Get my mortgage or pay someone elses?

men9jag

I live in Newcastle upon tyne and am about to start a new job. I know i will be staying in here for the next 2 to 3 years, but am not too sure what i will be doing after. I was considering potentially moving abroad.

My question is should i buy a house or rent for the next 3 years? At the moment i am in two minds about it. I keep telling myself that while i rent all i do is pay someone elses mortgage, yet buying a house for just 3 years does have its risks as well. Any suggestions?

thanks!

nrsql

Lets say you buy a place for 100,000 with 100% repayment mortgage @ 5%.
In 3 years you pay about 19,500 = 4,500 principal and 15,000 interest.
+ charges to purchase and upkeep of the property etc.
The amount you have paid off probably wouldn't cover the charges and upkeep of buying/selling so the gain/loss would be due to the fluctuations in property prices i.e you are investing in the property market rather than paying off a mortgage.
Note you could always rent out the property if you move abroad - but you should consider that when buying.

I would base the decision on whether you want to live in your own house or not.

justpaper

what risk could buying a house for just 3 years have,.? 100s but..main thing is if u can afford the mortgage then do it,. if u cant then simply rent,, my advise is based on the below true story ~lights dim~

story time,. a mate of mine moved too the u.s (las vegas) he was renting for 2 yrs (or more) he easly could of buyed a house,.. anyways he later buyed his house with his flat mate 1 yr later he moved to the u.s,.(totally random he met a gurl) and he was gutted he didnt buy sooner,. all he went with was about 2k in savings,.. i beleive the house is just on rent,..
,. he did marry the gurl he met,.
anyways end of story,.

whambamboo

justpaper wrote:

what risk could buying a house for just 3 years have,.?

if u can afford the mortgage then do it if u cant then simply rent,,

story time,. a mate of mine moved too the u.s (las vegas) he was renting for 2 yrs (or more) he easly could of buyed a house,.. anyways he later buyed his house with his flat mate 1 yr later he moved to the u.s,.(totally random he met a gurl) and he was gutted he didnt buy sooner,. all he went with was about 2k in savings,.. i beleive the house is just on rent,..
,. he did marry the gurl he met,.
anyways end of story,.

I'm not quite sure what the point of your story is, it's quite hard to understand your writing, but if he had 'buyed' the house in Las Vegas, he would have found that the market is now slumping, and he would probably be in negative equity, and is quite possibly better off having rented.

whambamboo

men9jag wrote:

My question is should i buy a house or rent for the next 3 years? At the moment i am in two minds about it. I keep telling myself that while i rent all i do is pay someone elses mortgage, yet buying a house for just 3 years does have its risks as well.

Indeed it does.

In fact renting doesn't just pay someone's mortgage - when you buy a house you pay 5%+ 'rent' on the money you owe to the bank.

Having a massive loan to buy a house can be more expensive than renting.

Renting is only dead money if borrowing money is free.

It is not.

In terms of any investment, 3 years is very short, and must be considered high risk - if you try to sell up in 3 years, it's very possible that prices will have slumped dramatically, leaving you trapped in negative equity. In my opinion, house prices in the North East are crazy, with houses that cost £30k now £100k+, and there's clearly plenty of risk on the downside.

You should look at the cost of renting, and if the annual it is less than about 5.5% of the cost of the house, then renting is cheaper. If it is more, then it might still be a good deal as there is clearly a short term potential for a serious slump in values, and so by paying a little buit more in rent than in interest, you are insuring against a fall in value (bearing in mind that the North East is not overpopulated, or subject to mass immigration, and wages are fairly low compared to the SOuth)

noyk

justpaper wrote:

what risk could buying a house for just 3 years have,.? 100s but..main thing is if u can afford the mortgage then do it,. if u cant then simply rent,, my advise is based on the below true story ~lights dim~

story time,. a mate of mine moved too the u.s (las vegas) he was renting for 2 yrs (or more) he easly could of buyed a house,.. anyways he later buyed his house with his flat mate 1 yr later he moved to the u.s,.(totally random he met a gurl) and he was gutted he didnt buy sooner,. all he went with was about 2k in savings,.. i beleive the house is just on rent,..
,. he did marry the gurl he met,.
anyways end of story,.

Really good story that one, i'm book marking this page now!

Gorgeous_George

Renting is a great alternative to buying and shouldn't be seen as second class or dead money.

Forgetting house price movements for a moment, I would recommend renting to people who would otherwise buy a house for a few years and then need to move. Owning a house for a short time exaggerates the effects of solicitor's fees, EA fees, Stamp Duty and all the other costs of moving. Renting is much more flexible as you can move at a month's or so notice. Buying a house that you intend to live in for 10 years may prove better than renting.

Bring house price movements back into the argument and the decision making process is different. If you think you know what prices will/should/could do over the next few years, base your decision on that but accept the risk that prices could fall. Make sure you have a contingency plan if things go wrong.

Personally, I'd rent.



GG

pboae

Also I would be willing to rent in cheaper (i.e. dodgier) areas and get more for my money that way, whereas if I was buying it would be a permanent commitment to that area and I would be a lot fussier. I'd also be happy to rent a flat, but would be less inclined to buy one, with all the problems leasehold etc can bring. That makes direct price comparisons difficult because you may be able to rent for a lot less than the mortgage but the properties wouldn't be comparable. YMMV of course.

meanmachine_2

You don't buy a house for 3 years. It's a 25 year commitment, so that, if prices do fall, there's the chance for them to recover again.

In 3 years' time, the property might have gone up in value and you'll come on here claiming to to be an "expert" in making money when all you've done is won that gamble.

And while property might have come up "black" for the last nine years. To me that's just a sign that they'll turn up "red", so to speak, in the future.

But then, I've always been a difficult blighter.

Guy_Montag

There are some good rental bargins to be had just now, though I do live close to you I'm not sure how localised that is. If you opt to rent don't forget to haggle.

sciencegeek

I may be in the same boat as the OP shortly,

My work is based on fixed term 3 or 4 yr contracts so you get good job security but only in small chunks. This makes buying scary as i might have to move across the country for the next contract.
If i do decide to rent (rental monthly outgoings would be between half or a third of a mortgage payment e.g. £250 Vs £750) I intend to set aside the extra money each month as if i were paying a £500 mortgate to myself.
This way when the 3 years or whatever are up I will have a nice big deposit in case I then decide to buy.
If you just pay the rent and fritter away the spare money you will never get anywhere very fast and will eventually have too few employable years left to be considered for a mortgate by a bank.

just my twopence worth.