To buy or not to buy that is the question

newbienewbison

Hey,

I want to get some opinion of the sensible people on this fourm if I may.

I am looking at buying a place (FTB). I think I have found a place that seems like a good deal. My worry at the moment is knowing if now is an OK time to buy. I know its difficult to predict and there are always conflicitng reports but here are my thoughts....

If you read the housepricecracsh site the people that post would have you believe that house prices will bottom out between 2012-2020 - They are pretty pesimistic over there so I am not sure if I am inclined to believe their predictions of 50%+ drop from peak.

On the flip side if you listen to the most optimistic people (Alistair Darling and crew) we probably have hit a bottom (Currently 16% drop from peak)

Personally I think we could be in for another 10% over the next year or so and then we will see it flatten out and start to rise a little 2014/2015..... This is personal opinion but I think its a sensible middle ground.

The property I am looking at is up at £135k but has been on the market for a year (started at 180k) I think if I can get it for around the 120 I should be OK. I am looking to get it to live in with a friend of mine. I am not looking to make a profit just not loose to much and safeguard savings from a possible runaway inflation at some point in the next 5 years or so....

So in summary 120k place. Savings(deposit) of 20k. Mortgage of 100000 (about £550pcm over 35 years. I am 23 and earn 35k per annum. Minimal outgoings no loans.

What do you reckon?

Thanks

QTPie

It is a VERY personal thing and nobody knows...

We are currently "chain free buyers" (having just sold and now in rented) and I am in the mind of "if the right thing comes along at the right price, then great.... otherwise wait" (although I am an impatient person and so that is tough ).

Personally I think there will be a bit more of a fall, but probably not a huge amount, but I could be COMPLETELY wrong!

The problem that you have during a recession (according to a surveyor friend of mine) is that towards the bottom (and for some time after that), the market is left with the "dregs" (i.e. the crap properties that no-one wants). You may get the occassional "half decent" distressed sale come up, but many of these will sell before reaching rightmove and/or have a bidding war over them...

The most important things about buying at the moment is your financial position: this is not a time to over-stretch yourself, especially if you don't have incredibly good job security (and if the recession deepens, many people who thought that they were 100% secure might get a surprise... ).

Another thing is the suitability of the property - what you don't want to do, at the moment, is buy now and want to sell in a year or two... anything you buy now should be looking to last you 5+ years.

One other thing I will say (which contradicts the last point!) is "35 year term"? If you can, go for a lower term (most go for 25 years). Enter what you want to borrow into a mortgage calculator and compare both the "monthly payment" and the "overall cost of borrowing" for both 25 and 35 year terms. You will find that the difference in "monthly payment" may not be huge, but the extra you pay across the term (i.e. "overall cost of borrowing") is pretty alarming. If you can, go for a shorter term than 35 years. Alternatively get a mortgage which allows regular overpayments and make it your goal to overpay AS MUCH as possible each month (to reduce your term and the amount you pay overall).

No-one can give you a simple answer, but good luck
QT

alexlyne

180 down to 135 sounds like the 180 was waaay overpriced, but as qtpie says, it's all personal opinion.
If your job is secure, then I would say that the longer you spend renting, the more you'll lose. But i could be wrong.
I bought my first house at 24, earning 22K at the time, and a mortgage of 80K. I had no problems paying 500 per month. Since girlfriend moved in, made it even easier
I am still earning less than 30K, but planning on moving to have around 130K mortgage, which'll be around £850 month for 5 years.
If you're not wasting money, you should easily be able to over-pay, or put loads into savings for the future!

newbienewbison

This is pretty much how I thought... I can easily pay the money IF i keep my job, it looks OK at the moment but who knows!!

I also have someone paying for part of it so from the 1000 I ussually save I will still have 700 to put away or overpay...

the_ash_and_the_oak

newbienewbison wrote: »

Hey,

Personally I think we could be in for another 10% over the next year or so and then we will see it flatten out and start to rise a little 2014/2015..... This is personal opinion but I think its a sensible middle ground.

The property I am looking at is up at £135k but has been on the market for a year (started at 180k) I think if I can get it for around the 120 I should be OK. I am looking to get it to live in with a friend of mine. I am not looking to make a profit just not loose to much and safeguard savings from a possible runaway inflation at some point in the next 5 years or so....

So in summary 120k place. Savings(deposit) of 20k. Mortgage of 100000 (about £550pcm over 35 years. I am 23 and earn 35k per annum. Minimal outgoings no loans.

What do you reckon?

Thanks

Depends if I'm reading this wrong but I think you've answered your own question. You think there's another 10% fall, stagnation, and a little rise, over the next 5 years. And this is somewhere you might be looking at living in for 5 years (at which point...?). Or will you and your friend be living in this house for more than 5 years?

the_ash_and_the_oak

Feel that hyperinflation is something that should worry older people (whose earnings are behind them and already converted into savings) more than younger people (whose earnings are ahead of them) imo.

Also if you went for a 5 year fix you would be coming off your fix at a time when you think prices will be lower or around the same (but with interest rates much higher than now to fight this hyperinflation?)

blunt_crayon

what are your reasons for wanting to buy? and what's special about this property?

as QT has pointed out, i would also seriously question taking a 35 year mortgage.

100k @ 6% over 25 years = 190k
100k @ 6% over 35 years = 235k

that's a lot of interest!!

newbienewbison

@ the ash and the oak

There is not much I can do if there is rapid inflation because if I had savings they would be worth less so the property is probably the right option. The fixed term is an issue.. but nobody can be sure so I will just have to hope for the best I suppose.


@ blunt

I really like the property and area. Its not really an investment for me.

Also yes its a lot of interest but so is 70k (25year) - That is a mortgage for you! It does bring the payments down about £100 pounds. I will have to think on that however I dont plan to have it for the full 35years and the mortgage is still £100000 no matter what the length of the term. Over 5 years it would not cost a lot interest but its about affordability in the short and meduim term too

hethmar

If you think you will be happy in the house, if you are thinking of living in it 5 years or more - then offer the £120k and then dont keep checking house prices

newbienewbison

110 going in take it or leave it

besonders1

The question is would you be upset if the value went down to half of what you paid and you needed to sell, if you moved house to a bigger property would it be possible to afford the difference? Would you opinions change later on about the house and regret it?

You say that your not sure that 50% from the peak sounds a bit too optimistic but remember we have just come from an era where all the experts believed that house prices would never fall and values increased by 200%. Anything is possible thats the most dangerous thing about it.