Buy now or bigger deposit

newbienewbison

Hey,

First a little background, I am 24 currently renting in London - I earn 70k per yr (50k basic for mortgage purposes)

I want to buy somewhere but am unsure of what to do. I have seen places I like way outside of London for 120 -130k and could afford to do this as I have 15-20k deposit.

I have also seen places in London I really like but they are too much money, if I had 40k+ deposit then it would be achievable. So here is my question...

Do I save up for 2 years and then get somewhere in London risking a rise in price and interest rate OR do I buy the cheaper place and lock in for 5yrs on a mortgage and save more for a bigger/better located place in a a few years?

Any advice would be much appreciated.

Thanks

rictus123

Bigger deposit everytime. Prices wont rise that much if they even do.

brit1234

bigger deposit and watch the price falls lol

MarsdenCuckoo

Am no expert but would hedge my bets and go for somewhere in the middle. Save up as much as you can for a deposit, hang fire through 2010 but watch for the market changing. Read recently (rightly or wrongly) that once prices start to rise again it will be in the stronger i.e. London, areas.

Anyone got access to a crystal ball? :rotfl:

CloudCuckooLand

A better question to ask yourself might be "how much would I enjoy commuting?"

Plus, the season ticket for the train would be a chunk of your saving ability gone.

rictus123

Like above, you could even see a fall in prices.

OzzMosiz_2

I'd advise you to save more money - get at least 40K saved if you're gonna buy in London. Try and live like you only earn 50K so you save the other 20K of your total salary(save more if possible) - should achieve the extra 20K in no time.

princeofpounds

You have to decide yourself as it is a totally personal choice on the basis of delayed gratification.

If you can put off the utility (i.e. the benefit) of owning your own place to save more then you will be in a better position when you do buy, as you will be paying a lower mortage rate spread as you are a lower risk. Over the course of the mortgage that has a massive benefit.

Only you can decide how valuable the utility of owning a place now is to you.

Of course the situation is complicated by house price inflation, but if you are that worried about it then why not invest part of your deposit in instruments that match your assets to this liability - real estate funds or equities or similar. (Note that anything that isn't direct exposure may be more sensitive than physical real estate thanks to financial and operating leverage).

Personally I don't think you need to worry about prices going up much in real terms, as long term interest rates can only go up from here (which really hurts house pricing). However, if the central banks print too much money you will get general inflation, which might lead to nominal house price increases, so suggest that you have some of your deposit saved in inflation-linked or resistant instruments.

Tuscan

would say its more down to were you want to live, London or out of town? if you dont mind an hour train ride into town then you will get so much more for your money and on your income you should be able to save a bigger deposit pretty fast unless you have a lot of other commitments..