FTB if you've come off the ladder?

cashorcheque

That's my point about not looking at how much our house will go up by - I know that an upturn in the housing market will be bad for us, just as a downturn was bad in 2007 and 2008. Getting off the ladder will not be the best thing to do financially if the market goes up, as well it may. But at least we'll be in cheaper accommodation, in good jobs and able to save at least £500 a month to add to our current savings, and living where we both work. We have thought about it long and hard and on the balance of our whole lives - finance, quality of life, career direction, families, etc, this seems to be the best decision. But it does involve risking taking a hit.

JimmyTheWig

cashorcheque wrote: »

Getting off the ladder will not be the best thing to do financially if the market goes up, as well it may.

Have you done the number crunching?

How much will renting cost you?
How much would a similar property cost to buy?
What mortgage interest rate would you be looking at?
What interest rate are you getting on your savings?

cashorcheque

Renting will cost £650-750 a month. A similar property to buy would cost £180-£200k. We'd take whatever interest rate we could get! But I think there aren't any 95% mortgages (£10k is the most we're going to have left after we move) and it's pointless predicting what the rates of 90% mortgages will be in a year or eighteen months, when we've saved up the difference. At the moment we owe £205k on our existing mortgage at 6.59% and we pay £1275 a month, though only around £120 of that comes off the balance, of course.

Our money is in a current account at the moment so we can access it as we move, and we're still shopping around for a savings account to put the leftovers in (which will constitute, roughly, the 5%).

This is all dependent, anyway, on selling our house, which only went on the market today,

JimmyTheWig

cashorcheque wrote: »

We'd take whatever interest rate we could get! But I think there aren't any 95% mortgages

Oh I see, the question is stay where you are or rent. Buying elsewhere isn't an option.

Renting will cost £650-750 a month.
At the moment we owe £205k on our existing mortgage at 6.59% and we pay £1275 a month, though only around £120 of that comes off the balance, of course.
we're still shopping around for a savings account to put the leftovers in (which will constitute, roughly, the 5%).

Ok, so at the moment your house is costing you around £1126 a month (the rest of the mortgage payment reduces your balance, which is the equivalent to money in your pocket [as long as you can afford it], so lets ignore that).
Lets say you rent for £700 a month.
Put the difference of £426 a month into a savings account. Lets say you earn 3% on those savings (fairly easy if you shop around, I believe).

In 12 months this extra money each month will have increased your savings balance by £5188 (includes £76 interest).

This represents an increase of around 2.5% in house prices. So if prices rise by more than 2.5% over the next year you would have been better off staying put.
If prices rise by less than this, stay the same or fall then you would be better off renting.

Your call, obviously, but I can't see prices rising by much more than 2.5% in the next year. I think, for example, no change in prices is much more likely than a 5% increase. In which case you are better off renting.

cashorcheque

Thank you so much for that - I was being a bit naive with the figures and not thinking them through in quite that way. That makes sense. We will also have around £8k in the bank after the move (fingers crossed) and are planning to really work hard to save around £300 per month on top (moneysaving budget planner here we come), so hopefully in a year or so we'll be able to get back on the ladder.

Thanks again - and sorry for not being clear. Buying was an option because our current lenders offered 95% but we have to clear any other debts first, and if our parents gave us a gift (which they can't anyway) they'd have to show it had been in a savings account for three years and had not come from a loan or remortgaging. So that scuppered us. So yes, now it's stay put or go into rented.

Renting here we come!