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Moving Up The Property Ladder · A Little Bit Richer

• 0:00
  Speaker 1: Hey, it is Kia. You may remember a few months
• 0:03
  Speaker 1: back we were getting the grips of how to join
• 0:05
  Speaker 1: a property market as a first time buyer. If you
• 0:07
  Speaker 1: missed it, make sure you go back and listen. But
• 0:10
  Speaker 1: this time I want to talk about next steps. You
• 0:13
  Speaker 1: bought your first property a few years back and life
• 0:15
  Speaker 1: has moved on. Maybe you're thinking of starting a family
• 0:18
  Speaker 1: and want to buy a bigger home, or perhaps you're
• 0:20
  Speaker 1: looking at a property as more of a financial investment.
• 0:23
  Speaker 1: Or maybe it's a bit of both. Whatever the case,
• 0:26
  Speaker 1: there's a lot to talk about when it comes to
• 0:28
  Speaker 1: moving up the property ladder. Also, it might be your
• 0:31
  Speaker 1: listen to this and thinking I'm not even close to
• 0:34
  Speaker 1: buying my first house, and that's totally fine too. There's
• 0:37
  Speaker 1: still lots of useful information in this episode if you're
• 0:39
  Speaker 1: considering trying to become a homeowner. With me to track
• 0:43
  Speaker 1: through all of this is Liam Anstruther. Liam is an
• 0:46
  Speaker 1: independent mortgage advisor who set up The Mortgage Advice Club
• 0:49
  Speaker 1: to help people with the home buying process. So Liam,
• 0:54
  Speaker 1: let's get into the nitty- gritty of this. When is
• 0:57
  Speaker 1: a good time to start thinking about the next step?
• 1:00
  Speaker 2: Yeah, fantastic. So I think with the next step, there's
• 1:03
  Speaker 2: usually two key factors that will come into play for
• 1:05
  Speaker 2: people. Usually they tend to be social or financial. So
• 1:09
  Speaker 2: whether it be they've had a kid or they're potentially
• 1:12
  Speaker 2: having a kid and they need to take that next
• 1:13
  Speaker 2: step up to get more size, you want to start
• 1:16
  Speaker 2: considering that probably before that happens so that you're ready
• 1:18
  Speaker 2: for the impending arrivals. Secondly, it'll be financial. So whether
• 1:22
  Speaker 2: it be with the way that property values have been
• 1:25
  Speaker 2: going, your property values went up, you want to take
• 1:28
  Speaker 2: advantage. Or you've got that first step in stone in
• 1:31
  Speaker 2: the market, but you've got new jobs, you've got more
• 1:33
  Speaker 2: money in, you want to get that property, maybe a
• 1:37
  Speaker 2: longer term property for you and your partner or yourself,
• 1:40
  Speaker 2: then that's the time you want to say, right, and
• 1:42
  Speaker 2: now's the time to start looking, see what we can
• 1:44
  Speaker 2: afford, what can we get, and then look to see
• 1:46
  Speaker 2: what properties you can get for that budget.
• 1:48
  Speaker 1: I think that's amazing. I think like you said, it's just figuring out
• 1:52
  Speaker 1: where you are to know when you're going to take
• 1:54
  Speaker 1: your next step. So I want to then ask you what are some of
• 1:58
  Speaker 1: the challenges that people may face if they are actually
• 2:00
  Speaker 1: looking to buy a bigger place?
• 2:04
  Speaker 2: I think the biggest one just now is affordability. I
• 2:07
  Speaker 2: think with the way rates that are just now, as I
• 2:10
  Speaker 2: said, we've got a whole generation who are used to,
• 2:12
  Speaker 2: my generation who are used to seeing rates of 1,
• 2:14
  Speaker 2: 2%, not much higher than that. They're now double that.
