Speaker 1: Hey, it is Kia. You may remember a few months
Speaker 1: back we were getting the grips of how to join
Speaker 1: a property market as a first time buyer. If you
Speaker 1: missed it, make sure you go back and listen. But
Speaker 1: this time I want to talk about next steps. You
Speaker 1: bought your first property a few years back and life
Speaker 1: has moved on. Maybe you're thinking of starting a family
Speaker 1: and want to buy a bigger home, or perhaps you're
Speaker 1: looking at a property as more of a financial investment.
Speaker 1: Or maybe it's a bit of both. Whatever the case,
Speaker 1: there's a lot to talk about when it comes to
Speaker 1: moving up the property ladder. Also, it might be your
Speaker 1: listen to this and thinking I'm not even close to
Speaker 1: buying my first house, and that's totally fine too. There's
Speaker 1: still lots of useful information in this episode if you're
Speaker 1: considering trying to become a homeowner. With me to track
Speaker 1: through all of this is Liam Anstruther. Liam is an
Speaker 1: independent mortgage advisor who set up The Mortgage Advice Club
Speaker 1: to help people with the home buying process. So Liam,
Speaker 1: let's get into the nitty- gritty of this. When is
Speaker 1: a good time to start thinking about the next step?
Speaker 2: Yeah, fantastic. So I think with the next step, there's
Speaker 2: usually two key factors that will come into play for
Speaker 2: people. Usually they tend to be social or financial. So
Speaker 2: whether it be they've had a kid or they're potentially
Speaker 2: having a kid and they need to take that next
Speaker 2: step up to get more size, you want to start
Speaker 2: considering that probably before that happens so that you're ready
Speaker 2: for the impending arrivals. Secondly, it'll be financial. So whether
Speaker 2: it be with the way that property values have been
Speaker 2: going, your property values went up, you want to take
Speaker 2: advantage. Or you've got that first step in stone in
Speaker 2: the market, but you've got new jobs, you've got more
Speaker 2: money in, you want to get that property, maybe a
Speaker 2: longer term property for you and your partner or yourself,
Speaker 2: then that's the time you want to say, right, and
Speaker 2: now's the time to start looking, see what we can
Speaker 2: afford, what can we get, and then look to see
Speaker 2: what properties you can get for that budget.
Speaker 1: I think that's amazing. I think like you said, it's just figuring out
Speaker 1: where you are to know when you're going to take
Speaker 1: your next step. So I want to then ask you what are some of
Speaker 1: the challenges that people may face if they are actually
Speaker 1: looking to buy a bigger place?
Speaker 2: I think the biggest one just now is affordability. I
Speaker 2: think with the way rates that are just now, as I
Speaker 2: said, we've got a whole generation who are used to,
Speaker 2: my generation who are used to seeing rates of 1,
Speaker 2: 2%, not much higher than that. They're now double that.
Speaker 2: So that's going to have a massive impact on the
Speaker 2: monthly, the payment. Electricity aint cheap. Your council tax is going to
Speaker 2: be higher. So it's mainly about that monthly budget and
Speaker 2: you really need to have a think about, and obviously
Speaker 2: when we are speaking to our clients, we go through
Speaker 2: that with you anyway to make sure first step is
Speaker 2: this affordable for you, but it's about making sure that
Speaker 2: this step is worth it or it might mean that the next step
Speaker 2: might not be your forever home. It might be like
Speaker 2: a middle step. It doesn't necessarily mean you need to
Speaker 2: go from first house, first flat to forever home. There
Speaker 2: might be that middle property that you're like, right, it's
Speaker 2: bigger, we can forward this now, but it's only a five-
Speaker 2: year plan and then planning to get that next step
Speaker 2: on it.
Speaker 1: I love that. Because I think it is about being realistic. I think, I'm
Speaker 1: not a property owner yet, but what I can relate
Speaker 1: that to is cars.
Speaker 2: Yeah.
Speaker 1: So you have your first car and then when you come
Speaker 1: to move up, you're probably not going to jump straight
Speaker 1: to your dream car because that's probably going to be way out of
Speaker 1: budget. So you're going to be something slightly bigger. And I
Speaker 1: think when you put it in that perspective, it makes
Speaker 1: sense. I think a lot of people either enter property
Speaker 1: ladder thinking they're going to live in their five bedroom
Speaker 1: mansion when they can't afford it, or they think I've
Speaker 1: come from maybe my one bed flat and I'm going
Speaker 1: to go straight into my mansion. Where it is stepping stones. Maybe
Speaker 1: it's figuring out, like you said, the in- between that
Speaker 1: is better suit for.
