With the current financial climate as it is, investing in property is quite tricky. Despite low housing prices, there is a relative lack of finance around and investors have to put in more of their own money up front than they had to just five years ago.
There are also far fewer deals around on the market, although what the market lacks in quantity, it makes up for in quality with the arrival of Spanish superbank Santander, on our high street. In certain circumstances, now is a great time to invest, even for those without a huge amount of cash, but you’ll need to do some hard research; try a calculator for mortgage payments such as the one from Santander.
Most people buy property to do it up and sell it on, or to rent it out. As far as renting goes, buy-to-let mortgages are common and relatively easy to find, they’re also quite easy to get a good deal on, for property development, however, finance is key, so you’ll need to look further.
The most important thing is to get enough capital to cover any work you’re doing, and to repay as little as possible. With that in mind, you’re looking for a short term deal, that’s not going to cost that much.
First thing to consider is interest only mortgages, these generally have lower repayments because you don’t ever pay off the actual equity in the house. They’re good for short periods because you pay very little on a month to month basis. If, however, you decide to hang onto the house for any reason, make sure you switch to a repayment deal as soon as possible.
Alternatively, try looking for deals with repayment windows, delayed starts, or special discounts that last for a limited period. All of these are ways of reducing your monthly payments for a short period with the hope that you’ll then pay off the mortgage immediately when you sell the house (and hopefully net a tidy profit). Beware, however, these sorts of deals can be risky because repayment windows and the like are paid for later on with higher monthly repayments and it’s altogether possible that you’ll pay over the odds.
Finally, the most important thing is to make sure that there aren’t any hidden penalties for selling the property on quickly, although it’s relatively rare for lenders to penalise people who sell a property, in certain situations you may have to pay a little more.
Investing in property is all about finance and planning. If everything goes to plan you can afford to take a risk with your mortgage, and hopefully pay a smaller amount as a result, however, if you’re not sure about the project it’s best to hedge your bets, because if you’re not convinced you can sell the property on straight away, you don’t want to suddenly find yourself having to deal with an expensive mortgage at the same time as finishing off any last minute work or trying to make a sale.