• 2:18
  Speaker 2: So that's going to have a massive impact on the
• 2:20
  Speaker 2: monthly, the payment. Electricity aint cheap. Your council tax is going to
• 2:23
  Speaker 2: be higher. So it's mainly about that monthly budget and
• 2:25
  Speaker 2: you really need to have a think about, and obviously
• 2:27
  Speaker 2: when we are speaking to our clients, we go through
• 2:29
  Speaker 2: that with you anyway to make sure first step is
• 2:31
  Speaker 2: this affordable for you, but it's about making sure that
• 2:34
  Speaker 2: this step is worth it or it might mean that the next step
• 2:38
  Speaker 2: might not be your forever home. It might be like
• 2:40
  Speaker 2: a middle step. It doesn't necessarily mean you need to
• 2:42
  Speaker 2: go from first house, first flat to forever home. There
• 2:46
  Speaker 2: might be that middle property that you're like, right, it's
• 2:48
  Speaker 2: bigger, we can forward this now, but it's only a five-
• 2:50
  Speaker 2: year plan and then planning to get that next step
• 2:53
  Speaker 2: on it.
• 2:54
  Speaker 1: I love that. Because I think it is about being realistic. I think, I'm
• 2:57
  Speaker 1: not a property owner yet, but what I can relate
• 2:59
  Speaker 1: that to is cars.
• 3:00
  Speaker 2: Yeah.
• 3:00
  Speaker 1: So you have your first car and then when you come
• 3:03
  Speaker 1: to move up, you're probably not going to jump straight
• 3:05
  Speaker 1: to your dream car because that's probably going to be way out of
• 3:07
  Speaker 1: budget. So you're going to be something slightly bigger. And I
• 3:09
  Speaker 1: think when you put it in that perspective, it makes
• 3:11
  Speaker 1: sense. I think a lot of people either enter property
• 3:13
  Speaker 1: ladder thinking they're going to live in their five bedroom
• 3:15
  Speaker 1: mansion when they can't afford it, or they think I've
• 3:18
  Speaker 1: come from maybe my one bed flat and I'm going
• 3:19
  Speaker 1: to go straight into my mansion. Where it is stepping stones. Maybe
• 3:22
  Speaker 1: it's figuring out, like you said, the in- between that
• 3:25
  Speaker 1: is better suit for.
• 3:26
  Speaker 2: I think that's something that is changing back. When I
• 3:30
  Speaker 2: bought my first property seven, eight years ago, you got
• 3:34
  Speaker 2: a small flat, you got a bigger flat or medium
• 3:37
  Speaker 2: house with garden and things, and then you've got your
• 3:39
  Speaker 2: forever home. Though there was kind of historically all that three-
• 3:41
  Speaker 2: step process. Because of the way rates were, younger people
• 3:45
  Speaker 2: having good wages, they tend to just skip from zero
• 3:47
  Speaker 2: to a hundred really quick. Whereas you're starting to see
• 3:50
  Speaker 2: it now because of the way rates are, property values
• 3:52
  Speaker 2: have went up a lot over the last few years
• 3:54
  Speaker 2: as well. You're starting to get that start at the
• 3:57
  Speaker 2: cheaper, lower flat, then take that middle step then the
• 4:00
  Speaker 2: forever home. So it's kind of naturally going back to
• 4:02
  Speaker 2: that after the kind of low rate period that we've
• 4:04
  Speaker 2: had over the last five years.
• 4:06
  Speaker 1: Yeah, amazing. So we got the three step in mind
• 4:09
  Speaker 1: when it comes to getting up that property ladder and taking it in bits, moving
• 4:13
  Speaker 1: up and getting the bigger property. So I want to
• 4:15
  Speaker 1: then ask you, what about if you want second property
• 4:20
  Speaker 1: because not everyone wants to move up and sell the
• 4:23
  Speaker 1: one they've got. So what if you want a second
• 4:24
  Speaker 1: property but you also want to keep the one that
• 4:27
  Speaker 1: you have already? Is that a good idea or should
• 4:30
  Speaker 1: maybe someone think about getting rid of their first one?
