Buying property to live in is a very different concept to investing in one to generate an income or turn a profit, and it can also impact the relationship you have with a mortgage broker.
The long-term growth and strength of the UK housing market have long since made it an enticing prospect for those who want to supplement their incomes, or indeed to make a living through rental returns and the profits made upon the ultimate sale of the property.
Equally, hundreds of thousands of people every year enter the market in order to take their first step onto the homeownership ladder, and buying property for them is about investing in a home for now and potentially in the future. So how does this change the way you approach your purchase?
There are numerous factors to consider that do not change whether you’re buying property to live in, to rent out, or to sell on. This includes aspects like budget, location, property type, and state of repair.
From a borrowing perspective, whether you’re a homebuyer or an investor can have a big impact on your relationship with your mortgage broker, as Nick Sheppard, managing director at Manchester-based specialist mortgage broker Framework Mortgaging, pointed out in a recent interview with BuyAssociation.
A wealth management approach
When helping buy-to-let clients who are looking at buying property, Sheppard says Framework Mortgaging adopts more of a “wealth management” approach to the advice it offers. This means looking after the interests of the investor over the long term to get the most out of their assets.
“When advising buy-to-let investors, it’s a completely different process than advising a homeowner,” he says. “We feel quite strongly that buy-to-let investors should work with one broker over the long term and build a portfolio as they would do a pension. We get involved with conversations from an early stage every time they buy a property.
“I encourage all clients to maintain a relationship with a buy-to-let broker throughout the whole property journey. We’re not just focused on one transaction.”
According to Sheppard, one major area that tends to diverge when looking at the difference between buying property to live in compared with as an investment is how you look at your finances.
“With homeowners, you’re fixated and advising on the strength of their household income and household expenditure, whereas with buy-to-let, we’re focused on the property and the strength of their rental income,” he points out.
“It’s very important we find the right property with the right lender, considering the right rental income for clients.”
Buying property off-plan
When it comes to buying property off-plan, in many ways, whether you are an investor or a homebuyer makes little difference when it comes to borrowing strategies. Off-plan property purchase is a long-term venture for any buyer, due to the nature of committing to owning a property that is not yet built.
Speaking to a mortgage broker before you reserve an off-plan property is the approach advised by Sheppard, and this fits in with the company’s ethos of working with its clients over the long term. It is important to “maintain your credit profile” over the course of the build until completion.
Sheppard notes: “We need to speak to clients before they reserve. Obviously with off-plan, completion is two years away, so we need to make sure that clients are mortgageable now, and also we advise clients how to stay mortgageable during the life of that completion time.
“Two years is a long time. A year is a long time. Life can happen and things can change. It’s about protecting that client in between reservation and completion.”
BuyAssociation specialises in helping investors find their next property investment opportunity, and we work with a number of partners who can assist you along the way. Get in touch for more information.