With today’s sky rocketing property prices it can feel like wages and savings are not the best option for securing your future. In fact it feels very much like if you’re not invested in property then you are rapidly falling behind and as prices rise you may end up with an insecure future.
Property is a very good asset to invest in and at the moment particularly so. Whether you want a condo, a downtown bolthole or a country ranch a lot of property is now rising in value. However for most people looking to secure and improve their future a big financial commitment, especially upfront, is not an option.
So what is the best way to take on a mortgage for a property investment? If borrowing feels worrying should you forget the whole idea?
This is where independent advice should come into play. You want to speak to someone who can review your finances and the opportunities available to you and suggest a course of action. No one should ever overstretch themselves to borrow, even if this is for an investment. This is particularly true of property as many people find out to their cost.
The value of property can go up but it can also come down very sharply. Borrowing to get a mortgage on a property depends upon the value of the house going up more than the cost of the interest on your loan. You don’t want to be in a situation where this formula is back to front and you are paying out big mortgage payments for a house that won’t sell for as much as you thought it would. An independent adviser can balance factors such as how much risk there is in the property you are interested in and give you a solid idea of what is best for you.
Another factor involved in property value is the area. Some people have the budget to buy in a great area and they hope the area remains this good when it comes time to sell. You may wish to get advice on upcoming planning permission or the likelihood of planning permission being granted. It can be a good idea to find out what projects are in the works and if there is a chance that these could damage the house value. It is sometimes possible to get written confirmation that areas such as parks or green space are not going to be removed for a given period of time. This guarantee, of sorts, can be factored into the length of time your mortgage spans.
Although most people want to be in the position of buying a great house in a nice area and watching the value rise steadily most people have to be a bit more open minded. If you buy a house in an up and coming area and perhaps take it upon yourself to fix a few problems with the property you are hoping to cash in when the area takes off and becomes popular. This phenomenon has been seen very strongly in London with properties in previously very undesirable areas now being fought over and selling for vastly more than their estimated value only a few years before.
This scenario also needs clear and expert advice. In the first instance it is possible that the gentrification of an area will not happen the way you had hoped. Secondly if you dive in and buy in a hot upcoming area you are going to have less choice. Houses get sold very quickly in these areas and you may have to bid and buy whats available and not what you prefer. If you are going to need to live in the property for some time before selling it this may be a sacrifice you need to be aware of.
Property is a great investment that is making many people a nice nest egg. At the same time there are common mistakes that cost people their flexibility as well as their cash. Make sure you’re armed with expert advice so you can make your investment with the peace of mind that you are securing your future, not damaging it.
10 Oct 2016