Best/most efficient way to buy if you have a lot of cash?

WTF?_2

I was planning on buying outright as prices come down and eventually stabilise (I reckon 2010 will see me able to get a 3-bed semi in a good area given my current levels of savings and earnings and the decline in prices) but I'm wondering if it's a good idea to tie pretty much all my capital up in a house.

I'm now thinking something like an offset mortgage. Putting maybe 60% down and holding the other 40% in the account to offset the capital loan. Essentially, I'd be maintaining a line of equity against my house that I could draw on.

Does that make sense or are there better ways to go about it? What sort of financial penalties would I pay for doing this?

Realy

Your main costs are arrangement fee, & valuation but if you went for worst rate you most probably looking at £399 arrangement and £99 drive by valuation.

Your biggest penalty would be obviously no intrest on your offset but then no tax either.

Open up an offset pay your 60% down. put the 40% in offset or leave it in an ISA if you have one.
Then pay wages in and save in the offset account and drip feed the ISA
(you could get first direct offset at the moment at 4.99% [£999 arrangement though ouch] and an isa would provide a better return than that)

That is what I am going to do when I re-mortgage.

Compleat sense getting rid of the interest + having funds for when you are in the poop is the idea when a housholder.(well it is mine anyway)

Realy

See you need us home owners some times.:D

WTF?_2

Realy wrote: »

See you need us home owners some times.:D

Thanks for the info about offsetting.

Like most of the bearish posters here, I have nothing against buying property, it's buying property at the wrong time that I have warned against.

Anyone who bought in the 2-3 years prior to the bursting of the bubble faces real problems now. They paid (borrowed) a whopping amount and have to service a large loan on an asset that is likely to be worth less than they borrowed against it.

That's why I have been so vocal on the board about falling prices and overborrowing. No-one in their right mind would put themselves in the position of being in negative equity with a recession looming but many people walked right into this situation with the encouragement of the media, their peers and various other HPI cheerleaders.

Prices look set to fall back to a sensible level relatively quickly (probably in the next 18 months) and once they stabilise I'm quite happy to recommend buying and I will indeed put my money where my mouth is and buy a house myself.

Realy

!!!!!!? wrote: »

Thanks for the info about offsetting.

Like most of the bearish posters here, I have nothing against buying property, it's buying property at the wrong time that I have warned against.

Anyone who bought in the 2-3 years prior to the bursting of the bubble faces real problems now. They paid (borrowed) a whopping amount and have to service a large loan on an asset that is likely to be worth less than they borrowed against it.

That's why I have been so vocal on the board about falling prices and overborrowing. No-one in their right mind would put themselves in the position of being in negative equity with a recession looming but many people walked right into this situation with the encouragement of the media, their peers and various other HPI cheerleaders.

Prices look set to fall back to a sensible level relatively quickly (probably in the next 18 months) and once they stabilise I'm quite happy to recommend buying and I will indeed put my money where my mouth is and buy a house myself.

Well I purchased a sizeable cornflake packet (new build house) in the last few months.
I am very happy with it. But the neighbours won't be when they see the land registry price. (not FTB, 30% down + big discount)
Good luck though as your idea is sound.
The only other advice would be Energy efficiency as you know energy is stupid at the moment so get the most energy efficient house you can (which you like)
If energy carries on going up like it had could be more expensive than a mortgage.

teabelly

It is nothing to do with buying at the wrong time. The issue is whether you paid the wrong price ie too much! Anyone that had the sense to get a good discount will be fine even if they bought recently. Buying doer uppers that need time rather than money spending on them is also a good way of ensuring you don't fall into negative equity.

On the mortgage front the something like an offset or the one account would be ideal. The latter is more flexible but more expensive.

ad9898_3

Realy wrote: »

Well I purchased a sizeable cornflake packet (new build house) in the last few months.
I am very happy with it. But the neighbours won't be when they see the land registry price. (not FTB, 30% down + big discount)
Good luck though as your idea is sound.
The only other advice would be Energy efficiency as you know energy is stupid at the moment so get the most energy efficient house you can (which you like)
If energy carries on going up like it had could be more expensive than a mortgage.

The neighbours will be even less happy if they have to sell, as the price you paid will be their new valuation.:D

TDS_2

teabelly wrote: »

It is nothing to do with buying at the wrong time. The issue is whether you paid the wrong price ie too much! Anyone that had the sense to get a good discount will be fine even if they bought recently. Buying doer uppers that need time rather than money spending on them is also a good way of ensuring you don't fall into negative equity.

I disagree. Clearly price is the issue here, but house prices are, to a vast extent, dictated by timing. Bought a house in 2007? Ouch. Buying a house next year, on the other hand, will keep negative equity at bay a lot more successfully than knocking down a few walls.

Realy

ad9898 wrote: »

The neighbours will be even less happy if they have to sell, as the price you paid will be their new valuation.:D

Not realy, houses are always worth what someone is willing to pay that is why prices are falling (+ the FSI going down the pan).
I was fortunate and hit a builder at the right time with cash.

That is like saying every house should achive over the ceiling price in a rising market!
As long as I have cut out the majority of HPC I am happy if I lose a bit fair enough but I can't be held responsible for other peoples decisions.

Anyway this is OT it's not all about me you know.:)

Conrad

!!!!!!

As you may have seen I have been putting in low offers (50% down on peak) on new builds. I am wavvering, but the consensus amongst my skilled investors is now is probably the optimum time to buy as interest rates are dropping which will draw back the buyers. This is in the South East.

teabelly

Prices aren't necessarily dictated by timing. Having bought a place for less than the previous owners paid 4 years before and who then added an extension which added a 4th bedroom and a second reception I'd say the price you pay is everything. Anyone that buys and exceeds the ceiling price in their area is vulnerable and always has been. Trick is to pay less than everyone else does at the same time so prices have further to fall to get you into negative equity.

What confuses me is that some on here complain about people treating their home as an investment then promptly go and discourage people from buying when they want on the grounds that they will lose money or could get it cheaper in a few years! If houses are just somewhere to live then it doesn't matter what they pay as long as they are happy with their choice and can pay the mortgage surely?