Friday, 12 October 2018

Welcome to our new blog - Confessions of a Letting Agent

Landlords often ask us what goes on behind the scenes at The Key Place and so we thought we would share our experiences, and what we have learned from those experiences, with you.

I had a call from one of my team to say that a tenant of ours had stormed into the office shouting and swearing and demanding money to stay in a hotel. 

A wee bit of background to this:  a landlord that we only find tenants for (TFO) has the flat upstairs from his, and there was a pretty big leak from her flat into the flat below.  The TFO landlord lives overseas and we don’t hold insurance for her, and so there was a delay in getting the leak fixed and the works dealt with.  Our angry tenant had to move out and we agreed to put him up in alternative accommodation or to give him an allowance to stay with friends and family.  He chose to stay with friends and family. 

So why the sudden change of heart that led to him storming into our office demanding cash to stay in hotel?  A few months ago this would have seemed completely out of character as he was a good tenant with a secure job who paid his rent on time.  I was suspicious about what was going on.  Well I called him myself and told him that we had found him a B&B locally and that I would pay for his room directly, and give him an allowance for food.  He wasn’t happy with this offer and wanted the cash instead.  In fact he not only wanted the cash, he was desperate for the cash.  This got me wondering what for?  Drugs? Drug debts? Certainly something that was causing him a lot of stress.  Having called his bluff, I never heard from him again. 

This got me thinking about what had happened.  The tenant was acting irrationally as he clearly wanted cash instead of just a bed.  However I chose not to offer cash, and by calling his bluff, I found out that it wasn’t a B&B he was after at all. 

The other consideration here is the overseas landlord trying to manage her flat from overseas.  Had her property been fully managed by The Key Place, the problem would have been dealt with much quicker.  We offer insurance to our fully managed landlords and so could have actioned the claim on her behalf too.

This is just one of many real life stories in our new Confessions of a Letting Agent blog. 

#penicuik #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #propertyinvesting

Thursday, 11 October 2018

Get in quick for this Penicuik house buy to let opportunity or you will miss it!

Today’s buy to let opportunity from the Penicuik Property Blog is a fairly standard, 2 bed property at 79 Windsor Drive in Penicuik.

It is a 2 bedroom, semi-detached house.  The property has a large lounge/dining room with a conservatory off the back adding more living space, a fitted kitchen, 2 bedrooms, a family bathroom with a shower over the bath, mono blocked drive way to the front that looks like it can take 2 cars and a very ‘low maintenance’ garden to the rear.

The decor and floor coverings are neutral.

Let’s do the maths.  This house is on the market with Deans Properties for offers over £125,000 so let’s say it goes for £135,000.  A house like this in this area should rent for £725 pcm, possibly £750 pcm.  Assuming a rent of £725 pcm gets you to a yield of 6.4%.
Although just on the market, this property is likely to sell quickly so you will need to move fast if you are interested in it.

If you would like any advice on buying a property to let, feel free to give me a call 01968 674601, email me on ( pop into the office for a chat (6 Bank Street, Penicuik).

#penicuik #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #propertyinvesting

Friday, 5 October 2018

Criminal offence ..... call to action

All letting agents now require to be registered with, and regulated by, the Scottish Government.  It is a criminal (not civil) offence to trade as a letting agent after 1 October 2018 if you are not registered with, and regulated by, the Scottish Government.

Registered letting agents require to adhere to the Scottish Government Letting Agent Code of Practice which means that, amongst other things, they have to have suitable policies and procedures in place, there staff need to be appropriately qualified, and they have to control their clients’ money sensibly and they have to have professional indemnity and client money insurances in place.

Call to action ..... landlords

If they use a letting agent, landlords now have a duty to only use a registered one to ensure that they are legally compliant.  I keep hearing more and more practical reasons why this is the case, for example, did you know that you will be refused a mortgage on a buy-to-let property if you use an agent who is not registered?

Landlords please use a registered letting agent.

Call to action ..... letting agents

There is significant work in getting a letting agent into a good enough shape to be able to be come regulated.  If letting agents who have not registered are looking to sell their business given the hassle involved, get in touch as I know people who are looking to buy such letting agents – they have the resource (both £££ and people) to complete a quick deal. 

Thursday, 4 October 2018

Penicuik Property - Do you know the Facts and Figures?

Here at The Key Place, we can guide you to the right places to identify property values and yields in Penicuik and, as well as that, we can provide you with other useful property related information so you can make sure you know all you need to know before making your future investments.

