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19 year old wanting to get on the property ladder - is it possible?

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  • 19 year old wanting to get on the property ladder - is it possible?

    I am a 19 year old student wanting to invest in a property for my future. I currently have access to £45-70k depending on how the stock markets are feeling (currently it's caught a nasty case of flu).

    My thinking is to get a suitable property and let it out, using this rental income to pay the mortgage and eventually end up fully owning the property without debt or simply selling the property at some point before then. So in effect I'd grow my current lump of cash into a far bigger lump of cash over the years.

    I figure now is a good time to buy given the state of the housing market and the fact that this hasn't had a huge effect on rental income (just what I read in an article, maybe is has had a huge effect) so I don't want to have missed this opportunity.

    As a 19 year old with zero experience with debt products, I naturally have questions and holes in my knowledge.

    Firstly, is it possible to get a mortgage that IS NOT interest only where total monthly repayments will be less than or equal to the likely rental income? Though saying this, how much lower would repayments on an interest only mortgage be? Taking rental income and then selling a property around 2020 when the market is supposed to be at its peak again doesn't sound too bad to me either but this would depend on how much of the rental income I'd be likely to keep after repayments.

    I'm not expecting to be able to get any mortgage if I apply for it myself seeing as I have no real annual income and am still in full time education. So would I be able to get a family member to co-sign or something like that? How would this work?

    Responses would be greatly appreciated!! Thank you.

  • #2
    Hi there,

    You have fielded some very good questions here but what you are considering to enter into has many other ares you need to consider.

    Firstly I would say you seek advice from an accountant with reference to possible CGT liabilties in the future as this could affect whether you decide to proceed or not.

    Secondly I would advoise you to speak with a solicitor with regards to the above and how it affects any family member being involved in the transaction.

    The reason I say this is because you were right to predict it could be difficult for you to get a mortgage in your own right for a number of reasons i.e. no job and it is extremely difficult for a first time buyer, at your age, to obtain a BTL mortgage.

    After taking advice on the matters above, and consulting with a family member whom wishes to proceed on the transaction with you, please then do get back in touch fo further direction.

    Until we know what the other individual on the mortgage details are it is difficult to give an idea of what mortgages are available.
    Worldwide Financial Planning is a specialist independent provider of Large mortgages.


    • #3
      Thank you for your reply.

      I come from a family of accountants and have a bit of personal tax experience myself so I know about the CGT liabilities involved with this sort of mission. In fact it's a good point because I had forgotten I'll have to pay CGT on the shares when I sell them so this will reduce the amount I'll be able to deposit by a considerable amount.

      My options regarding having a family member involved would be to either have them do everything in their name and then just trust they'd pass everything over to me. However, this is very complicated when it comes to declaring it on a tax return as it would probably work out that they have to pay tax on rental income & CG and then so would I, not to mention it might involve pushing the family member up a tax bracket meaning even more income being removed. My other option (I assume) is to have a 50/50 share with the family member, putting in equal deposits and taking equal rental income, however, my name would still be on half the mortgage so it would still have a big effect on whether the bank will choose to give a mortgage because when it comes down to it we would both be fully liable(?).

      I think in this case the best option would be to see what I can get if go joint with a family member but like you said I should really see a solicitor about this, I think this would have to wait until my shares are back to a price worth selling at and would depend on how serious my family member is about this. I've just remembered I have relatives who are mortgage brokers, maybe they'll be able to help me get some information on this.

      My other option is to find a property worth the value of my shares and just take rental income on it, car parking space perhaps?:P

      Anyway, thank you for your advice! I'll get in touch when I have solid information and not just guesses/assumptions.


      • #4
        and if anyone else has anything to add it would be much appreciated!


        • #5
          I think you have a great outlook and it's good to see - there are a few caveats, though, so far as I can see it:

          1. Negative Equity

          The expectation is that the property market will fall further - original expectations were up to 20% over 2 years, but Nationwide and Halifax are basically saying it's 16% already just in 2008.

          For comparison, there were similar expectations for the US housing market, but they have now been revised to around 30-35% overall - AND with a potential over-compensation to around 40% or other (from RGE monitor - Nouriel Roubini's site - he's been absolutely right about what's been coming with the credit crunch so far).

          So you would need to bear in mind:

          a) How going into negative equity would affect your financial position - could you cope with a further 25% loss of equity, if only temporary?

          b) How can you assure the banks that you can cope with this?

          2. Costs

          I think the big problem a lot of people overlook with BTL is the costing - when renting, you don't simply take the money - you lose a % to a rental management company (and if doing it yourself, have associated admin fees and time spent administrating). Plus there's landlord insurance, repairs, professional fees, and similar costs to bear in mind.

          3. Mortgage

          You could probably get a mortgage, but may need someone from your family as a guarantor. Can feel a bit humiliating, but this is a period of credit crisis and the expectation is that you have limited credit scoring simply because you've not built up a debt record to be scored against. So something to bear in mind.

          Overall, I think your outlook is good, but do watch out for being overly-optimistic - it's probably better at this stage to not presume your property rental will just pay for the property outright, but instead expect to have to make some investment - there are an awful lot of issues that cane come up over a couple of years, let alone 20+! The idea being, that any investment required will offer great returns, but will require funds.

          I guess a main issue of buying - buy now, you're in real danger of immediate negative equity - there also seems to be a bounce in play on the US stock market at least, with a positive outlook to Q4 2009.

          So you may find that your biggest challenge is not getting a mortgage, but instead timing your entry into the market.

          The only pearl of wisdom I can add is that it's all about the location, not property itself - a crap house in a good area will almost always sell (or rent) better than a good house in a crap area.

          Hope that helps.


          • #6

            Good to see, our young generation have got great ambition!

            Good luck
            http://www.debtshifter.net - info on debt,loans and mortgages


            • #7
              You're right to still try to buy if possible when you're young, I've been renting for years and I definitely won't see any of that money back..

              do lots of research and don't rush your decision, prices could still fall further...