For those that aren’t yet on the property ladder, the thought of getting their first home is one that has occupied their mind for some time. But what will they decide to do with it once they have saved enough for a deposit?
They could move in or they could use it as an investment and rent it out whilst continuing to live in their current property.
What is the difference between buying a home and investing in a property?
The majority of first time buyers will need a mortgage of some sort. Residential mortgages are for properties that the borrower will reside in and call their home. If you want to buy a property to rent out and not live in, a buy-to-let mortgage is needed.
Becoming a first time buyer landlord
It can be tempting to use your first property as an investment and rent it out but it can be difficult to get a buy-to-let mortgage as a first time buyer because lenders typically find it riskier.
Because of the risk, lenders ask for a higher deposit. Usually, this is a minimum of 25 per cent although many demand 40 per cent or more. This large sum can be out of reach for most people, without taking the investment as a joint venture with a friend or family member.
Using help-to-but to let property
First time buyers need to be careful if they plan on letting their first property and use help to buy schemes. The schemes cannot be used if your intention is to rent the property out once you receive the discounts and benefits. If your intent from the offset is to get a discount from help to buy schemes only to rent the property out, you will get found out and will have to repay the value of the Help to Buy assistance.
Of course, circumstances changes and a few years after buying you might want to buy elsewhere and rent it out, get a new job and have to move to a different part of the country or want to move back with parents. The government has said that they will not claim Help to Buy ISA bonuses back from people whose circumstances have changed and who need to make different arrangements for their property.
However, the intention of the Help to Buy ISA policy is to provide support to first-time buyers who are struggling to take the first step on the housing ladder. Therefore, if the intention isn’t to make the property their home, the government will seek a return of the funds.
First time buyers in Market Harborough
However you choose to use your first property, Naylors Estate Agents can help you to find the ideal property, whatever its purpose. Our team that has a specialist knowledge of the town and surrounding villages so can propose expert advice in your move. For help in finding your ideal first home in the Harborough district, call Naylors estate agents today on 01858 450 020.