I was reminded of this the other day when I was chatting to a landlord of mine and he said that I was a font of useful information about the Penicuik property market ..... at least I think he said useful! 

This got me thinking that others may be interested in some ‘useful’ property facts about our town of Penicuik....

There are 230 streets Penicuik with 6,627 households, and just 27.55% of all those houses (1,826 to be precise) have changed hands since 2008.

Compared to the national average, Penicuik has 18% less detached houses, 51% more semi detached houses, 95% more terraced houses and 52% less flats. This ties in with Penicuik having significantly less single person property occupancy compared to the national average (27% vs 35%) and correspondingly more 2 person + households.  This is a good indicator that Penicuik is good place to buy property in as yields on semi detached and terraced houses are generally higher than detached houses and flats.

Penicuik has more owned properties than the national average (71% vs 62%) and less Council/social renting than nationally (21% vs 25%).  Overall this means that only 8% of properties in Penicuik are privately rented which is much lower than the national average of 13%. Given that there is a shift towards people renting rather than buying their own home, this means that there is more to ‘go after’ in Penicuik.

We also have information at our fingertips on seemingly daft things which can turn out to be quite important.  For example, 92% of properties in Penicuik have gas central heating which is much higher than the national average of 74%.  This is really useful to know when refurbishing a flat and considering whether you can ‘get away’ with electrical heating ..... you probably can’t in Penicuik

I could go on but I better not!

If you would like more useful facts and figures call me (01968 674601), pop in to see me at our offices (6 Bank Street, Penicuik) or email me (

#penicuik #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #propertyinvesting

Friday, 14 September 2018

The Penicuik property market – ten years on from Lehman Brothers

 Can you believe this week marks ten years since Lehman Brothers collapsed and the dominoes of the late 2000’s financial crisis fell? The property market had actually been slowing before this, with the number of sales in the first half of 2008 down 40% compared to 2007. House prices had already dropped 10% too.

This trend accelerated though with Lehman Brothers demise. House prices fell a further 10% in the following six months, finally bottoming out in March 2009 (not that anyone knew they’d stopped falling at the time). This meant they had fallen from a high of £190,032 in September 2007 to £154,452 in March 2009; a drop of 19%.

Not coincidentally, in March 2009 interest rates were dropped to an all-time low (at the time) of 0.5%, where they were held for nine years. That’s a staggering decline considering they were still at 5% just six months beforehand, when Lehman Brothers went bankrupt. It’s quite the news story nowadays if interest rates change by 0.25%…back then we had six months in a row of them dropping between 0.5% and 1.5%!

Interestingly the average mortgage ‘SVR’ (Standard Variable Rate) in September 2008 was 6.95% (1.95% above the base rate) whereas it is now 4.1% (3.35% higher than the current base rate of 0.75%). So, compared to the stated base rate, borrowing money is actually more expensive now than it used to be - something which could be key if the base rate begins to rise.

It took until August 2014 for house prices in the UK to surpass the previous high of September 2007. During those seven years it was those in negative equity who faced the trickiest situation. With house prices retreating to levels last seen in April 2005, it was the property buyers between April 2005 and September 2007 who became trapped in their homes. For some this led to becoming accidental landlords so they could move on, whilst for others it meant having to wait out the storm.

Fast forward to today and the average UK property price stands at £228,384; 20% higher than the September 2007 ‘peak’ and 48% higher than the March 2009 low. Whilst you might have preferred not to buy between April 2005 and March 2009, anyone who did so should now have come out the other side ahead.

What still hasn’t recovered though is the volume of homes being sold. The record year for property sales in the UK remains 2006, with 1,581,727 sales. The following year there was a small dip of 6%, before the number of sales fell off a cliff in 2008, with just 765,313 homes changing hands (a drop of 49%!). A decade later and the volume of sales has recovered (to 1,098,215 in 2017) but are still well down on the levels seen in the years before the financial crisis.

For many it was the lowering of interest rates that helped them keep their homes; arguably stopping house prices from falling further. This, along with artificially pumping money into the economy, has led to asset prices becoming ever more expensive in absolute terms, whilst some will say it has only served to kick the can further down the road.

#penicuik #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #prs #privaterentedsector

Thursday, 16 November 2017

Another acquisition for the fast expanding Penicuik based The Key Place

The Key Place, the "go to letting agency" across Edinburgh and the Lothians, Central Scotland and the Scottish Borders, specialising in property management and buy to let investment, is delighted to announce that it has taken on PH Young’s letting business based in Bo’ness.

