Renting whilst saving for deposit

AliceBanned

Hi all

I am unsure about what to do but want to plan for the longer term re renting/buying.

I am managing to save at a very slow pace towards a deposit. At present I rent a Housing Association one bed flat which has Right to Buy. I have been offered this at a very good price with discount (£58k) but there is a reason for cheapness; it is concrete build and therefore at the moment especially impossible to get a mortgage on. This is partly due to credit crunch but it has put me off buying it altogether as it is a risk when coming to re-sell. I like living here and have made it my home but am still really in a dilemma and just cannot go ahead and buy it whilst there are doubts.

Renting it is only £320 per month, in theory allowing me to save, but
I live in Hertfordshire and do 80 mile round trip commuting to London Mon-Fri. My basic outgoings are fairly expensive £700 per month on a £25k salary (travel, rent, bills, c tax). It does allow me to save a bit towards a deposit but I have only just started and am wondering whether I would be better off leaving the flat (I only live here because of this tenancy, no other reason although I like the area) and renting a room for a year or two/houseshare nearer London, cutting my costs but losing the permanent tenancy. I am quite scared to do this, but unless I do I can't see myself getting anywhere as it is too expensive for me to live like this and save. Any ideas/recommendations? I know it is personal choice but thought I would try and get feedback on here as it has previously been very helpful with these big decisions. I have been to'ing and from'ing with the flat purchase for a while, but the high street lenders don't want to know so it seems too risky to even go there now... thanks.

BitterAndTwisted

Have you looked into actual rent-levels where you think you might choose to live if you move as your rent seems very reasonable at present? I'm assuming that your fares to work are quite a lot out of your monthly budget but that really should be balanced against the life-style if you move closer. It's great living in London most of the time but it is at a cost sometimes where lack of green space and peace and quiet come into the equation. Also, if you're sharing you won't have anything like the control over your bills as you do now. Honestly, living with other people can be absolute hell, especially if you're used to having the place to yourself and pleasing yourself.

Giving up a secure tenancy in exchange for the unknown is another compelling factor imo.

If you are serious about buying I'd tell you to not do it now and not buy the HA property at all

AliceBanned

Thanks for your reply BitterAndTwisted.

Yeah train fares this year £250 per month. You are right about quality of life; it is very relaxing here and I would only move nearer London for a year or two, then would move back out when I buy. My hesitation is probably telling me not to give up the security too, as you have said.

Why would you say not by the HA property at all, out of interest? do you think I might never re-sell it? Thanks

BitterAndTwisted

If you're having serious doubts about buying the property because you can't get a mortgage on it then any other buyer would have a similar problem and you might find you'll never be able to sell other than back to the HA. I don't think the credit-crunch has anything to do with it, personally. Finding a decent roof over your head for less than the £80 a week you're paying now would be a miracle imo.

Your basic outgoings are £700 a month on a net income of about double that so I think you're well-placed to sit tight and stack up those savings for as long as you possibly can until you've got a really substantial deposit to buy something better than you're living in now. I appreciate that trying to become a home-owner/mortgage-slave is very, very difficult on one salary but you might not have to do it on your own in the future, who knows? Meanwhile get on the Old Style moneysaving forum and pick up tips on how you can spend less, have the same standards as you do now and save more.

AliceBanned

BitterAndTwisted wrote: »

If you're having serious doubts about buying the property because you can't get a mortgage on it then any other buyer would have a similar problem and you might find you'll never be able to sell other than back to the HA. I don't think the credit-crunch has anything to do with it, personally. Finding a decent roof over your head for less than the £80 a week you're paying now would be a miracle imo.

Your basic outgoings are £700 a month on a net income of about double that so I think you're well-placed to sit tight and stack up those savings for as long as you possibly can until you've got a really substantial deposit to buy something better than you're living in now. I appreciate that trying to become a home-owner/mortgage-slave is very, very difficult on one salary but you might not have to do it on your own in the future, who knows? Meanwhile get on the Old Style moneysaving forum and pick up tips on how you can spend less, have the same standards as you do now and save more.

I wouldn't really mind selling back to the HA - if they would have it. I get £13.5 k discount so at least they wouldn't take that back as they would have to offer me market value and I keep the discount after 3 years. Still not worth buying do you think? Unless HA would not buy back either!!

Well I'm trying internet dating and that's even more disconcerting than trying to buy a flat :eek:

But you're right and your advice echoes my deepest intuition of the right thing to do. Just fancied a last fling with no responsibilities in a houseshare... the reality as I now remember it is hell. And I am not as house-trained as I once was so on balance the stress of always coming up or even down to flatmates' standards would probably be a bit too much.

