Buying Vs Renting

squidgeykate

Hi there,

Me and my partner are first time buyers. We have a 10% deposit for a 100k mortgage but are struggling to find a house for it in the area that we'd like.

We do of course have the option of buying in a less desired area but are not keen to do this. The option we are currently considering is renting until we can scrape together another 5 or 10k. I was wondering if anybody has found this beneficial or whether renting really is dead money?

Thanks,:D

Cannon_Fodder

Are you on the streets at the moment?

squidgeykate

no, we're both living with parents.

Cannon_Fodder

It doesn't get any cheaper than that to save hard...

Renting is not exactly dead money. As you get a roof over your heads, privacy from your parents etc...!

If, however, renting on the open market will dent your ability to save, then I'd suggest you put maximum effort into a 6 months saving blitz, get to 15% or even 20% deposit - as that will help the interest rate you pay, too - and hopefully give yourselves a wider range of properties to choose from...

mr_fishbulb

squidgeykate wrote: »

no, we're both living with parents.

Although I don't normally comment on incest cases, I'll give it a go this time.

Have you and your partner ever lived together before? What happens if you find you can't do it and get on each other's nerves? What happens if you have bought a house? Renting before hand will show you both what it is like living together.

Also consider your standard of life at the moment. How much do you want to move in together. How often do you get to see each other living at your parents?

What are your finances like? How long do you think it will take you to save up an extra 5-10K if you are a) at parents or b) renting?

tommy75

Hi squidgeykate, I'm in the same position at the moment with a larger deposit. I'm currently renting and have been for 8 months. I need something a bit bigger and really want to buy but I find average house prices still ridiculous and as I've mentioned before, I just can't bring myself to buy a house now for 90k-100k that was 30k to 40k in 2003. You've also got the added interest from your mortgage on top of this and with only a 10% deposit your not going to get the best mortage rates either at the moment. I could and should of bought a 2/3 bed terrace in the north west for 35k and a 4.5% 23 year mortgage with 5% deposit in 2003 but it passed by. Now I have to find a huge deposit (nearly the amount of the house I could of bought in 2003) to get a reasonable interest rate and im looking at nearly double my monthly payment as apposed to 2003. My wage has gone up around 5k a year in this time so I don't know how anybody else does it. It looks like I will be renting for another 6-12 months in hope that house prices become affordable again and banks will give me a decent rate for my hard earned aswell. Also, just to point out how silly house prices still are, I'm currently renting a property that was sold in 2002 for 6k! A terraced house 3 doors down was on the market for 92k until about a month ago where it was taken off the market... Madness..

End of the day, its your decision as renting is deffo not for everyone(me inc :S). Good luck either way!

tommy75

squidgeykate wrote: »

no, we're both living with parents.

If your renting, this is taking alot of money from your savings each month. If you can, you should stay at home for a bit longer and save a bit more up for a better deposit.

mrstinchcombe

Renting isn't dead money, the landlord benefits greatly from you paying off his mortgage.

princeofpounds

If renting is dead money what do you think the interest on a mortgage is?

That statement has always been a mark of financial illiteracy, although I don't blame people as they generally get ZERO financial education in schools.

Buying is not much more than renting from the bank whilst obtaining an option to buy at the initial house price.

mrstinchcombe

princeofpounds wrote: »

Buying is not much more than renting from the bank whilst obtaining an option to buy at the initial house price.

That sums up buying very well.

Essentially if you can buy and your mortgage payments arent a lot more than what rent would be then you are going well.

RabbitMad

princeofpounds wrote: »

Buying is not much more than renting from the bank whilst obtaining an option to buy at the initial house price.

Buying is so much more. You own what you buy, can't be kicked out with 2 months notice provided you keep payments up, can do what you want to the property etc. Plus once the mortgage is paid off there is no more rent to pay.

Obviously there are flip sides such as commitment to the property, can't hand one months notice in and leave if you want to move etc.

On the whole buying is usually cheaper, it all depends upon, location, interest rates HPI ...

In 2007 when I sold my LTB it was only cheaper to buy (that house / type of house in that location) than rent if property prices decreased by no more than 0.2%. This was only if you kept the property for at least 5 years. This was based upon various assumptions such as interest rates remaining fairly static and rent increases at 2.5%

Now the same type of property in the same area is cheaper to buy than rent with similar assumptions provided you keep the propery for at least 2 years.

This has lead me to think in my area that prices are now correct, however I expected the correction to overshoot to leave property even cheaper.