Speaker 2: I think that's something that is changing back. When I
Speaker 2: bought my first property seven, eight years ago, you got
Speaker 2: a small flat, you got a bigger flat or medium
Speaker 2: house with garden and things, and then you've got your
Speaker 2: forever home. Though there was kind of historically all that three-
Speaker 2: step process. Because of the way rates were, younger people
Speaker 2: having good wages, they tend to just skip from zero
Speaker 2: to a hundred really quick. Whereas you're starting to see
Speaker 2: it now because of the way rates are, property values
Speaker 2: have went up a lot over the last few years
Speaker 2: as well. You're starting to get that start at the
Speaker 2: cheaper, lower flat, then take that middle step then the
Speaker 2: forever home. So it's kind of naturally going back to
Speaker 2: that after the kind of low rate period that we've
Speaker 2: had over the last five years.
Speaker 1: Yeah, amazing. So we got the three step in mind
Speaker 1: when it comes to getting up that property ladder and taking it in bits, moving
Speaker 1: up and getting the bigger property. So I want to
Speaker 1: then ask you, what about if you want second property
Speaker 1: because not everyone wants to move up and sell the
Speaker 1: one they've got. So what if you want a second
Speaker 1: property but you also want to keep the one that
Speaker 1: you have already? Is that a good idea or should
Speaker 1: maybe someone think about getting rid of their first one?
Speaker 2: No, a lot of it depends on your financial circumstances
Speaker 2: personally. I mean what you'd be moving onto to there
Speaker 2: would be becoming a landlord. So you'd be moving into
Speaker 2: getting rental income, so an extra revenue source, but there's
Speaker 2: pros and cons to both sides. The deposits tend to
Speaker 2: be a little bit higher if you're buying a property
Speaker 2: to rent out or if you're staying in your current
Speaker 2: property you've got and you're buying another one. You need
Speaker 2: to have that equity to be able to do that.
Speaker 2: So it can be great for some people. A lot
Speaker 2: of people, if they've got that entrepreneurial sense in them,
Speaker 2: they want to make money, they want to make money
Speaker 2: from property and they might buy more further than the line
Speaker 2: and make it a real revenue income. It is possible
Speaker 2: to do something called let to buy, which is where
Speaker 2: you've let out your existing property and then you go
Speaker 2: buy another property. And obviously with that things to consider
Speaker 2: there's going to be additional stamp duty, things like that as
Speaker 2: well. But as you said, if you've got the finance
Speaker 2: there and you've got the understanding of it by speaking
Speaker 2: to somebody like ourselves, then it's definitely something that you
Speaker 2: can do.
Speaker 1: So let's kind of delve into a bit more then
Speaker 1: on getting your second property if you did want to
Speaker 1: become a landlord, because people who are listening, we've spoken
Speaker 1: about getting your first property and there's all kinds of mortgage
Speaker 1: products on the market you can get. There's no deposits,
Speaker 1: there's 5% deposit, 10%. So is that the same if you are
Speaker 1: going to buy a second property that's an investment property
Speaker 1: or how does that differ?
Speaker 2: It differs. You need to have more of a deposit
Speaker 2: when you're buying a buy- to- let at that point,
Speaker 2: if you've already got a property and you're buying one, so
Speaker 2: tends to be 20 to 25% as the minimum. There are certain circumstances
Speaker 2: where if it's for a family member, things like that, the
Speaker 2: deposit doesn't have to be that high, but generally nine
Speaker 2: times out of ten it will be a higher deposit. One
Speaker 2: of the main differences is on what people will tend
Speaker 2: to do with buy- to- let properties as it will
Speaker 2: be on an interest only basis, because you want to
Speaker 2: make as much money as possible from that rental income.
Speaker 2: So your monthly payments will be substantially lower, because you
Speaker 2: making the profit from the rent's coming in. But as
Speaker 2: I said, with the way rates are just now, a lot
Speaker 2: of landlords are probably going the other way rather than
Speaker 2: coming in. But again, some things that can be of
Speaker 2: benefit if you come in at this time and you're going to
Speaker 2: make more money as the rates come down.
Speaker 1: I mean I think everyone loves when you're here making
Speaker 1: money, every ones ears prick up and they want to
Speaker 1: hear about that. But you did mention something there that I kind
Speaker 1: of want you to expand a little bit more. It's
Speaker 1: interest only mortgage. What is that for anyone who doesn't know?
