Should we pull out of house buy

Northants_Simon

Sitting it out (renting) until prices drop to there lowest is fine if you can do that. But in my case I feel I'm running out of time due to my age. Lenders don't like to run mortgages past retirement age. Even though I'm self employed and don't intend to retire at 65, the banks don't want to lend longer than that. Lets say I wait 3 years and then get a 22 year mortgage, and lets say interest rates go up to 9 or 10 percent. There would be a chance I couldn't afford to buy. However I can get a 10 year fixed rate at just over 6.4% at present, or 5 years at 6.19%. And spreading the mortgage over 25 years makes the monthly payments more affordable.

The Homebuy Mychoice scheme doesn't mean you have a 100% mortgage. You can put a deposit down and they contribute towards it. All it means is part of your borrowing will be at only 1.75% (but this rises each year). Maybe the silly people are those borrowing 50% from Homebuy, in effect getting a 100% mortgage for 8 times their salary. Myself, I'm borrowing 3 times my income.


The other way of looking at it is in 10 years time you will have paid off a chunk of your mortgage, even if prices don't go up you will still have equity in your home. If you rent you have nothing.

Chris2685

dopester wrote: »

This is from June, but I imagine a new update for August / September will be coming out soon. And I think you have to allow a bit of time for the contagion to spread.

First you get higher demand pushing the prices up, then you've had so many people who can't sell who've begun letting their own homes.

That said, do keep in mind I predict much higher unemployment, paycuts, and less revenue intakes for the Government where it might be forced to cut back on many things, including what it pays in housing benefits, as it recalculates those figures with property valuations falling.

http://www.propertysecrets.net/article/uk_property_investment_rent_levels_head_downwards_but_the_data_may_be_skewed/2055.html


However - up to you to use take all data and any projections you see the economy going in making any decision.

True, you have highlighted another benefit to renting that I missed, which is the economic uncertainty of the future. You are really making me think now...

If we pull out now we should only lose less than £1000

I hate not knowing.

GDB2222

Chris2685 wrote: »

Can anyone tell me in really basic costing terms how I am better off paying £800 per month to a landlord instead of paying £800 a month to clear a mortgage? I understand that if I wait 2 years I could get a better price on the property, but the fact is we have to move before November as the baby is due in December, and we can't stay where we are.

Ok, really basic:

Buy a place, and over the next 2 years, it costs you £800 per month plus the loss in value. (You also have to insure and maintain it, so say £850 per month, rather than £800.)

Rent a place with 3 bedrooms, and over the next 2 years, it costs you say £900 or £1000 per month.

Over the next 2 years, the extra you pay in rent is probably £2k-£4k, say. Now, all you need to ask yourself is whether the likely loss in value will be more than that?

Northants_Simon

GDB2222 wrote: »

Over the next 2 years, the extra you pay in rent is probably £2k-£4k, say. Now, all you need to ask yourself is whether the likely loss in value will be more than that?

Not sure I agree with that logic.

You only have to worry about a decrease in values if you need to sell. If you intend to live long term in the house then the value doesn't matter.

For that reason I'd say buy something you could live in for the next 10 to 15 years.

Historically prices always go up. In the 1970's you could buy a house for £5000.

Chris2685

GDB2222 wrote: »

Ok, really basic:

Buy a place, and over the next 2 years, it costs you £800 per month plus the loss in value. (You also have to insure and maintain it, so say £850 per month, rather than £800.)

Rent a place with 3 bedrooms, and over the next 2 years, it costs you say £900 or £1000 per month.

Over the next 2 years, the extra you pay in rent is probably £2k-£4k, say. Now, all you need to ask yourself is whether the likely loss in value will be more than that?

Thanks, that is pretty much what I thought myself. If I do have to sell within 2 years, then no it won't be worth it. I am not planning on selling in less than 10 years unless something dramatic changes in my life.

I guess it all comes down to risk, and I think it is pretty low risk that I will have to sell in 2 years.

Thanks for all your advice.

Watch this, now I will end up having the mortgage application refused or some crap

GDB2222

Northants_Simon wrote: »

Not sure I agree with that logic.