• 4:33
  Speaker 2: No, a lot of it depends on your financial circumstances
• 4:36
  Speaker 2: personally. I mean what you'd be moving onto to there
• 4:38
  Speaker 2: would be becoming a landlord. So you'd be moving into
• 4:41
  Speaker 2: getting rental income, so an extra revenue source, but there's
• 4:45
  Speaker 2: pros and cons to both sides. The deposits tend to
• 4:48
  Speaker 2: be a little bit higher if you're buying a property
• 4:50
  Speaker 2: to rent out or if you're staying in your current
• 4:52
  Speaker 2: property you've got and you're buying another one. You need
• 4:54
  Speaker 2: to have that equity to be able to do that.
• 4:56
  Speaker 2: So it can be great for some people. A lot
• 4:59
  Speaker 2: of people, if they've got that entrepreneurial sense in them,
• 5:03
  Speaker 2: they want to make money, they want to make money
• 5:04
  Speaker 2: from property and they might buy more further than the line
• 5:07
  Speaker 2: and make it a real revenue income. It is possible
• 5:10
  Speaker 2: to do something called let to buy, which is where
• 5:11
  Speaker 2: you've let out your existing property and then you go
• 5:14
  Speaker 2: buy another property. And obviously with that things to consider
• 5:18
  Speaker 2: there's going to be additional stamp duty, things like that as
• 5:20
  Speaker 2: well. But as you said, if you've got the finance
• 5:22
  Speaker 2: there and you've got the understanding of it by speaking
• 5:24
  Speaker 2: to somebody like ourselves, then it's definitely something that you
• 5:27
  Speaker 2: can do.
• 5:28
  Speaker 1: So let's kind of delve into a bit more then
• 5:30
  Speaker 1: on getting your second property if you did want to
• 5:32
  Speaker 1: become a landlord, because people who are listening, we've spoken
• 5:35
  Speaker 1: about getting your first property and there's all kinds of mortgage
• 5:38
  Speaker 1: products on the market you can get. There's no deposits,
• 5:42
  Speaker 1: there's 5% deposit, 10%. So is that the same if you are
• 5:45
  Speaker 1: going to buy a second property that's an investment property
• 5:47
  Speaker 1: or how does that differ?
• 5:49
  Speaker 2: It differs. You need to have more of a deposit
• 5:52
  Speaker 2: when you're buying a buy- to- let at that point,
• 5:54
  Speaker 2: if you've already got a property and you're buying one, so
• 5:56
  Speaker 2: tends to be 20 to 25% as the minimum. There are certain circumstances
• 6:00
  Speaker 2: where if it's for a family member, things like that, the
• 6:03
  Speaker 2: deposit doesn't have to be that high, but generally nine
• 6:05
  Speaker 2: times out of ten it will be a higher deposit. One
• 6:08
  Speaker 2: of the main differences is on what people will tend
• 6:11
  Speaker 2: to do with buy- to- let properties as it will
• 6:12
  Speaker 2: be on an interest only basis, because you want to
• 6:14
  Speaker 2: make as much money as possible from that rental income.
• 6:16
  Speaker 2: So your monthly payments will be substantially lower, because you
• 6:20
  Speaker 2: making the profit from the rent's coming in. But as
• 6:25
  Speaker 2: I said, with the way rates are just now, a lot
• 6:28
  Speaker 2: of landlords are probably going the other way rather than
• 6:30
  Speaker 2: coming in. But again, some things that can be of
• 6:32
  Speaker 2: benefit if you come in at this time and you're going to
• 6:34
  Speaker 2: make more money as the rates come down.