Speaker 2: Yeah. So when it's a second property, it's not the
Speaker 2: home you live in, the risk is lower because in
Speaker 2: the worst case scenario, if you had to sell that property,
Speaker 2: it's not the one you're living in. So there's less
Speaker 2: of an impact on you. (inaudible) buy- to- let
Speaker 2: properties is it's not based on your income, it's based
Speaker 2: on the mortgage payment versus the rental income. So it's
Speaker 2: a completely different thing and it tends to be a
Speaker 2: little bit probably easier on personal circumstances than what a
Speaker 2: residential home would be. So interest only is where you're
Speaker 2: just paying interest and you're not bringing down any of
Speaker 2: the mortgage balance. So obviously if it's your home you're
Speaker 2: living in, you don't want to be doing that. You
Speaker 2: want to be bringing down your mortgage, get paid off
Speaker 2: as soon as possible, happy days. You enjoy your retirement
Speaker 2: with no mortgage. With a rental property, you want to
Speaker 2: get as much rental income out of that and at
Speaker 2: the end of the day when you get to the end of
Speaker 2: the term, you're ready to retire and you don't need
Speaker 2: it anymore, you can just sell it and you'll still
Speaker 2: have that, fingers crossed, your property values went up a
Speaker 2: little bit as well. So you kind of get that win-
Speaker 2: win from hope, a little bit of an equity boost and also
Speaker 2: the rental income as well.
Speaker 1: Amazing. I think that's good to know for people. I
Speaker 1: think there's all kinds of mortgage products and it can
Speaker 1: be so confusing. But you breaking it down if you're
Speaker 1: going down that route for an investment property, that makes
Speaker 1: sense there. But let's kind of bring it back. So
Speaker 1: someone who wants to get second property in general, whether
Speaker 1: they want to get it for investment or just for
Speaker 1: them to have themselves, what would you recommend that people
Speaker 1: keep in mind when they are coming to actually make
Speaker 1: this decision?
Speaker 2: So if they're moving up the property ladder, I think one of
Speaker 2: the biggest things, especially with the way rates are just
Speaker 2: now, a lot of people will be used to low
Speaker 2: rates. We've had low rates for about 10 years, so
Speaker 2: anyone who's going to take that next step now is
Speaker 2: going to get a little bit of a shock on
Speaker 2: how much higher the interest rates are. If you're getting
Speaker 2: a bigger house, tends to be a bigger mortgage, which
Speaker 2: automatically mean a bigger monthly payment, more electricity, higher council
Speaker 2: tax. There's a lot of things you have to consider
Speaker 2: about your budget. So the main thing people need consider
Speaker 2: is speak to someone like ourselves or even have a
Speaker 2: little look online on calculators and things to see is
Speaker 2: that property even just going to be affordable even with
Speaker 2: whether it's a change in income or you're needing that
Speaker 2: extra space, is it affordable? Because that's the most important thing,
Speaker 2: is making sure that property is affordable for you, whether
Speaker 2: it be. And also if you're buying a bigger property,
Speaker 2: you're probably going to have higher stamp duties, another thing, higher solicitor costs,
Speaker 2: furnishing other rooms. There's a whole lot of other costs
Speaker 2: and things you need to think about. So it's that
Speaker 2: monthly budget you're thinking about as well as the upfront cost.
Speaker 1: I love the fact that you mentioned affordability because I
Speaker 1: think it's great to be in a property ladder, number one. And if you
Speaker 1: can move up, and that's another great achievement, but it
Speaker 1: is making sure that you don't overextend yourself just for the
Speaker 1: sake of being able to say, " I've got two properties
Speaker 1: now instead of just one". It is like you said,
Speaker 1: it's fracturing in and making sure have I figured out
Speaker 1: because like you said, now I'm getting two mortgages and not just
Speaker 1: one. Now there's double the expenses. Can I actually physically
Speaker 1: afford this?
Speaker 2: And if it is an additional property you're going down.
Speaker 2: You've also got to think about have you got time and is it worth
Speaker 2: the hassle as well? Because being a landlord is a
Speaker 2: great idea. It's about do you have the time to
Speaker 2: manage that property as well? Because as much as you
Speaker 2: can get letting agents and things to do it, but
Speaker 2: that will bring down what you make in the end. So it's
Speaker 2: about thinking about do you have that time, patience, the
Speaker 2: stress levels to deal with that as well as the
Speaker 2: finances behind it.
