Risking It All To Get on the Property Ladder

First time buyers are risking everything to get onto the property ladder. With property prices continuing to rise there is an increasing desperation among them, to buy property sooner rather than later. Some buyers are risking financial and personal ruin to take their first steps onto what they see as a lucrative and secure property ladder.

Lenders are aware of the problems that increasing property prices are causing the first time buyer. They are also very aware of the problem that this causes them as mortgage lenders, as a considerable amount of their profit is made through interest paid to them on mortgages. Hence, if first time buyers are being priced out of the market, it leaves these lenders with a major financial problem.

To try and find a solution to the problem, many lenders have come up with progressively more creative ways for the buyer to fund their purchase. Things such as buying with friends, getting lifetime mortgages, interest only mortgages or self certified mortgages are becoming increasingly more popular.

These creative financing methods are at times, resulting in people being able to get far higher mortgages than they were previously able to. Not that long ago it was on heard of for anyone to get a mortgage five times their salary, where as now, it is becoming increasingly more common for buyers to get a mortgage five or six times their salary, by the use of methods such as self certifying themselves for a mortgage, as often no proof of income is required.

Even if you have only been in the country for a few years, if you have built up a good credit rating and are aware of the mortgage deals available and the loopholes within them, it is fairly straightforward for you to obtain some sort of finance.

The question is, is it worth the risk? Historically the answer has got to be a resounding yes. I have yet to meet many people who bought their property over seven years ago and have managed by hook or by crook to pay their mortgage, who regret their decision to buy. The topic of dinner conversation among these people is often how much equity they think they have accrued in their house. History bears out their enthusiasm by revealing that even though the property market has the occasional dip, it has always recovered, and normally goes into a period of rapid growth soon after the dip to make up for lost time.

On the other hand, at the other end of the spectrum we have those who have had their homes repossessed or whose marriages and personal lives have been ruined in some way by the pressure of keeping up with high mortgage costs. If you look at how the dream of getting onto the property ladder has ruined their lives you could be forgiven for never wanting to take the plunge yourself.

These two opposing viewpoints leave the first time buyer in somewhat of a quandary. However, perhaps this dilemma is caused or at least left more perplexing because we are asking the wrong question. If we changed the question from, would you risk it all to get on the property ladder? To, would you be prepared to do whatever it takes to stay on the property ladder? This might add some clarity.

Those people, who have taken a gamble and obtained mortgages way beyond their means, but have coped and even thrived, tend to be the sort of people that would do anything to pay their mortgage. That could mean getting another job and working over 70 hours a week, it could mean learning another skill altogether and changing careers totally in order to obtain a pay rise, or it could even mean forgoing holidays and regular meals out for a number of months or even years.

The people who don't tend to cope tend to fall into one of two categories, either they weren't prepared to make the sacrifices and do whatever it took to keep up the repayment on their mortgage, or alternatively they were hit by some disaster that they did not recover from. Maybe, they where made redundant or became ill or had an accident that meant their ability to work was affected in someway.

Though, it could be argued that this second group is only a minority because even of those people who lose their job, if they had the single-minded determination to still pay their mortgage, or even to downsize if need be, it would still be achievable for the vast majority of them. So, again we come down to the key question.

Would you be prepared to do whatever it takes to stay on the property ladder?
The answer to this simple question may hold the key as to whether any particular individual will be able to hold onto their property or whether they will be forced to join the growing band of people who are facing bankruptcy and their homes being repossessed.

The Big Fat Property Lie

I watched a programme on TV last night called "My Big Fat Property Fortune". I don't watch a lot of TV but this programme caught my eye, it was supposed to be how these incredible people had made their fortune from property. WHAT A DISAPPOINTMENT.

What the show consisted of was a bunch of people that had made their money from property mainly through luck and good fortune rather than their business acumen. There were a few exceptions to this, must notably, a husband and wife team whom I have seen a couple of times before, they own over 700 properties that are worth in excess of 170 million. There is no disputing that this couple are worth a fortune and that they continue to rake in a fortune from property.

The problem I have with this show and others like it is that it is not realistic and truthful. Let me explain myself. Yes, there is no doubt that this couple have made an absolute fortune years ago, mainly by the sound of it by buying new and off plan properties. However what is not taken into consideration is the changing housing market.If this couple started today and did exactly the same thing all over again, the results would not be the same, in fact they would probably end of being bankrupt quicker than you can say "Jack Rabbit." It was a different market when they started investing and so many novice investors (or hopefuls) will have watched that programme and thought yes that is how I am going to do it.

The key with making money from property is knowing your market. Knowing whether it is the right time to buy off plans or to buy old houses etc. You have to give the property market and it's current condition due consideration and respect, many would be investors and developers get into financial difficulty because they haven't taken this into consideration. Exactly the same money is still out there to be made, you just have to adjust your strategy to make sure you are making it in the safest and most profitable way possible.

Carlton Johnson

http://www.UKPropertysuccess.com

Is your house really an ASSET?

Would you class your home as good debt? Well, countless people might, but the reality is, it isn’t. Good debt is normally only found when you have invested in an asset. What is an asset, you say? Well, there are several definitions depending on who you speak to, but I think the following sentence epitomises it well: it is something that appreciates in value and/or can provide you with passive income, that pays for itself, and doesn’t need you constantly putting money into it.

So, what is good debt?

Good debt is debt that you have incurred by purchasing an asset that appreciates in value and/or can provide you with passive income that pays for itself, and doesn’t need you constantly putting money into it.

In this vein, your house could not be classed as an asset, because you live there and you have to pay the mortgage yourself through other means i.e. through working at your job for a wage to pay the mortgage or through the money you get from other assets. And even if you have paid off the mortgage, you would still have things to pay on the house, such as utility bills, council tax, repairs etc. So you will always need to have some income from some other means in order to finance the upkeep on your home.
Food for thought?
However, maybe you could class it has a sleeping asset ready to be realised whenever you choose to cash it in or remortgage? Well, maybe.

Invaluable Free website for property investors

There are a few key changes within the law that are coming into effect this year. One you don’t want to forget about if you are a property investor are the changes to Tenancy deposits, which comes into effect today (April 6th). If you haven’t already got it in your favorites on your computer then it might be useful to put the web address below there now, as it has many useful update as regards to property and it contains all the info – or links to all the info – you need to know as regards to tenancy deposit.

http://www.communities.gov.uk

For more info on all aspects of property investing you can go to my website at:

http://www.ukpropertysuccess.com/

Regards Carlton

(Author UK Property Success)