What Type of Buyer are You?

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How to Live Mortgage Free with Sarah Beany got us thinking about what type of buyer a person may be.

I don't know about you but I am loving the new series on TV at the moment; How to Live Mortgage Free.

For those of you who haven't seen it yet, the programme is on Channel 4 and stars Sarah Beeny. The premise of the show is to show us examples of people who have found ways of either paying off their mortgage much sooner than planned or who find novel ways of building a home for little money and so avoid having to get a mortgage in the first place.

At the end of 2016, my partner and I decided that we would set ourselves the goal of becoming mortgage free by the end of 2018. We set ourselves that goal and put in place a plan of firstly increasing the monthly mortgage payments and secondly also assessing what we can save and whenever possible paying off a lumps sum. We also took a look at our savings & ISAs and since these were not giving us a great return, we released those savings and made further lump sum payments off the mortgage.

Take it from me, that is is not an easy goal to accomplish. But the goal is worth achieving. It would mean paying off the mortgage about 8 years earlier than the mortgage allows and the savings made eventually would mean we stand to save thousands of pounds in mortgage interest payments.

Of course, there is no gain without pain and for us the pain is not spending the way we used to do. There will be fewer treats. But it does focus your attention on just where you spend money and where savings can be made and belts tightened. As a simple example, I now cycle to work. I used to go by bus. That was £16 per week and so over the course of 2017 that in itself will give a saving of £832. And has the added advantage of being good exercise.

But enough about me.

You see the How to Live Mortgage Free series started me thinking that there are several different types of buyer and perhaps it might be helpful to first time buyers- especially first time buyers in Edinburgh given the state of the Edinburgh property market at present - to give you my thoughts on the different types of buyer there are to help you decide which one you are.

Buy a home and stay there

This is the type of buyer I turned out to be. I moved to Edinburgh in the late 1980s. I have lived in only three properties in all that time and I have lived in my current property since 2001. The property we have suits us fine and we have no desire to live in a larger property or a different location.

So this type of buyer achieves in one or two property moves; the property that they want, that suits their needs and are happy to stay there. The goal then is to become mortgage free just as soon as possible. These people, myself included, do not see property as an investment or as a means of making them rich. The goal is to own your own home and sooner or later to be mortgage free.

Climbing the property ladder

I remember a solicitor I used to work for many years ago saying that you should always try to buy a property that you cannot really afford yet and then keep moving up the property ladder every four to five years. That is still good advice and many people will set that as their goal. The aim is not to be mortgage free necessarily but rather to reach retirement owning an expensive property which you then sell and downsize to a smaller property with the profit made from the sale of the big house going a long way towards funding your pension.

Becoming a property investor

A lot of investors suffered during the financial crisis that followed the crash in 2008 but property investing is still a very popular means of saving for your future. The template is easy to understand. You start off with one investment property, the tenant's rent covers the mortgage payments, wait two years for the value of property one to increase, remortgage to release capital which then goes towards funding the deposit on investment property two and then repeat every couple of years.

If you start early enough you could grow your property portfolio to between 10 and 20 properties before you consider cashing in. Of course in this case you are running a business and so would be liable to pay tax on your profits. But your goal is still to come out having made a substantial profit.

Doing up a property and rolling it over

If I had the time, this is something I would love to do. The idea here is that you buy a property that is in need of modernisation or can be improved or extended. Once the work is done you then sell it on hopefully having made a profit after taking into account the cost of the improvements. It takes time and money, but if you have these and have mates in the building trades, then I can't think of a better way of spending time and money. This would give a great feeling of achievement.

 


At Cameron Stephen solicitors and estate agents Edinburgh, we would be delighted to help you achieve your properties goals, whether you are a first time buyer, investor or developer. So, why not get in touch and see if we can help you?

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