how much I pay for it. Is that 3-5% on the LTV amount? so, say, £150,000 would actually mean a £154,500 mortgage? Or does it include the deposit?

Thanks
The stamp duty is done on the selling price of the house, your mortgage amount isn't relevant to it. You can't use your mortgage to pay stamp duty, it has to come from your own money. I'm a FTB at the moment and the solicitors fees alone are about £1k (our bank is covering most of it) so i'm very glad not to be paying stamp duty. I wouldn't become a landlord unless you had a solid plan to get yourself a place as well but i think buy to let mortgages are quite difficult to get whereas if you have a 25% deposit on a home for yourself you'd be in a good place to get a mortgage.
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BigShack
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#5
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(Original post by claireestelle)
The stamp duty is done on the selling price of the house, your mortgage amount isn't relevant to it. You can't use your mortgage to pay stamp duty, it has to come from your own money. I'm a FTB at the moment and the solicitors fees alone are about £1k (our bank is covering most of it) so i'm very glad not to be paying stamp duty. I wouldn't become a landlord unless you had a solid plan to get yourself a place as well but i think buy to let mortgages are quite difficult to get whereas if you have a 25% deposit on a home for yourself you'd be in a good place to get a mortgage.
Okay I understand, thankyou for your input
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Reue
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#6
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I think you'd need to do alot more research before considering a BTL.

Get your own property first to live in.
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Calmapal
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#7
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Why pay someone else's mortgage renting when you can pay your own?
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NX172
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#8
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#8
As I mentioned in another post, 25% isn't enough for a BTL these days, plus for reasons such as losing your stamp duty relief, very high stamp duty on BTL properties and most banks not offering BTL to FTB, just get your own place sorted out first.
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NX172
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#9
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(Original post by Calmapal)
Why pay someone else's mortgage renting when you can pay your own?
Because renting allows you to live closer to where you need to be and is more suitable for those not looking to settle there given the costs of acquisition and disposal (i.e, solicitor costs, estate agency commission for selling, stamp duty, etc).

In London you'd need 550k for a 1 bed in Zone 3 (45m-1 hour commute). So this won't be affordable for most FTBs. Especially if they don't plan to live there for very long, why'd they want to put down 10k in stamp duty to never see it again? Chances are you'd have to live further out or in a worse area to be able to find something affordable. Not everyone enjoys 1h or longer commutes and higher transportation costs, less access to the city centre, etc. This applies to all cities, not just London.

There's a significant amount of investment, time and effort to run a rental property for a very small margin nowadays. When you're renting, you're paying for a service. Or, all the effort in setting up that accommodation for you to rent in the first place given you can't afford to live where you need to be. That's why you "pay someone else's mortgage". (Even though that's still not the correct way of looking at it)
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Calmapal
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#10
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(Original post by NX172)
Because renting allows you to live closer to where you need to be and is more suitable for those not looking to settle there given the costs of acquisition and disposal (i.e, solicitor costs, estate agency commission for selling, stamp duty, etc).

In London you'd need 550k for a 1 bed in Zone 3 (45m-1 hour commute). So this won't be affordable for most FTBs. Especially if they don't plan to live there for very long, why'd they want to put down 10k in stamp duty to never see it again? Chances are you'd have to live further out or in a worse area to be able to find something affordable. Not everyone enjoys 1h or longer commutes and higher transportation costs, less access to the city centre, etc. This applies to all cities, not just London.

There's a significant amount of investment, time and effort to run a rental property for a very small margin nowadays. When you're renting, you're paying for a service. Or, all the effort in setting up that accommodation for you to rent in the first place given you can't afford to live where you need to be. That's why you "pay someone else's mortgage". (Even though that's still not the correct way of looking at it)
Well rent is usually more expensive than a mortgage so if you have the deposit and the salary to get the mortgage what difference does that make:banana: There's also no stamp duty for first time buyers unless spending over 300k so outside London I'd always buy not rent, solicitor costs are nominal as it's a one off fee, use an online estate agent when you decide to sell to minimise your costs of sale... In London however, live in a different location such as zone 2 where you can pick up a one bed for £350-400k, also reduces your commute to approx 25-30mins.

Lol, enjoy your dead money though mate.
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BigShack
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#11
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(Original post by Reue)
I think you'd need to do alot more research before considering a BTL.

Get your own property first to live in.
Yes it's very early days and just an idea I had in my head. I have yet to do proper research on it
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NX172
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#12
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(Original post by Calmapal)
Well rent is usually more expensive than a mortgage
Maybe in times where interest rates are at a record low. Historically speaking 5-15% isn't unusual.

