Rent/Buy/Mortgages

uk_rider

Right, its time for me to move out of my parents house.

I've been thinking and looking at house prices for a year now but not put anything in gear.

I’m looking at moving to Bromley, possibly Blackheath/Greenwich. The main reason for my procrastination is that I am unsure whether to buy or rent. After reading the pros and cons of both multiple times I’m yet undecided. I've got savings of £30k I could use as a deposit, slightly more if I sold my motorbike.

I could rent a one bed flat in Bromley for £600, closer to London looking at £750/£800.

One bed flats in Blackheath/Greenwich seem to be advertised for around £200K, and I could buy a small house for that in Kent.

I'm divided between living in the country and south London. Its a decision that’s also delayed my moving out. I could live in both with easy access to work.

So that’s my situation and I have the following questions:

A) Are the advertised house prices set in stone? If not what offers would be normal on a £200k flat/house in such locations assuming that they are all similarly priced?

I've been looking at mortgages but still a bit confused. Is an APR of 4% about right for an interest only tracker offset mortgage? If I can get one of course!

C) What other costs should I include when calculating the costs of a mortgage compared to renting. For example if I bought a flat/house for £180K with a £30k deposit on a 4% mortgage. I’m looking at £500 p/m compared to renting of £600-800. Is this view too simplistic / am I missing something? I understand when buying wear and tear comes into play.

C) I’ve had my mind set on travelling Canada for a year with my mountain bike. Is it hard to rent out a property if I did buy somewhere for such a time? This is one of the other factors for me trying to decide whether to buy or rent. If i like Canada a lot I may want to move there.


Thanks for the help

Fire_Fox

Why don't you rent a room/ share a flat for six months, so that you can get a feel for an area that you are interested in purchasing in? You'd also get used to budgeting for household bills and food.

If you buy a leasehold flat you must factor in service charges; if you buy a house that isn't brand new you are likely to have repairs and redecoration. Either way you will have buildings insurance which you won't have to pay if you rent. If you can afford to buy a two bedroom place you have the option of taking in a lodger, moving your partner in and even starting a family without all the associated costs of selling up.

You should get a mortgage offer in principle before you begin house-hunting in earnest, as this speeds up the process and shows you are a serious buyer. If you want to let out a house/ flat you will need the permission of the mortgage provider, and this is not always forthcoming. What is a reasonable offer depends on what similar properties in the area have sold for (as opposed to 'for sale' for). As an FTB in an uncertain market you should go in very low - but how low depends on the area.

mike5678

I am in a very similar financial situation as you, but north London, not south.

I also found a flat for £200k. My first offer of £175k was rejected, but my third offer of £180k was accepted. I am mortgaging £149k of this, very similar to you.

Let me tell you now, you will not get a 4% interest rate and it will cost you more than £500 per month. For example, with my £31k deposit and £149k mortgage and excellent credit history, my interest rate is 5.99% fixed for three years. Which on a 25 year term, makes payments of £959 per month on a repayment mortgage.

To get a 4% interest rate, you will need to drastically improve your LTV to about 60%. Mine is in the 85% LTV bracket and you are looking in the 6% region, not 4%.

Re-do your calculations and then see how you feel about this decision.

Catblue

I think you've answered your own question really.

You're not sure whether to live in the country or South London. If you do live in South London you are not sure which area to choose. You don't know whether to buy or rent. You want to go travelling relatively soon and you may end up moving abroad.

All of these ideas are absolutely great, but make sure you don't get trapped by any decision that you make now.

Rent a room in a shared house in an area that you like which is convenient for work. You'd only be committing yourself for 6 months or so and at the end of that, you'll have the flexibility to move on and do whatever else you fancy. If you love the area, you might want to buy there. If you hate it, you'll move on elsewhere with a lesson learned.

Keep your options open and enjoy yourself.