Robert Young, The Key Place’s Chief Executive, commented “We are delighted to have taken on PH Young Lets as, on top of it being an excellent, well run business, it enables us to consolidate our strength in property lettings across Central Scotland.  I can see this being the first of many acquisitions that we make over the next couple of years and, with the regulation coming into the sector next year, I expect that a fair number of property letting agencies will be looking to exit the market rather than go through the hassle of becoming regulated.” 

Thursday, 9 November 2017

Penicuik landlords owe more than £52 million!

The Brits can’t stop talking about property. The hot topic of discussion at the posh dinner parties of Mauricewood, Broomyhill and Milton Bridge’s movers and shakers is the subject of the Penicuik Property market, but in particular, buy to let. These people are buying up buy to let properties quicker than an ace Monopoly player ...... or so it would seem if you read the Sunday papers. So is the buy to let market a sure fire way to make money?  Is it something everyone should be jumping into? Is it a sure fire way to make money? Am I asking too many questions? The answer is Yes and No to all those questions!

Firstly, the government gives tax breaks to landlords, as it allows some mortgage interest payments on a buy to let property to be tax deductible. Also, a landlord only has to flick through Rightmove or Zoopla, pick any property at random and agree a price. Then, find a modest deposit of 25% (often by remortgaging their own home) which for an average Penicuik terraced house, would mean finding £38,830 for the deposit (as the average Penicuik terraced house is currently worth £155,319) and borrow the rest with a low interest rate buy to let mortgage.  Finally, the landlord would rent out the property in a matter of hours for top dollar and live happily ever after, with the rent then covering the mortgage payments, with loads of money to spare and come retirement have a portfolio of property that would have quadrupled in value in fifteen years. Sounds wonderful – doesn’t it? Or does it?

Let us not forgot that the half of one per cent Bank of England base rate is artificially low. The international money markets can be fickle and if interest rates do rise quicker and higher than expected because of some unforeseen global economic situation, that monthly profit will soon turn into a loss as the mortgage will be more than the rent. Even though tenants are staying longer in their rental property, tenants still come and go and my guidance to landlords is they should allow for void periods, plus the maintenance costs of a rental property and of course, agents fees ...... all things that eat into that profit.

Interestingly, by my calculations Penicuik landlords owe in excess of £47 million in mortgages on buy to let properties.  An impressive amount when you consider Penicuik only has 0.04% of all the rental properties in the Country. It really does come down to a number of important factors going forward to ensure you are water tight for the future. A lot of my existing landlords are fixing their mortgage rates. One told me that the Post Office are currently offering a 5 year fixed BTL remortgage rate at 2.74% for 5 years (based on a 75% loan). I don’t give financial advice, so you must speak with a qualified mortgage advisor...... but that sounds very fair!

However, one thing I do know is that buy to let is a long term investment, it’s a ten, fifteen, twenty year plan and property prices will go down as well as up. You wouldn’t dream of investing in the stock market without advice, so why invest in the Penicuik Property Market without advice? We give bespoke detailed advice to our landlords to enable them to spot trends in the Penicuik Property Market before others, enabling them to buy better properties at better prices. For example, did you know that terraced houses are selling for around 7.27% more than 12 months ago in Penicuik yet detached houses are selling for 4.98% more (with every other type in between). This means we can advise on which properties will go up in value better (or lose less if property prices drop), we can also advise which have lower voids and which properties have higher maintenance issues. 

Information on the local property market and ability to process it is the strongest asset we can give you. As Lois Horowitz, the famous author says, “Not having the information you need when you need it leaves you wanting. Not knowing where to look for that information leaves you powerless. In a society where information is king, none of us can afford that”. One place to find information on the Penicuik Property Market is The Penicuik Property Blog, where you will find many articles just like this.

#penicuik #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #propertyinvesting

Thursday, 2 November 2017

Property investing in Penicuik .... my 5 golden rules

As a landlord myself, I thought I would share some of my rules/tips on finding the right investment property for you in Penicuik and its surrounding areas.

Rule 1 -  location  

My number 1 rule is invest in a town you know. What better town to invest in than the town you grew up in? Now you will know which areas are high in renters and which areas are high in home owners. You will know where the schools are, local shops and importantly the transport links.

Think about the sort of tenant you want to attract – if you are looking for professional tenants then you will need to look at properties which are close to the centre of town. The properties you tend to get close to the town centre are flats or one/two bed houses.