(Original post by Calmapal)
so if you have the deposit and the salary to get the mortgage what difference does that make:banana:
Living further out, spending more on transportation and living in a worse area than somewhere you'd be renting?

(Original post by Calmapal)
solicitor costs are nominal as it's a one off fee
My point is that renting isn't a bad idea if you don't plan to live there long. Otherwise you'd end up buying and selling, paying solicitor fees each time, and stamp duty every time you move. Hardly a one off fee in that scenario.

In most cases in the present, with low interest rates (on the rise, mind), paying a mortgage might be lucrative but there's plenty of cases where renting is the better option.

(Original post by Calmapal)
use an online estate agent when you decide to sell to minimise your costs of sale...
I'm quite happy with the service and value added by an estate agent. Especially the fact they care of viewings, the communication between all parties and usually have a dedicated sales progressor. In the world of house buying where a purchase can take months, getting it sold quickly and without hassle such as sales falling through is even more costly than saving a couple hundred pounds.

(Original post by Calmapal)
In London however, live in a different location such as zone 2 where you can pick up a one bed for £350-400k, also reduces your commute to approx 25-30mins.
How can zone 2 be cheaper? Do you know your way around London?
(Original post by Calmapal)
Lol, enjoy your dead money though mate.
What dead money? I'm paying 3 mortgages right now.
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Calmapal
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(Original post by NX172)
Maybe in times where interest rates are at a record low. Historically speaking 5-15% isn't unusual.


Living further out, spending more on transportation and living in a worse area than somewhere you'd be renting?


My point is that renting isn't a bad idea if you don't plan to live there long. Otherwise you'd end up buying and selling, paying solicitor fees each time, and stamp duty every time you move. Hardly a one off fee in that scenario.

In most cases in the present, with low interest rates (on the rise, mind), paying a mortgage might be lucrative but there's plenty of cases where renting is the better option.


I'm quite happy with the service and value added by an estate agent. Especially the fact they care of viewings, the communication between all parties and usually have a dedicated sales progressor.


How can zone 2 be cheaper? Do you know your way around London?


What dead money? I'm paying 3 mortgages right now.
lol, you don't pay 3 mortgages the renters pay them for you Also, might want to check out zone 2, plenty of 1 bed flats around the 300k mark - right move is good place to check if you want to get a 4th mortgage
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NX172
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#14
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#14
(Original post by Calmapal)
lol, you don't pay 3 mortgages the renters pay them for you
They don't pay my residential mortgage, my salary does. As for the BTLs, they're interest-only mortgages. I don't own any more of the property from them paying the mortgage for me. The BTL mortgages don't get 'paid off'.

Either way, what's the problem? I could have afforded a property when I moved here in London a while back. But I chose to rent to see if I liked the city enough to stay and settle down and pull the trigger on a purchase. I don't consider it money wasted. It would've been a bigger waste to pay stamp duty, furnish the property and pay fees to buy/sell a property in which I could not settle.

My colleague recently purchased a property and the mortgage is slightly more than the rent he was paying plus his monthly outgoings have gone up, mainly due to increased transportation costs, some bills no longer included, etc. Yes, he's paying off a mortgage, but being so early in the mortgage, he's paying more in interest than reducing the balance. Not lucrative if he plans to move house anytime soon. Looking at it in the short term, he's not much better off than renting. In the long term, the added leverage isn't necessarily a positive thing and if interest rates were to go up, he'd be in a bad position and worse off than renting. Buying a house for the sake of it not necessarily a good thing. Leverage is a double edged sword.
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Calmapal
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#15
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(Original post by NX172)
They don't pay my residential mortgage, my salary does. As for the BTLs, they're interest-only mortgages. I don't own any more of the property from them paying the mortgage for me. The BTL mortgages don't get 'paid off'.

Either way, what's the problem? I could have afforded a property when I moved here in London a while back. But I chose to rent to see if I liked the city enough to stay and settle down and pull the trigger on a purchase. I don't consider it money wasted. It would've been a bigger waste to pay stamp duty, furnish the property and pay fees to buy/sell a property in which I could not settle.

My colleague recently purchased a property and the mortgage is slightly more than the rent he was paying plus his monthly outgoings have gone up, mainly due to increased transportation costs, some bills no longer included, etc. Yes, he's paying off a mortgage, but being so early in the mortgage, he's paying more in interest than reducing the balance. Not lucrative if he plans to move house anytime soon. Looking at it in the short term, he's not much better off than renting. In the long term, the added leverage isn't necessarily a positive thing and if interest rates were to go up, he'd be in a bad position and worse off than renting.
All the risk for little reward
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