I am paying into the co. pension so net income is 1250 (also after season ticket loan). Over the long term this has not been much fun; previous salaries much lower. So I guess I'm feeling careworn by the whole thing.
I will look for moneysaving tips as you advise but I have been scrimping for some time so at the moment the saving is not going too well.

Thanks for your help.

Fire_Fox

I would sit down and have a massive brainstorm about this, maybe with a creative money-savvy friend or two. At the end of the day your choices boil down to increase your income, decrease your outgoings or change your expectations, or some combination.

Do you know where every penny of your income is going? If not keep a spending diary, no cheating. What are you earning per hour after you take into account the huge travel costs and time? Can you swap your housing association flat for another one nearer work? What are your longer term job prospects, must you be in London or could you work in Hertfordshire? How would you feel about getting a shoebox close to work and taking on a second part time job with the travel time you save?

AliceBanned

Fire_Fox wrote: »

I would sit down and have a massive brainstorm about this, maybe with a creative money-savvy friend or two. At the end of the day your choices boil down to increase your income, decrease your outgoings or change your expectations, or some combination.

Do you know where every penny of your income is going? If not keep a spending diary, no cheating. What are you earning per hour after you take into account the huge travel costs and time? Can you swap your housing association flat for another one nearer work? What are your longer term job prospects, must you be in London or could you work in Hertfordshire? How would you feel about getting a shoebox close to work and taking on a second part time job with the travel time you save?

Thanks Fire Fox. I am looking into swapping the flat - have only just started through a homeswap website but from experience this can take a year or more, or never happen. But that would be the best option.

I have also applied for three better paid jobs over the past three weeks (no interview!). bit disappointing. In theory I could earn £30k or a bit more (have been offered that before but perhaps stupidly, turned it down). My health is not 100% so I can't kill myself with work til 7pm every night and can't handle too much stress so I'm a bit careful. Where I work now it is busy, but secure and not hectic like many places which pay more. At least that's the way it seems to work. I am disappointed at not getting interviews for the three posts and it has made me more depressed about the whole thing. Difficult but that was going to be my next goal, and after this rejection I wonder whether it will be possible to up my income. I do have an occasional second job (12 hour shifts on a Sunday) pays well but I've done it for a couple of years and it is only ad hoc when they need me. Really struggle with it though due to health not being great at moment (bad back and problem with joints; more hours at a desk is hell!).

Spending diary is a good idea, I'll do that and start budgeting properly. I have kept my eye out for jobs in Hertfordshire but have seen nothing which could equal the pay minus rail fares (and stress). Unfortunately without being extravagent, I do need holidays and time away, and to buy clothes occasionally and go out, as I live on my own and there isn't much point spending all my time saving money - I think I need to change my income and outgoings as well as budget sensibly but not scrimp and make myself even more fed up! Thanks again, it's great to have different viewpoints on this as it is a tricky one.

AliceBanned

Fire Fox - that's an interesting one - "earnings per hour after taking into account travel costs and time". Pretty low and I've never considered it like that, which is perhaps why I'm feeling so disillusioned and drained - I don't seem to be getting anywhere for the huge effort and stress.

property.advert

I had a friend in a HA property who was given a cash bonus of between £10,000 and £15,000 to move out so they could put another tenant in there. he then used that to get onto the property ladder. That might be available ?

Another thing is to check how much you could rent your place out for. You may be restricted in the terms of the sale but it might also be possible for you to buy it and rent it back to the HA, effectively getting rent on 100% but you only paying 77% for it. That should pay the mortgage and have some left over and you could then move, knowing you still had a property to go back to.

You can get a mortgage of 2.79% or better (only looked 2 minutes) so interest only on 58k is £135 a month. Repayment over 25 years is £269 per month.

If you take a standard buy to let mortgage the numbers are rubbish as the fees are high and many are fixed, so really hit small mortgages. You might get a better deal changing it after a year or so ????

DawnW

In your calculations when deciding whether or not to buy your flat, do take other costs (than the mortgage) into consideration. There will be some sort of ground rent presumably? Also your share of any repairs that the HA decide to carry out on the block, repainting, cleaning communal areas etc. I have heard of people ending up with huge repair bills in particular.

You say you like where you live - that is a big bonus, as well as the low cost. Why not give it a bit longer, see how the job situation pans out over the longer term and investigate the spending diary thing with the idea of cutting down your outgoings? Try not to get stressed about not being a home owner - I couldn't afford to buy till I reached middle age, thought I never would etc.

And have a nice Christmas !

AliceBanned

Thanks property.advert and DawnW for your great advice. The buy to let idea is a good one; I will be taking a risk in buying the flat but having made some profit from renting it out maybe I could still sell it. And you are right DawnW about the stress of not being a property owner. I am getting very stressed about my long term future when maybe it isn't all that bad! This time of year tends to have that affect as it is so easy to part with too much money. Merry Christmas to you too!