• 6:36
  Speaker 1: I mean I think everyone loves when you're here making
• 6:38
  Speaker 1: money, every ones ears prick up and they want to
• 6:40
  Speaker 1: hear about that. But you did mention something there that I kind
• 6:42
  Speaker 1: of want you to expand a little bit more. It's
• 6:44
  Speaker 1: interest only mortgage. What is that for anyone who doesn't know?
• 6:48
  Speaker 2: Yeah. So when it's a second property, it's not the
• 6:51
  Speaker 2: home you live in, the risk is lower because in
• 6:53
  Speaker 2: the worst case scenario, if you had to sell that property,
• 6:55
  Speaker 2: it's not the one you're living in. So there's less
• 6:57
  Speaker 2: of an impact on you. (inaudible) buy- to- let
• 7:00
  Speaker 2: properties is it's not based on your income, it's based
• 7:02
  Speaker 2: on the mortgage payment versus the rental income. So it's
• 7:05
  Speaker 2: a completely different thing and it tends to be a
• 7:07
  Speaker 2: little bit probably easier on personal circumstances than what a
• 7:10
  Speaker 2: residential home would be. So interest only is where you're
• 7:13
  Speaker 2: just paying interest and you're not bringing down any of
• 7:16
  Speaker 2: the mortgage balance. So obviously if it's your home you're
• 7:18
  Speaker 2: living in, you don't want to be doing that. You
• 7:20
  Speaker 2: want to be bringing down your mortgage, get paid off
• 7:21
  Speaker 2: as soon as possible, happy days. You enjoy your retirement
• 7:24
  Speaker 2: with no mortgage. With a rental property, you want to
• 7:27
  Speaker 2: get as much rental income out of that and at
• 7:29
  Speaker 2: the end of the day when you get to the end of
• 7:30
  Speaker 2: the term, you're ready to retire and you don't need
• 7:32
  Speaker 2: it anymore, you can just sell it and you'll still
• 7:33
  Speaker 2: have that, fingers crossed, your property values went up a
• 7:36
  Speaker 2: little bit as well. So you kind of get that win-
• 7:38
  Speaker 2: win from hope, a little bit of an equity boost and also
• 7:40
  Speaker 2: the rental income as well.
• 7:41
  Speaker 1: Amazing. I think that's good to know for people. I
• 7:43
  Speaker 1: think there's all kinds of mortgage products and it can
• 7:45
  Speaker 1: be so confusing. But you breaking it down if you're
• 7:47
  Speaker 1: going down that route for an investment property, that makes
• 7:49
  Speaker 1: sense there. But let's kind of bring it back. So
• 7:52
  Speaker 1: someone who wants to get second property in general, whether
• 7:54
  Speaker 1: they want to get it for investment or just for
• 7:55
  Speaker 1: them to have themselves, what would you recommend that people
• 7:58
  Speaker 1: keep in mind when they are coming to actually make
• 8:00
  Speaker 1: this decision?
• 8:02
  Speaker 2: So if they're moving up the property ladder, I think one of
• 8:04
  Speaker 2: the biggest things, especially with the way rates are just
• 8:06
  Speaker 2: now, a lot of people will be used to low
• 8:08
  Speaker 2: rates. We've had low rates for about 10 years, so
• 8:11
  Speaker 2: anyone who's going to take that next step now is
• 8:13
  Speaker 2: going to get a little bit of a shock on
• 8:14
  Speaker 2: how much higher the interest rates are. If you're getting
• 8:17
  Speaker 2: a bigger house, tends to be a bigger mortgage, which
• 8:19
  Speaker 2: automatically mean a bigger monthly payment, more electricity, higher council
• 8:23
  Speaker 2: tax. There's a lot of things you have to consider
• 8:25
  Speaker 2: about your budget. So the main thing people need consider
• 8:28
  Speaker 2: is speak to someone like ourselves or even have a
• 8:30
  Speaker 2: little look online on calculators and things to see is
• 8:33
  Speaker 2: that property even just going to be affordable even with
• 8:36
  Speaker 2: whether it's a change in income or you're needing that
• 8:38
  Speaker 2: extra space, is it affordable? Because that's the most important thing,
• 8:41
  Speaker 2: is making sure that property is affordable for you, whether
• 8:44
  Speaker 2: it be. And also if you're buying a bigger property,
• 8:47
  Speaker 2: you're probably going to have higher stamp duties, another thing, higher solicitor costs,
• 8:51
  Speaker 2: furnishing other rooms. There's a whole lot of other costs
• 8:54
  Speaker 2: and things you need to think about. So it's that
• 8:55
  Speaker 2: monthly budget you're thinking about as well as the upfront cost.
