Feel like giving up saving for a deposit

property.advert

wymondham wrote: »

In this situation I'd say save less and enjoy your young life. You don't need to own a home any time soon - life is more important to you. Rent, enjoy each other and it wil happen eventually - probably when they are much more affordable anyhow!!

I think there is a need to buy ASAP if you can because prices are getting higher which means the deposit you need is getting larger and the eventual mortgage you require may well get too large for you. In the meanwhile you are throwing money down the toilet in rent. It is really a no brainer and the risk is that the figures rise faster than you can save.

Procrastinator333

property.advert wrote: »

I think there is a need to buy ASAP if you can because prices are getting higher which means the deposit you need is getting larger and the eventual mortgage you require may well get too large for you. In the meanwhile you are throwing money down the toilet in rent. It is really a no brainer and the risk is that the figures rise faster than you can save.

I'm sorry, but the claim so often made by so many that renting is dead or wasted money is an ignorant comment.

In a market where property prices remain constant, the only driver (in financial terms) is rental cost (as a % of value) vs interest rate.

That is a mathematical fact.

If house prices rise at a rate greater than any difference between rent and interest costs, then yes financially it is better to buy.

So I wouldn't disagree with a statement like - imo house prices will rise, this will make it financially beneficial to be an owner - But it is only the speculation that prices will rise that makes this statement true.

An example. £100k house. No deposit for simplicity of example (it doesn't change the result).

Interest rate 6% (applies to most FTB's today).

Cost per year = £6k.

At the end of the year, house is still worth the £100k they paid for it and they have paid £6 of "dead money" in interest.

Take a rental example, say rent is at 6% too. Cost is £6k per year. Then after 1 year of renting you buy. You end up having spent the same £100k on the house and £6k of "dead money" on rent.

If rental yield < interest rates, with flat house prices, you are better off financially by renting and then buying later than buying at the start.

If rental yield = interest rate it makes no difference.

Before anyone points out about repayment mortgages, yes, but they cost more, the interest rate is still the same, so in the above, the buyer pays 6% plus the capital repayment. To make it equal, the renter just saves the difference as their rent is 6% too. They then buy the house with the money they have saved up and still are in the same place.

Renting is no less wasted money than interest. At present, interest costs for first time buyers are probably higher than rental costs.So the only way you are better of is if prices do rise.

There are plenty of other reasons to buy and many do believe prices will rise. Fair enough. But the notion that renting in of itself is somehow dead money while a mortgage is an "investment" is mathematical ignorance.

Wutang_2

property.advert wrote: »

I think there is a need to buy ASAP if you can because prices are getting higher which means the deposit you need is getting larger and the eventual mortgage you require may well get too large for you. In the meanwhile you are throwing money down the toilet in rent. It is really a no brainer and the risk is that the figures rise faster than you can save.

Its not a no-brainer, its a brainer....

Bad, naive and ignorant advice!

getmore4less

Procrastinator333 wrote: »

An example. £100k house. No deposit for simplicity of example (it doesn't change the result).

Interest rate 6% (applies to most FTB's today).

Cost per year = £6k.

At the end of the year, house is still worth the £100k they paid for it and they have paid £6 of "dead money" in interest.

Take a rental example, say rent is at 6% too. Cost is £6k per year. Then after 1 year of renting you buy. You end up having spent the same £100k on the house and £6k of "dead money" on rent.

If rental yield < interest rates, with flat house prices, you are better off financially by renting and then buying later than buying at the start.

If rental yield = interest rate it makes no difference.

If only it was that easy.

Rent
you can walk away for nothing(in practice moving costs)
Move within a month if you go periodic.
Its not your place so restriction on what you can do
Free maintanence
Can be asked to move in 2 months

Buy,
It costs to move
No idea how long it will take
Do what you like to the place
Responsible for maintanence.
keep paying the mortgage you can stay

These are a few of the issues the make the cost test more complex.

Personaly I think the priority should be career and jobs first and once those look stable thats the time to buy, forced moves are so expensive.

Also buying together when you have not lived together before full time can turn into a costly mistake if it goes wrong, rent first.

Procrastinator333

getmore4less wrote: »

If only it was that easy.

Rent
you can walk away for nothing(in practice moving costs)
Move within a month if you go periodic.
Its not your place so restriction on what you can do
Free maintanence
Can be asked to move in 2 months

Buy,
It costs to move
No idea how long it will take
Do what you like to the place
Responsible for maintanence.
keep paying the mortgage you can stay

These are a few of the issues the make the cost test more complex.

Personaly I think the priority should be career and jobs first and once those look stable thats the time to buy, forced moves are so expensive.

Also buying together when you have not lived together before full time can turn into a costly mistake if it goes wrong, rent first.

Please read my post. I clearly stated in the last line that there are plenty of other reasons for buying. Should have also added plenty of other reasons for renting.I don't disagree with anything you have said.

I just disagree with throw away comments like renting is throwing money down the toilet when it is no different to the amount spent on interest or even less.

People should buy or rent based on the kind of things you have highlighted, or the direction they believe house prices will go. I just object to this naive idea that when you spend £1000 on rent in a month it is dead money. But spending £1050 on a repayment mortgage, of which £1000 is interest is somehow money much better spent.

rach83

Rent first. Two reasons. 1. Renting isnt such dead money at the moment I know of two couples around 25 years of age who are in serious negative equity at the moment. One couple has just had to sell (they split up) and they are -£30,000 they have now had to take out a loan of £15,000 each to clear the negative equity and to be frank it has ruined their life for the best part of 5-10 years . 2. It is good to see whether you can actually live with each other before financially committing yourself to a mortgage for x number of years.

Trust me on the second point, I have been there done it and got the t-shirt!