It's hard to admit when you're jumping from rent-to-mortgage for the first time…but rent prices are at an all time high!
Property prices aren't getting any cheaper, and saving up that deposit feels like torture. Between extortionate rents and greedflation amongst landlords and letting agents, buying feels impossible.
That's totally understandable. For anyone trying to get on the property ladder right now, saving up that deposit can be demoralising.
HOWEVER…
Once you know what you're doing and have a plan…getting a property investment mortgage really is achievable.
In this guide, you'll find exactly what you need to do to switch from renting, to earning rental income of your own.
Ready?
Let's jump right in…
You'll Learn:
The Real Reason It's Tough to Get on the Property Ladder Right Now
How to SAVE UP for a Deposit (Even When Renting!)
How to Find the Right Property Investment Mortgage
Government Grant Schemes to Help You
Know When YOU Should Make Your Move
The Real Reason It's Tough to Get on the Property Ladder Right Now
Don't worry… you'll be let off easy.
Here's the hard truth:
Rent is at an all time high. Recent data from the English Housing Survey found that average private renters now spend 39% of their monthly income on rent alone.
Yep. Nearly 40% of your earnings every month goes on your landlord's mortgage.
And it only gets worse…
When so much money goes on rent, there's nothing left over to save up for a deposit.
It's no surprise that the average first-time buyer age has rocketed to 34 years old. That's up from 32 just TWO YEARS ago before the pandemic.
Rent eats away all your savings.
Not having a deposit means you won't get accepted for a mortgage.
Not being able to get a mortgage means you're stuck renting forever.
Sound about right?
The cycle that renters face is frustrating. But at least now you know how it works. That means you can start planning to break it!
Working with a broker for first-time buyers is one of the best things you can do. They'll let you know exactly what you need to do, earn and save to get accepted for a mortgage. Then they'll find you the best property investment mortgage deal to fit your situation.
How To Save Up For a Deposit (Even When Renting!)
Rent + savings. The balance everyone struggles with.
It feels like for every pound you put into your savings account, two jumps onto your landlords cushion.
But you can do it.
The average UK FTB deposit is currently sitting at around £61,000. YIKES.
Don't panic.
You don't always need a 20% deposit. A lot of lenders will accept a deposit as low as 5%.
That £61,000 suddenly becomes £10,000.
Okay. Now we're talking.
Here are a few tips to start building that deposit ASAP.
Set yourself a monthly saving target. Aim to save £200-£400 a month at least. Automate your savings so it happens without you having to think about it.
Sign up for a Lifetime ISA. These allow you to save up to £4,000 per year and receive 25% bonus from the government. That's free money!
Cut out unnecessary subscriptions and costs. Are you really watching enough TV to justify a streaming service? Those impulse buys add up!
Look for a side hustle. Do you have a skill that could earn you some extra cash on the weekends? Maybe pick up some freelance work to help boost your income.
Saving for a deposit will feel long. But if you're consistent with your savings, those little bits add up!
Finding the Right Property Investment Mortgage
Ah…finally. The fun part.
Not all mortgages are created equal.
There are thousands of mortgage deals with different interest rates, affordability options and fees attached. Choosing incorrectly could cost you THOUSANDS.
Here are a few things ALL buyers should know.
Fixed vs variable. Fixed rate mortgages lock your interest rate into your agreement for a set period of time. With variable, your interest can go up and down. As a first-time buyer, you'll probably feel more comfortable with a fixed rate mortgage.
Your loan to value. Your deposit size affects your loan-to-value ratio. The lower your loan-to-value, the lower your interest rate will typically be. Meaning lower monthly repayments.
You'll face strict affordability checks. Lenders will take a CLOSE look at your income, outgoing bills, spending habits and overall lifestyle. So make sure your finances are in good shape before you apply.
This step is definitely where having a mortgage advisor will shine. A good broker will know which mortgages suit your circumstances best. They can compare hundreds of deals on your behalf and find the perfect option. Saving you time and money.
Government Grant Schemes That Can Help
Buying your first home is EXPENSIVE.
And while there are plenty of tricks to save up for that deposit. There are also some government grant schemes that you might be eligible for to help get you on the property ladder.
But here's the kicker. A lot of first-time buyers don't even know these schemes exist. Or they instantly think they won't qualify.
NEVER assume that you won't qualify.
Check these schemes out:
Lifetime ISA (LISA). Perfect for first-time buyers. Receive up to a 25% bonus from the government on savings up to £4,000/year.
Shared Ownership. Buy between 25%-75% of a property. You'll then pay rent on the remaining portion. Great for saving on deposit.
First Homes. Get at least 30% OFF brand new builds when you're a first-time buyer.
95% Mortgage Guarantee Scheme. The government will back mortgages with a 95% loan-to-value. Meaning you only need a 5% deposit.
There's a lot more out there to help you than you think. Do your research and take advantage of any opportunities!
Know When YOU Should Make the Move
Timing is everything.
Listen. The property market moves in cycles. Interest rates change all the time. And government incentives come and go.
Buying at the right time could save you THOUSANDS.
But how do you know when that IS?
Well you know your situation best. But here are a few tips to know if YOU should buy.
Do you have a deposit saved? (Remember, it can be as low as 5%)
Is your credit score high enough?
Do you have stable employment with a good income?
Have you spoken to a mortgage lender/broker to see what you can afford?
If you answered YES to all of the above. It's probably time to stop renting and make the jump.
Don't get caught thinking "it's not the right time" forever. Your time will NEVER be perfect. You just need to get your finances in a position that you know you can AFFORD to buy.
And remember…
Rent is killing your ability to save up for a house. Every month you pay rent, YOU pay it. The second you swap that rental payment for a mortgage payment, that money is going into your OWN property.
Don't sit around waiting to buy. Start making a plan TODAY.
Wrapping It All Up
Going from renting, to owning your very own rental property is difficult. But it's far from impossible!
Everyone has to start somewhere. And if thousands of people have done it… then so can you!
Let's review:
Know how much you'll need for a deposit before you start saving.
Open up a Lifetime ISA and set up automated transfers to start building that deposit.
Research government grants that could help you save on your first home.
Speak to a mortgage advisor who can find you the best property investment mortgage deal.
Take action. When you're ready. Stop paying rent and pay yourself instead!