Speaker 1: Yeah, I completely agree with you. So Liam, I want
Speaker 1: to end the episode how I always end it, asking
Speaker 1: our quests the same question. What are your top three
Speaker 1: tips? Help our listeners get a little bit richer.
Speaker 2: Yeah, sure. So not being biased, but the first one I would say is
Speaker 2: speak to a broker. Whether it's ourselves or somebody else,
Speaker 2: you compare your car insurance, you compare your home insurance,
Speaker 2: you compare everything. Your mortgage is the biggest loan you're
Speaker 2: ever going to have. Compare it when your product comes
Speaker 2: to an end. We've got all the lenders, we look across
Speaker 2: them all. We do this day in, day out, we
Speaker 2: know what we're looking for. So to save as much
Speaker 2: money as possible, get that lowest rate, go with whoever
Speaker 2: the best lender is at that time. It will change
Speaker 2: probably in two years, five years time when you look again.
Speaker 2: But that's what we are here for. We want to
Speaker 2: save you as much money as possible, get your mortgage
Speaker 2: paid off as soon as possible so you can enjoy
Speaker 2: your retirement in your mortgage free home as soon as
Speaker 2: possible. Because that's the most important thing, that's the end
Speaker 2: goal. In regards to making money or saving money when
Speaker 2: you're selling and buying. When you're selling your home, it
Speaker 2: sounds daft and obvious, but if you're taking that next
Speaker 2: step in the property ladder just to cosmetic stuff when
Speaker 2: you're selling, if there's little jobs that are kind of
Speaker 2: outstanding or superficial things that need done to make it
Speaker 2: look that little bit better and that little bit more
Speaker 2: marketable, do it, pay that little bit extra because that
Speaker 2: little few hundred pounds might be a few thousand pounds
Speaker 2: in somebody else's eyes. Because they don't have to do
Speaker 2: it, they don't have the hassle. So when you're coming
Speaker 2: to sell the property, just make it as beautiful and
Speaker 2: as marketable as possible so that you're getting the most
Speaker 2: for what you're selling it for. Because again, it's a
Speaker 2: knock on impact on hopefully getting you that little bit
Speaker 2: of a better property at the other end. And last but not least,
Speaker 2: when you're looking to buy your property, your next one,
Speaker 2: whether it be an investment or whether it be your
Speaker 2: next step on the ladder, negotiate. Don't just, if you
Speaker 2: see a property there, use tools like Rightmove, how long
Speaker 2: has it been in the market for? The market is
Speaker 2: changing again, in the last two years it's been very,
Speaker 2: very hot. Property's going in two, three weeks really, really
Speaker 2: quick. It's starting to change again and normalize. So don't
Speaker 2: just think that you have to go anywhere with your maximum offer, negotiate
Speaker 2: it, put a low offer in first. The worst thing that can happen
Speaker 2: is it gets rejected, and then you go in again
Speaker 2: and you go in again. So the three things there
Speaker 2: are obviously saving on your mortgage, using somebody like a
Speaker 2: broker to get the best monthly payment in your mortgage.
Speaker 2: Next one, when you're selling your property, getting as much money
Speaker 2: as you can for your old one. So just making
Speaker 2: sure all those cosmetics touches are nice and tidy, photos
Speaker 2: and things. And I'm sure the estate agent will help
Speaker 2: you with this as well. And then when you're putting
Speaker 2: in offers, don't be shy, don't think you have to. Whatever the
Speaker 2: agent has told you or the person selling that's told
Speaker 2: you put an offer in. The worst thing that can
Speaker 2: happen is they say, no.
Speaker 1: I love those. Those tips are really good, especially the
Speaker 1: one negotiate. I'm always saying this, make sure you negotiate. Don't always take
Speaker 1: the first price you're given, see what you can get. And
Speaker 1: I said, " Don't go with your maximum offer, so if you
Speaker 1: can get it lower". If you have to get there,
Speaker 1: then you get there eventually, but you go in lower and see what
Speaker 1: you can get. You'd be surprised. Liam, this has been
Speaker 1: a great episode.
Speaker 2: Thank you.
Speaker 1: You've shared so many (inaudible) . Thank you so much for coming on.
Speaker 1: Next time I'm chatting all things credit. What is credit?
Speaker 1: What do we need to be careful of and can
Speaker 1: debt actually be a positive thing? We'll get into all
Speaker 1: of it, but while you wait, if A Little Bit
Speaker 1: Richer is helping you, then be sure to leave a
Speaker 1: review, hit follow and tell a friend. It all helps other people find
Speaker 1: us. See you next time.