• 8:59
  Speaker 1: I love the fact that you mentioned affordability because I
• 9:01
  Speaker 1: think it's great to be in a property ladder, number one. And if you
• 9:03
  Speaker 1: can move up, and that's another great achievement, but it
• 9:06
  Speaker 1: is making sure that you don't overextend yourself just for the
• 9:09
  Speaker 1: sake of being able to say, " I've got two properties
• 9:11
  Speaker 1: now instead of just one". It is like you said,
• 9:13
  Speaker 1: it's fracturing in and making sure have I figured out
• 9:15
  Speaker 1: because like you said, now I'm getting two mortgages and not just
• 9:18
  Speaker 1: one. Now there's double the expenses. Can I actually physically
• 9:21
  Speaker 1: afford this?
• 9:21
  Speaker 2: And if it is an additional property you're going down.
• 9:24
  Speaker 2: You've also got to think about have you got time and is it worth
• 9:27
  Speaker 2: the hassle as well? Because being a landlord is a
• 9:30
  Speaker 2: great idea. It's about do you have the time to
• 9:33
  Speaker 2: manage that property as well? Because as much as you
• 9:35
  Speaker 2: can get letting agents and things to do it, but
• 9:37
  Speaker 2: that will bring down what you make in the end. So it's
• 9:39
  Speaker 2: about thinking about do you have that time, patience, the
• 9:43
  Speaker 2: stress levels to deal with that as well as the
• 9:46
  Speaker 2: finances behind it.
• 9:47
  Speaker 1: Yeah, I completely agree with you. So Liam, I want
• 9:49
  Speaker 1: to end the episode how I always end it, asking
• 9:51
  Speaker 1: our quests the same question. What are your top three
• 9:54
  Speaker 1: tips? Help our listeners get a little bit richer.
• 9:56
  Speaker 2: Yeah, sure. So not being biased, but the first one I would say is
• 10:00
  Speaker 2: speak to a broker. Whether it's ourselves or somebody else,
• 10:03
  Speaker 2: you compare your car insurance, you compare your home insurance,
• 10:06
  Speaker 2: you compare everything. Your mortgage is the biggest loan you're
• 10:08
  Speaker 2: ever going to have. Compare it when your product comes
• 10:10
  Speaker 2: to an end. We've got all the lenders, we look across
• 10:13
  Speaker 2: them all. We do this day in, day out, we
• 10:15
  Speaker 2: know what we're looking for. So to save as much
• 10:17
  Speaker 2: money as possible, get that lowest rate, go with whoever
• 10:20
  Speaker 2: the best lender is at that time. It will change
• 10:22
  Speaker 2: probably in two years, five years time when you look again.