If you are looking to attract families then you may want to look at property that’s away from the town centre with noise and traffic etc and find somewhere which is close to shops, schools and parks.  Penicuik offers plenty of areas suitable for both, you have areas such as Valleyfield, Rullion Road and Mauricewood to name a few and these locations are all great for rentals both families and professionals as the centre of town is not too far away but far enough from all the hustle and bustle.

Rule 2 - motivated sellers

I’m not sure what you think of when you hear motivated seller but what pops into my mind is someone who will take a very low price for a quick sale. When I say low, I mean anywhere between 10%-30% below market value.  Finding these motivated sellers is not easy, you can start by looking at how long a property has been on the market. Usually November seems to be a good time to negotiate the price down on a property as people want to be out and in their new home for Christmas. Another motivated seller is often someone who has inherited the property.

Rule 3 – the figures  

So we have established the sort of tenant you want, you now have the location and a list of motivated sellers. Now you need to make sure all this stacks up financially. At the end of the day you are in this to make money rather than breaking even or being in a loss.

Make sure you do plenty of research on the sorts of rents your potential investment property can achieve – my advice is to give my team a call and pick our brains. We are local to Penicuik and we are landlords. My team and I will be able to give you accurate numbers of the rents you can achieve in and around Penicuik. 

You will also need to set a buffer aside for unexpected expenses, usually this is general maintenance but we have had the odd boiler needing replacing which requires forward thinking. From my experience with my own properties and properties I manage, these often occur when you are undertaking works. Often other issues arise which need sorting out and this will always add more time to the job and it usually means you will go over budget.  But if you do it correctly then you will have a sound solid investment.

Rule 4 – Not a get rich quick

The Penicuik property market has gone down and up in the last 10 years and it’s very difficult to predict what the changes will be and if the prices will change.  As a landlord in Penicuik, think about the long goal. Use this as a plan for the future and the short term ups and downs will not affect you as much.

Rule 5 – Understand your market. 

This is similar to Rule 1 (location) however you can never do to much research, ring other landlords from Penicuik, speak to several local agents. The independent agents can make instant decisions there and then as the owner of the business tends to be close by (you will always find me in the office). They are more likely to sit down and give you their time, even if it means they get no business from it they just love to talk all things property.

There you have it, my 5 top tips to investing in Penicuik. If you are a seasoned landlord or you are just looking to start my team and I are always happy to chat about your goals and plans. We can point you in the right direction and even  accompany you on viewings so you have a second opinion.
If you find yourself passing our office then pop in (the kettle is always boiling). We have plenty of free parking available and I’ll even get the ‘posh’ biscuits out.

Our office address is based at 6 Bank Street, Penicuik, EH26 9BG. Many of my blog readers also email me with RightMove , Zoopla or On The Market links to look at and offer a second opinion so if that’s more convenient my email address is

Don't forget to visit The Penicuik Property Blog ( to view back dated articles about the Penicuik property market as well as property deals in Penicuik.

#penicuik #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #propertyinvesting

Thursday, 26 October 2017

Moving tips for Penicuik families with children

Moving home can be a stressful experience without a doubt. There may well be lots of excitement because of new opportunities over the horizon but there will also some major issues to consider. How do you get all your stuff packed up and moved safely? How are you going to make friends in your new location? Is it going to be okay?

Of course, the entire process is made a lot more challenging when you have children involved. Here are some of our top tips in making the trip from old home to new location go as smoothly as possible when you have children in tow.

Talk to your children

Adults can generally get their heads around, and cope with, change. For children, it will be more than just the challenge of packing up and moving from A to B. Not only could they be losing the friends they’ve made, there’s the prospect of starting in a new school and beginning over again.

Prior to moving, you need to make sure you talk as much as possible and get them used to the idea of moving. Of course, a lot will depend on the age of your children and how much they understand about this big change.

It can often be harder for teenagers because, for example, they have made long term friendships and have lived in the same place for a good while. Smaller children tend to have shorter attention spans but you might want to look out for tell-tale signs that they are stressed out and find a way to talk these through to put them at ease. Those under five still have a greater attachment to their parents and are usually the easiest to handle because they haven’t yet started to develop their own independence.

The good news is that social media and technology means that friends can remain in contact with each other a lot easier than in the past. It may not be the perfect solution but it can help, particularly older children, cope a lot better.

