FTB - advice on when to buy

houmous99

Hi,

I'm currently saving up for a deposit and I'd really appreciate some advice on when people think would be the best time to buy.

So, to try and set out my situation clearly:

I currently live with my boyfriend who will be a student for the next 3 1/2 years. We rent from family essentially just covering bills plus a bit extra.

I currently have £44,000 saved and reckon that I'll save around another £7000 this year (and in subsequent years if I don't have a mortgage).

My boyfriend has £20,000 saved up but most of this will go over the next 3 1/2 years whilst he's studying, although there may be some left over depending on how well he budgets!

We had previously planned to buy when he finished studying and when we would then be on a joint income, however I'm wondering whether prices might have gone up by then? So, what I'm contemplating at the moment is the idea of buying somewhere before then and renting it out. However, as I live in London I'll still need to borrow £200,000 despite my savings (very envious of other posts I see on here where people are buying 2 bedroom houses for £130,000!). I'm currently on a salary of £25,000 going up to £27,000 in 6 months time. So, if I was to go down this route I was wondering whether I could get some sort of joint or guarantor mortgage with my mother? (She is mortgage free on her own home, but does have a mortgage on another flat that she rents out. She is retired but has an 'income' of around £40,000 and is very keen to help us out if she can - it was her that suggested this plan).

Is this an unwise plan? If it seems like it might work when do you think (very roughly) would be the sort of time I should think about buying?

Thanks very much for any advice.

Robert_Sterling_3

When you buy a property you get "Gearing"
Example:-

You put in £50,000 Mortgage £200,000 Total £250,000
If the house goes up in value by 1% i.e. New Value
£252,500.

Your equity goes up from £50,000 to £52,500
which is an increase of 5% on your original investment.

The downside of this is if your house goes down 1% to £247,500 t
hen your equity goes down to £47,500 i.e. Down 5%.

Because of this gearing ...
... and because prices are falling ....
I would not buy to let in these circumstances.

houmous99

Thanks Robert. I wouldn't buy to let now when prices are still falling, I suppose my question is whether house prices are going to begin to go up in the next 3 1/2 years, in which case would it be sensible to buy in say 2 years time before that happens? Or do you think they will continue to fall past that?

Also, I'm not sure I understand about 'gearing' totally. If my equity decreased why would that be worse if renting it out than if I was just living in it?

SavingSteve

TBH if anyone on here knew the answer to your question they'd be en route to becoming a millionaire.

Robert_Sterling_3

houmous99 wrote: »

Also, I'm not sure I understand about 'gearing' totally. If my equity decreased why would that be worse if renting it out than if I was just living in it?

The equity you would be losing is the same either way. It is the fact that you are losing equity and gearing is involved that makes it a bad idea. Stay with mum & dad until the wind of change blows again and in the right direction.

brit1234

Your best plan is to buy when your boyfriend finishes uni. Prices have a long way to fall before they get back to normal levels and even then stagnate for years.

Don't fall for all this false pressure to buy now just in case the market goes up. The people who say this are just trying to talk it up for there own benefit despite the economic fundamentals being against them.

If someone says prices are going to rise rapidly ask them simply "Where are the banks going to get the funds for these rises when they are making huge loses, are reliant on savers and can't sell the mortgage debts on anymore"

No the banks have not got the money to fund rises otherwise their lending criteria wouldn't of got so tight. They have no money to lend.

Be patient and you will be laughing.

good luck.

confused31_2

I dont think prices will rise in the next 12 months, but people are starting to buy now and i personally i think by the end of the years prices will be stable, you can see from the last few weeks, buyers are coming back but i think it will be a very slow process, to when houses start to go back up in price.

i would just look and when a bargain comes up make your move, depending on where you live matters with the prices aswell, by me the drops havent been very big at all, but some areas have had massive drops, it just deends where you want to live.

Running_Horse

houmous99 wrote: »

however I'm wondering whether prices might have gone up by then?

They might, they might not, who knows? One thing I am sure of is, the days of buying for profit (for most) are long gone. Buy for somewhere to live. Don't use your mother, in case the worst happens (which it sometimes does), and wait for your boyfriend to be solvent. A lot can change in a few years; relationships, earning power, desired location, career, number of bedrooms needed. It's not like the bubble years when people were worried about missing out. Enjoy life, and enjoy your boyfriend.

hethmar

I think you have plenty of time. Following the 90s recession, prices stagnated for about 8 years.

Bf109

houmous99 wrote: »

Is this an unwise plan?

Yes. Very.

http://forums.moneysavingexpert.com/newreply.html?do=newreply&p=19033771

houmous99

Thanks for the replies everyone, I suppose we should just sit it out and cross our fingers that the market doesn't recover too quickly in the next 3 1/2 years!

We're not looking at this as an investment, just worried that if we leave it too long and the market rebounds back to 2007 prices then we won't be able to afford the kind of place we want/need for quite a long time, and if we can't afford somewhere in 3 1/2 years time then it's going to be a lot harder to continue saving as then we're going to be renting somewhere else at market rates.

I'd be interested in seeing the link you posted Bf109 but for some reason it seems to just take me into editing my original post?