• 10:25
  Speaker 2: But that's what we are here for. We want to
• 10:26
  Speaker 2: save you as much money as possible, get your mortgage
• 10:28
  Speaker 2: paid off as soon as possible so you can enjoy
• 10:30
  Speaker 2: your retirement in your mortgage free home as soon as
• 10:32
  Speaker 2: possible. Because that's the most important thing, that's the end
• 10:34
  Speaker 2: goal. In regards to making money or saving money when
• 10:38
  Speaker 2: you're selling and buying. When you're selling your home, it
• 10:41
  Speaker 2: sounds daft and obvious, but if you're taking that next
• 10:44
  Speaker 2: step in the property ladder just to cosmetic stuff when
• 10:47
  Speaker 2: you're selling, if there's little jobs that are kind of
• 10:49
  Speaker 2: outstanding or superficial things that need done to make it
• 10:53
  Speaker 2: look that little bit better and that little bit more
• 10:55
  Speaker 2: marketable, do it, pay that little bit extra because that
• 10:57
  Speaker 2: little few hundred pounds might be a few thousand pounds
• 11:00
  Speaker 2: in somebody else's eyes. Because they don't have to do
• 11:02
  Speaker 2: it, they don't have the hassle. So when you're coming
• 11:03
  Speaker 2: to sell the property, just make it as beautiful and
• 11:06
  Speaker 2: as marketable as possible so that you're getting the most
• 11:09
  Speaker 2: for what you're selling it for. Because again, it's a
• 11:11
  Speaker 2: knock on impact on hopefully getting you that little bit
• 11:14
  Speaker 2: of a better property at the other end. And last but not least,
• 11:16
  Speaker 2: when you're looking to buy your property, your next one,
• 11:19
  Speaker 2: whether it be an investment or whether it be your
• 11:22
  Speaker 2: next step on the ladder, negotiate. Don't just, if you
• 11:25
  Speaker 2: see a property there, use tools like Rightmove, how long
• 11:28
  Speaker 2: has it been in the market for? The market is
• 11:30
  Speaker 2: changing again, in the last two years it's been very,
• 11:33
  Speaker 2: very hot. Property's going in two, three weeks really, really
• 11:35
  Speaker 2: quick. It's starting to change again and normalize. So don't
• 11:40
  Speaker 2: just think that you have to go anywhere with your maximum offer, negotiate
• 11:43
  Speaker 2: it, put a low offer in first. The worst thing that can happen
• 11:46
  Speaker 2: is it gets rejected, and then you go in again
• 11:48
  Speaker 2: and you go in again. So the three things there
• 11:50
  Speaker 2: are obviously saving on your mortgage, using somebody like a
• 11:52
  Speaker 2: broker to get the best monthly payment in your mortgage.
• 11:56
  Speaker 2: Next one, when you're selling your property, getting as much money
• 11:58
  Speaker 2: as you can for your old one. So just making
• 12:00
  Speaker 2: sure all those cosmetics touches are nice and tidy, photos
• 12:03
  Speaker 2: and things. And I'm sure the estate agent will help
• 12:05
  Speaker 2: you with this as well. And then when you're putting
• 12:06
  Speaker 2: in offers, don't be shy, don't think you have to. Whatever the
• 12:10
  Speaker 2: agent has told you or the person selling that's told
• 12:11
  Speaker 2: you put an offer in. The worst thing that can
• 12:13
  Speaker 2: happen is they say, no.
• 12:14
  Speaker 1: I love those. Those tips are really good, especially the
• 12:16
  Speaker 1: one negotiate. I'm always saying this, make sure you negotiate. Don't always take
• 12:19
  Speaker 1: the first price you're given, see what you can get. And
• 12:21
  Speaker 1: I said, " Don't go with your maximum offer, so if you
• 12:23
  Speaker 1: can get it lower". If you have to get there,
• 12:25
  Speaker 1: then you get there eventually, but you go in lower and see what
• 12:27
  Speaker 1: you can get. You'd be surprised. Liam, this has been
• 12:30
  Speaker 1: a great episode.
• 12:30
  Speaker 2: Thank you.
• 12:30
  Speaker 1: You've shared so many (inaudible) . Thank you so much for coming on.
• 12:34
  Speaker 1: Next time I'm chatting all things credit. What is credit?
• 12:38
  Speaker 1: What do we need to be careful of and can
• 12:40
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• 12:43
  Speaker 1: of it, but while you wait, if A Little Bit
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