Getting the children involved

It’s important to get children involved with the moving process and packing up as much as possible. That could involve putting them in charge of their own room (nominally in the case of younger children!) and helping with the planning. It will make the feel part of the move and in control rather than simply having the change thrust upon them. Try to be as flexible as possible and don’t be too upset if your child suddenly loses interest and finds something else to do.

For much younger children, having them out of the way while you pack and prepare to move home can be a lot less stressful. That means you may need to call on friends and family to look after them while you get everything done. Even if your children are involved in the move, it’s a great idea to involve close relatives and family friends to help normalise the process as well as get that extra needed help.

Getting the children used to the new home and area

Where possible make sure the children have visited the new home a few times, point out their new room and ask their opinion on where things should go, what new items will be needed, should you decorate, by getting them involved they will develop a sense of ownership and hopefully excitement. 

Also, get the children especially the younger ones, used to the new area by, for example, driving past the new school and exploring the local amenities to show all the possibilities.
Visiting their new home and area before you move is one way to start getting your children used to the change.

Try the ‘is that a bird?’ approach once you have moved

Once you have moved, it is good to distract the children from the thought of having to move by, for example, getting them involved in activities in the new area or even getting them some new toys to play with. 

Finally, planning, understanding and accepting things not going right

Good planning and plenty of understanding go a long way to helping things run much smoother when moving home. Don’t expect everything to go like clockwork, though. That rarely happens with any move. Each child is different and they’ll react in their own unique way. For some it will be a worrying time, for others it can be a great adventure.

#penicuik #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #housemoving #housemovingwithchildren

Thursday, 19 October 2017

Are ‘would be’ Penicuik homeowners warming to the idea of renting?

I was reading a report the other day produced by the Halifax, about the UK property market and why more and more of the younger generation seem to be renting rather than buying. I find it fascinating that over the last 10 - 15 years, the British obsession of buying a house almost as soon as you left school, and the fact that if you rented you were seen as a second class citizen, has turned on its head to a point where the hopes and dreams to own a nice home will be replaced by the ambition simply to live in one.

In the latter half of the 20th Century, you left school, got a job, bought a small house and kept buying and selling property, constantly upgrading until eventually they carried you out in a box. However, the perceived shame and stigma of renting is no longer the case, as it seems that the British are now beginning to accept a lifetime of renting. This is a very important consideration for both Penicuik homeowners and Penicuik landlords as it will transform the way the Penicuik property ladder looks in the future and I might ask whether or not it will exist at all for some people? The make up of households is one important factor, especially in the Penicuik property market. The normal stereotypical married couple, two kids and dog of the 1970’s and 80’s has changed. More and more we have the need for larger houses where two families come together after divorces (+ kids) and need a property to house everyone through to an increase in the number of one person households.

Looking at the data for Penicuik, of the 901 private rental properties in the Penicuik Locality, 27.62% of those rented properties are one person households (249 properties). However, when we compare the number of one person Penicuik households who have bought their own property with a mortgage (i.e. therefore they are still in work), of the 4,705 owner occupied households in the area, only 355 of those properties are a one person household (i.e. 7.54%). Compared to a decade ago, this explosion in demand for decent high quality rental properties that one person households require has not been met with an increase in supply of such properties.  More and more I believe Penicuik landlords need to consider this change in the make up of Penicuik households, as I believe this could be an opportunity.

It is true that the Government’s introduction in 2013 of the Help to Buy scheme, where first time buyers only needed a 5% deposit, changed the perception of peoples’ ability to buy without having to save ten’s of thousands of pounds for a deposit. However, it might surprise you, 95% mortgages were re-introduced within six months of the Credit Crunch in late 2009, so again it comes down to people’s own perception. Many youngsters think they won’t get a mortgage, so don’t even bother trying.

Coming back to the deposit, it’s still a fact that once you start renting it becomes that much harder to save for a deposit, regardless of the size. Interestingly, 7 out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice the quality of accommodation they currently live in to reduce the amount of rent they pay in order to save for a deposit.  This is the crux and the real reason why people aren’t buying but renting... and why demand for renting will continue to grow in the future (i.e. good news for landlords). Penicuik tenants can upgrade the quality and size of the property they live in for a minimal rent increase. The average rent of a two bed property in Penicuik is £700pm, but a three bed is only £150pm more at £850pm, whilst the average four bed rent is £1,000pm. If you had to make that jump when buying, the monthly mortgage payments would be stratospherically more than that! Without any social pressure and better quality rental properties compared to a decade ago, we will become a nation of renters within the next generation, as the UK is becoming more like Europe, where renting is ‘the norm’.

