How hard will it be for a jobless 23 year old to get a mortgage... (I have £££ to buy though)

by aj555s 21 January 2009 |

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I am 23 years old and looking to buy my first house, having recently been a student I am very keen on looking into the possibility of buying a 6 bed investment property in a popular student area in Nottingham outright -CASH! and using the returns to cover the cost of a mortgage on my own place.

I have approx £160,000 in savings in a 1 year fixed bond which is due to expire in March, I am looking to find the answer as to what to do with it when this bond expires.

I am currently doing some traveling as far away from the meltdown in england as possible an waiting for a good time to return. My gut feeling is that a good time to buy or at least put in a few below market value offers will be autumn 2009. It seems to me that the yields from the investment property would more than cover the cost of "my own" mortgage even if interest rates rose significantly - even on a repayment mortgage.

Any advice on this would be much appreciated.

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MikeGG1 posted
Buy the investment property with a business (BTL) loan. You get tax relief on the interest. Put your cash towards your own property because you won't get tax relief on a mortgage for yourself.

Bear in mind the annual cycle for student accommodation. You wouldn't want to just miss a year's market.
Posted on 21 January 2009 | Love 0 loves Report
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TMFJoker posted
In addition to MikeGG1's answer I'd like to suggest you become familiar with what it means to be a landlord as far as your rights and responsibilities go.

Will you be using estate agents to manage the property or will you be doing it yourself? (Estate agents are rubbish, in my experience.)

It is very important to take some basic precautions like making sure you have an inventory of the property done at least each year (this will be at your expense) and, if you're renting to a group of students, you'll want a joint and several contract and possibly require them to have a cleaner come in each week to make sure the property is cleaned regularly.

If you're planning on renting to students you may need to adjust your rent so it's still profitable if the house is empty during the summer months.

You should also factor in maintenance costs and the fact that student houses tend to wear more than those with families.

You can get some good information from Shelter (http://england.shelter.org.uk/get_advice/advice_topics/renting_and_leasehold).

Good luck!
~Joker
Posted on 21 January 2009 | Love 0 loves Report
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meita posted
Good advice above. As to your question - will anybody give you a mortgage? The answer is, only if you have proof of income. It doesn't absolutely have to be a steady job, but it does have to be a pretty solid, certain, long-term, income.

As an example, I have a reasonable income but it's from abroad and comes not in monthly, but in yearly instalments. Our bank wouldn't even glance at the documentation when we applied for a mortgage. Two different mortgage brokers (one of them the service here on the Fool) couldn't find any lender who would take it into account. So my experience is that today, if your situation is unusual, and there is any doubt whatsoever that you can meet the repayments, you don't get the mortgage.

On the other hand, if you do as Mike said, the profitability of your investment property has a more direct impact on the chances of your getting a mortgage. Yes, BTL rates are higher, but as mentioned above, you can deduct them from taxes.

Keep in mind that many BTL investors (on fixed rates) are now barely able to cover costs. Far from generating much income. Also, are you convinced that the student BTL market is the most profitable way to invest your money?
Posted on 21 January 2009 | Love 0 loves Report
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karatekate posted
You could start a property company and this first house would count towards your earnings....?

I assume that you WILL be getting a job (hopefully) when you come back into the UK and therefore you may not actually be an 'jobless' applicant by the time you apply for your mortgage?

To help you save for your own house you could have one of the 6 rooms for the first year (rent free of course!)if necessary too; I would also start putting in below market offers in April - you want it ready for viewing around Mid June when the new students are house hunting for September/October time!

Good luck!
Posted on 22 January 2009 | Love 0 loves Report

How hard will it be for a jobless 23 year old to get a mortgage... (I have £££ to buy though)

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