Know your options to get moving in this stagnant market

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Q: If I can’t sell my house, how will I secure a mortgage to enable me to buy the property I want?

A: The stagnant property market is forcing more people into this situation. As people are forced to consider reducing their asking prices the hope of achieving their next purchase dwindles as buying power becomes limited.

The solution could be to re-consider the recognised format of buying and selling a property. One option could be to become a landlord and rent out the property that you currently own. This particular approach is referred to as a Let to Buy transaction and works by enabling access to the equity within a property by a re-mortgage. It doesn’t release all of the equity but it can provide sufficient equity to enable a new mortgage on the property you’d like to buy.

You should be aware that a Let to Buy can mean taking a much bigger mortgage but with interest rates at an all-time low it’s unlikely to cost as much as you think. In addition the rental income from your old home may assist in softening those monthly repayments.

The fact is many people are still not exploring their options. My advice is discuss your situation with the experts and speak to a professional independent mortgage advisor.

Q: Will I pay more to rent than repayments on a mortgage?

A: The natural order of things is for us to grow up in the family home and make plans to buy our own property when we become financially secure. This approach was appropriate in the past, with low deposit requirements and even 100 per cent mortgages, it couldn’t have been easier. Since the demise of the 100 per cent mortgage, becoming a first-time buyer is little more than pipe dream for most. This not only calls for a shift in expectations but a shift in attitude. While people are hung-up on buying they could have realised their independence and rented instead. The rentals market saw an up-turn last year and the expectations are to see an even stronger year in 2012. There are more professional landlords with growing property portfolios providing discerning tenants with the choice and quality they are looking for. With competition so strong the chances of negotiating on a rental are good and furthermore the budget you have could enable you to rent a better property compared to buying. The conundrum many people face is do you rent a larger and better property or look to own a smaller one? It gets back to choices, recognise them, weigh them up and get the right advice.

Q: Would a buy-to-let be a better investment for me?

A: From recent reports it would certainly look like a good proposition. All you have to do is research websites such as Rightmove to see the amount of properties that are for the taking. Research by specialist Buy to Let lender, Paragon Group, has revealed that landlords are expecting tenant demand to continue to remain high in 2012. More than half of the landlords who took part in the survey thought that tenant demand would either continue to grow or even boom in 2012 and just over half of those same landlords thought that rental income would rise in the same year.

It looks like all the facts point to a good investment, even ARLA (Association of Residential Letting Agents) commented that three quarters of their members are reporting demand for rental property is outstripping supply.

I’d consider the investment options given rental returns are currently at five per cent. However the most popular regions for investment are currently reported to be the North West, Midlands and Central London so it pays to do your research within the area you are interested in. My advice is talk to a professional, licensed lettings agent, that way you’ll receive the benefit of local knowledge.

Franz Muelthaler is mortgage adviser at Wakefield and Dewsbury-based Holroyd Miller. Tel: 01924 465671.