You only have to worry about a decrease in values if you need to sell. If you intend to live long term in the house then the value doesn't matter.

I just knew that someone was going to say this. It's a red herring!

The point is that I was comparing buying the house in two years time for less money, with buying it now for more money. I called the difference a loss, but it doesn't really matter what I call it, does it? It represents a 20% saving on all future mortgage payments, starting in 2 years time, and that needs to be compared with a bit of extra rent paid over the next two years.

Maybe I can make it simpler:

Buy now, and pay £800 a month for your mortgage for the next 25 years.

Rent for two years, and then buy: Pay say £900 a month rent for 2 years, then pay say £600 or £650 a month for your mortgage over the next 23 years.

Now, you tell me which of those is better financially?

flea72

GDB2222 wrote: »

Ok, really basic:

Buy a place, and over the next 2 years, it costs you £800 per month plus the loss in value. (You also have to insure and maintain it, so say £850 per month, rather than £800.)

Rent a place with 3 bedrooms, and over the next 2 years, it costs you say £900 or £1000 per month.

Over the next 2 years, the extra you pay in rent is probably £2k-£4k, say. Now, all you need to ask yourself is whether the likely loss in value will be more than that?

but money spent isnt the only thing to consider. i would assume once having a child, you will either be taking a drop in income (due to looking after child) or if returning to work, having more expense, ie childcare?

applying now, as a couple for a mortgage would mean you can get the mortgage you require. if you apply after having the child, and are in the situation of then only having one income, your mortgage entitlement will be greatly reduced, so you will be stuck renting for a very long time

Also you have to look at stability. with renting your could be moving every 6m. ok if you like a change of scenery, but the expenses involved and the time it takes to find another property, can be a real pita

Ok, short to mid term, buying a house might be the most risky option. But having the stablility (espec once you have kids), really does wonders for your mental health (renting is anything but stressfree). Buying a house shouldnt be seen as a financial investment, where you only do it to make profit. its more about settling down as a family, and living out your days, with a roof over your heads, that you are free to do with, as you please.


In your situation, if renting is going to cost the same as buying, and you dont have any options to save further to increase any future deposits towards a house, that might be 10% cheaper in 1yrs time, then i would always go with buying

Flea

GDB2222

Chris2685 wrote: »

Thanks, that is pretty much what I thought myself. If I do have to sell within 2 years, then no it won't be worth it. I am not planning on selling in less than 10 years unless something dramatic changes in my life.

I guess it all comes down to risk, and I think it is pretty low risk that I will have to sell in 2 years.

Thanks for all your advice.

Watch this, now I will end up having the mortgage application refused or some crap

It's nothing to do with whether you sell in the next 2 years!

Buy now, and pay £800 a month for your mortgage for the next 25 years.

Rent for two years, and then buy: Pay say £900 a month rent for 2 years, then pay say £600 or £650 a month for your mortgage over the next 23 years.

Chris2685

Thanks again GDB, that also makes sense. It doesn't take my personal situation into account though. It is nice to think that the mortgage would be greatly reduced per month if we waited 2 years, and I like that as a valid argument.
Hopefully in 2 years I will be on a greater income too, which makes it even more appealing to rent.

I'll do some calculations and see what I come up with. The trouble is the uncertainty of interest rates and how much house prices really will drop.
I know house prices are being predicted to drop a fair amount in the next few years, but at the same time aren't interest rates predicted to rise?

Time to do some sums and what ifs

flea72

GDB2222 wrote: »

Maybe I can make it simpler:

Buy now, and pay £800 a month for your mortgage for the next 25 years.

Rent for two years, and then buy: Pay say £900 a month rent for 2 years, then pay say £600 or £650 a month for your mortgage over the next 23 years.

Now, you tell me which of those is better financially?

well, thats ok if you can afford £900 a month for the next 2yrs, and you can guarantee that the mortgage will be £600 a month thereafter

If you think house prices, and mortgage interest rates are gonna be such, that we go back to house prices of 10yrs ago, and interest rates of 3yrs ago, then you are working with very exaggerated figures.

Flea