Who is going to supply all these properties to rent? Landlords! Whether you are an existing landlord looking to grow your portfolio or looking to become a ‘first time landlord’, my thoughts are take advice from as many people as possible. However, as the majority of landlords buy their buy to let properties in the same town they live, you will need specific advice about Penicuik itself.

One place for such quality advice and opinion is the Penicuik Property Blog

#penicuik #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #firsttimebuyers

Thursday, 5 October 2017

Opinion piece: The Key Place, Countrywide, Purplebricks and the changing lettings landscape in Penicuik

The lettings landscape is changing. 

It is changing as a result of the regulation of the sector being implemented by the Scottish Government.  It is changing because of the recent tax changes introduced by that historical figure, George Osbourne .... remember him?  It is changing because of the changing mortgage market.  And it is changing because of technology advancements.

Fundamentally, even with all this change, the lettings market is still a good place to be just now because current demand greatly exceeds current supply and this shows no sign of changing in the short, medium or long term as the obstacles to building more properties are so high that we will not be building enough properties to solve the problem for decades to come.

However, what will evolve is who manages letting properties and how they are managed.

At the moment there is great talk of national internet based letting agencies, like Purplebricks and Ewemove, being the next great thing and there is lots and lots of talk that large national office based letting agencies like Countrywide (called Slater Hogg & Howison in Scotland) being dinosaurs who will not survive (for what it worth, I personally suspect that Countrywide may well be more valuable if it is broken up .....). 

For me, technology will change the lettings market and the lettings industry must embrace technology so that it provides a continually improving service.  However, unlike selling tins of beans (which absolutely lend themselves to be sold by national and international businesses on the internet), ultimately lettings is about local knowledge and long-term relationships and personally I do not think that national letting agencies – whether internet based or not – can provide the same level of local knowledge, people skills and long-term relationships as local letting agencies like The Key Place.  The Key Place is a family run business with extensive local knowledge, people skills and long-term relationships with landlords, tenants, contractors, Councils, Penicuik etc which is invaluable in ensuring that lettings is done properly .... particularly when the ‘road bumps’ of lettings come along.

Keep it real, keep it local!

#penicuik #property #buytolet #realestate #ownermanagedbusiness #retirement #retirementplanning #energyefficiency #privaterentedsector #prs #privaterentedsector #firsttimebuyers

Thursday, 28 September 2017

Home Buyers in Penicuik – Beware the Cost of 90% Mortgages

There are an increasing number of lenders willing to grant 90% mortgages to first-time buyers, but that doesn’t necessarily mean you should jump in without exhausting other possibilities.

You see, the cost of a 90% mortgage to first-time buyers compares quite poorly to those with a deposit of 15% or more; so much so that it could actually be beneficial to take out a separate loan to cover the difference.

Currently a first-time buyer with a 10% deposit can access a two-year fixed mortgage at a rate of 1.79%. Whereas having a 15% deposit in place would lower the rate on the same product to just 1.27% (meaning there’s 29% less interest to pay!).

If you’re reading this thinking a 0.5% difference in interest rates is negligible and all the mortgage rates seem very low, you’re right! But it can still make a real difference in the long-term.

Let’s say you’re thinking of buying a £125,000 house with a 10% deposit. On a repayment basis, you can expect to pay £465 each month towards the mortgage. But by raising your deposit to 15% those repayments would drop to £413 per month OR if you paid the same £465 a month as you were going to, the mortgage would be paid off three years quicker!

You may think you have little choice; and with the average property in Penicuik selling for £185,695, even a 10% deposit will require £18,570! But if you consider that by borrowing the additional £9,285 to step up to a 15% deposit could save you £77 per month in this scenario, you could actually afford to borrow this sum at 10% (interest only) to be no worse off.  

So even though the interest rates on a personal loan might be higher than a mortgage, the shorter length of the loan means you’ll pay it off quicker. This will boost the level of equity in your home, which will help when re-mortgaging in the future and could save you money in the long-term.  However, and it is a big however, certain mortgage lenders take a dim view about this sort of thing.

I’m not saying you should borrow more to stretch yourself and this certainly doesn’t constitute financial advice (you should consider contacting the registered professionals for that). But, I would urge you to ensure you’re accessing money as cheaply as possible to future-proof yourself and keep more money in your own pockets rather than in the banks coffers!

And, of course, there is another alternative although I appreciate that this is an unpopular thing to say .... give up some of lives ‘less essential’ ‘essentials’ and save the greater deposit.

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