Mis advised- FURIOUS

Conrad

Courtmill, it is possible to make the case that rent can be cheaper than interest (dead money) on a mortgage. The difference can be saved to put down as cash on a house later.

The sorts of people that go in for this are fixated by money. The rest of us would rather own and not be at the beheast of a landlord.
Doing theoretical calculations as to which is 'best' is utterly pointless for us as we have no interest in saving money 'at all costs'.

In the end most home owners long term do very nicely and enjoy the feeling they at least partly own a home with the Bank and get to decorate as they wish and put down long term roots. Money isn't everything, and those that let money rule them are pretty pointless. We each live about 78000 days and a third of those asleep / in dementia - so whilst we must look after our finances, life is about enjoyment and eperience, and not about worshiping the money God and dieing rich and probably lonely.

Courtmill

Conrad... Thank you... You rather more eloquently explain my points exactly.

I would offer you a virtual high five...

arby

"give the market a chance to recover"?? do you even know what that means? are you talking about a recovery to an unsustainable level? a market recovery is a drop in prices!

I don't expect you to take our advice and pull out of a purchase, but i think you'd be very immature to not consider that at your young age you might not understand all the implications of what you're doing and maye you should speak to an independent advisor. I state independent, as up to now, I'm betting you've only spoken to mortgage brokers/persimmons/estate agents/banks, all of whom are reliant on you parting with your money. By all means, make your decision, but don't go into it half-blind which is what you're doing.

The house i last rented fell in value by £40k in a time where i paid £20k rent. So how is rent throwing money away? it's only throwing money away when prices are rising, and THEY ARE NOT RISING.

courtmill, it's easy to agree with someone who has similar views to you, much harder to take advice from someone who thinks differently, but they're the people you need to give you a balanced picture. that's all i'm suggesting; to get a balance as at the moment you're completely fixed in one mindset

arby

Conrad wrote: »

Courtmill, it is possible to make the case that rent can be cheaper than interest (dead money) on a mortgage. The difference can be saved to put down as cash on a house later.

The sorts of people that go in for this are fixated by money. The rest of us would rather own and not be at the beheast of a landlord.
Doing theoretical calculations as to which is 'best' is utterly pointless for us as we have no interest in saving money 'at all costs'.

In the end most home owners long term do very nicely and enjoy the feeling they at least partly own a home with the Bank and get to decorate as they wish and put down long term roots. Money isn't everything, and those that let money rule them are pretty pointless. We each live about 78000 days and a third of those asleep / in dementia - so whilst we must look after our finances, life is about enjoyment and eperience, and not about worshiping the money God and dieing rich and probably lonely.

i'm not fixated by money at all, equally I manage to enjoy life whether I 'own' my own house or not. You feel sorry for those 'fixated by money'. I feel sorry for people who let having their name on the deeds of a house determine their happiness.

Cannon_Fodder

(edited to say; much the same as Conrad, but not entirely agreeing about "worshipping" money. Its about saving money for when you need it...and picking your moment)

Renting put a roof over your head, gave you leeway to save £7k in one year, and got you out of the parental home to build your life and relationship - if you call that wasted, that's up to you.

Renting is often the same (a touch higher for letting agent fees and some profit) as the interest on the same property's mortgage.

Whether renting the physical house or renting the money from the bank (i.e. interest on a mortgage) its pretty much the same.

The bit that matters is the capital sum, and how that is repaid.

1 year more saving the deposit, to qualify for open market mortgages, could see you save fees, reduce the interest rate or both.

Get to a 15% deposit and the rates reduce more.

Over the life of a 25, 30 or 35 year mortgage, that is tens of thousands of pounds, that you will need to trade up to somewhere bigger when you start a family, or even afford to start a family.

Yes, as a life goal, to have the house bought and paid for before retirement is a good idea.

At 21, you don't have to rush into meeting that target. You can pick your moment.

The DFW forum is full of 30-yr-olds who wish they hadn't been rash when they were 21...

Thrugelmir

Courtmill wrote: »

The way I see it, all this scaremongering is what's stopping the economy improving.

If only.

The "scaremongering" is discussion about serious issues that will take many years to resolve. There's no quick fixes, no magic wand. Debt levels across the board Government, Corporate and personal have to come down. Net effect of this will be a deflationary impact on asset prices, primarily in the UK property. As people's earning fail to keep pace with inflation by any measure. This will result effectively in a cut in living standards for many.

arby

http://www.moneymarketing.co.uk/mortgages/coalition-ready-to-let-property-values-fall/1015197.article

Evilm

Courtmill wrote: »

Please someone explain to me how renting is not money that is ultimately wasted.

~cut~

The "property ladder"--- okay I won't call it that. I want a house. I want to know that in 30 years, I'll own a house. I will then be mortgage, and rent free for the rest of my life- leaving me to enjoy the money I earn in my old age. It will also leave me with something to pass on- as Conrad posted previously.

In situations where you don't have a lot of spare cash and don't have a large deposit you risk leaving yourself in an awkward position.

We are in a time where its very likely house prices are going to go down for a while more and you are buying with very little cash and equity and high LTV.

Renting somewhere and saving a higher deposit puts you in a better LTV position, gives you more emergency cash (and believe me when you own the house you will need it for something or the other), and will get you access to better mortgage deals. This will save you money - and heartache - in the future.

Its nice to say "but I'll own it in 30 years" but that's assuming a lot of things go your way for the next 30 years (for example jobs, interest rates, cashflow, no financial emergencies, house prices etc).

The only simile I can come up with is this: Its like pledging to run a marathon next month when you can only manage a mile now. Unless you literally have every minute to train its a fools errand or you are relying on a lot of luck.

If you are struggling to raise the extra £1500 then that is why people are being so reserved about wishing you well in buying. I expect this won't be your only surprise in the house buying process.

I understand your position and why you wish to get your own property but its a hell of a commitment. I do wish you well but I wouldn't personally try to buy a house yet in your situation.

Good luck.

Cannon_Fodder

Courtmill wrote: »

The way I see it, all this scaremongering is what's stopping the economy improving. It's what means people aren't buying houses, which wont give the market chance to recover.

Last years unexpected upswing in house prices was false hope, that is now being dashed by the reality of dealing with our debts...

A good dose of reality earlier on, could have seen a sensible flat-lining, to allow things to stabilise, rather than a false mini-boom.

Now we are seeing the rebound from that. I would not be surprised to see all last years gains reversed, and then a bit more. (Maybe pockets of London will buck the trend due to city bonuses etc)

Putting you in negative equity, and damaging your re-mortgage options - which will cost you even more than it needs to.

Courtmill

We are not struggling to find the extra money- we have it... it was just meant to be what we had spare. So, we're okay to pay it, and luckily have found some extra money along the way now to make up the bit we planned to have as "spare emergency cash". Yes, we could probably do well to have £10k or even £20k as an emergency fund, but I doubt that will ever happen... somethings always going to come up...

I fully understand everyones reservations, but I could also spend the next however many years trying to save, and all the same things might happen. I might lose my job at any time. I might get sick anytime. I might die... then I'll have really done nothing apart from save- for nothing.

(Hope I don't die though because I might leave my boyfriend in a pickle)

It's a whole load of ifs and buts, and there is no way to 100% guarantee that it wont go wrong.

If we end up in negative equity- that £500 a month we're saving- will go to covering us. We are not fully clued in, but to be honest I don't know anyone that is...

*thumbsup*