By Peter Harrison, Chartered
Financial Planner, Manning and Company
Those with available cash may wonder whether to buy an investment
property.
Property is often thought of as a reliable long-term investment – and
indeed predictions for the next few years look good. However, the Mortgage Market Review (which
came into effect a month ago) will mean borrowers purchasing a property solely
for their own use will be scrutinised to ensure they can afford the repayments.
There has been significant growth in the buy-to-let market; and a recent
survey indicated that more than a third of new landlords were investing for the
long-term. Buy-to-let mortgages are not
currently subject to the Mortgage Market Review – so borrowers do not face the
same degree of scrutiny. But if interest
rates rise, the gains could be short-term.
An overseas holiday home could be an attractive idea. Raising finance for an overseas property may differ
from the UK, as some countries do not have buy-to-let mortgages in quite the
same way. There may also be implications
for your UK home if the bottom drops out of the overseas market.
Some people view property investment as an alternative pension. However, property assets are not subject to
the same protection as a pension pot. If
you need to fund care, for example, you cannot make the argument that a second
property is your ‘pension’ – it will be considered as an asset, and so could be
vulnerable.
There are pros and cons to every option.
Taking professional advice early in the process will ensure you make an
informed decision.
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