dont know if i should be buying?

djdymond

Good afternoon everyone

Im not sure where to post this so I shall stick it in here and see how i go!

basically, im 24 and my partner is 25 and we want to get on the property ladder.

i currently earn 17k a year, hes on 17.5k. we pay 650 a month rent and have done for 2 years which we know is dead money. we also have a debt of about 4.5k on CCs which we are currently changing to 0 per cent interest to pay them off more quickly.

we decided to start saving for fees (we want a 100 per cent morgage), rather than clear our debts thinking by the time the CC are cleared, house prices are bound to go up again so we thought we would get on the property ladder ASAP and pay bits and pieces extra off our cards as and when

we plan to have 4k for january of next year. we have seen a morgage advisor who told us we could prbably get a 100 per cent mortgage with a loan on top, meaning we could borrow about 144k. we live in croydon though and for that, were looking at one bedroom flats (which is what were renting anyway) I dont actually know how much we would need to pay off the mortgage then each month to work out if we can afford it. how would i do that?

someone on here mentioned the average persons age buying their first home is 32 or something which made me think maybe we should save until the following january and then we would have a deposit (well, im guessing 5k)

what im saying is i dont know whether to save till jan 2008 and clear debts before actually moving in somewhere, or stick to the plan, save 4k for january and then move somewhere and go from there. i suppose it comes down to whether i can pay off the repayments each month... how do i work that out?!

the point of buying somewhere so soon is that obviously we can spend longer paying it off and then enjoy life after its all been paid... but do people think were too young to be buying at 24/25?

any advice would be great!

thanks in advance!

Helena

Rosie75

I can't really advise you on whether this is the right time for you to buy, but I'd suggest being cautious about how much you borrow. £144k is 4.2 times your joint income, which is more than a lot of mainstream lenders will allow you to borrow. At current interest rates of around 5.5% (which may well go up) you will be repaying £850 a month on a 25-year mortgage. A 1% rise in interest rates will take that up to £970 per month. There is a calculator you can use on the Guardian website
http://money.guardian.co.uk/calculator/form/0,,603156,00.html
As you're currently renting you will have a good idea how much additional costs such as council tax, bills, water rates, etc. cost on top, and you will also need buildings insurance, plus some kind of payment protection scheme would be advisable should one of you become ill / lose your job. It's not impossible if you're extremely good with money, but you certainly won't have much of a life. If you are in jobs that guarantee career progression and a decent pay rise each year, then then obviously the belt-tightening would only be a short-term thing.

CB1979_2

nope not too young IF you can afford it.

I've just bought a place in South Croydon and renting it out for 6-12 months getting £800pcm for it, but just need it to cover my costs, not doing it for profit as found out my g/f needs an operation, so we'll continue to live at my parents whilst I rent it out and also gives us more opportunity to save more money for furniture, etc.

basically only borrow what you can afford, what happens if you decide in a years time that want kids, will you be able to afford the monthly payments if you have to give up work, etc etc.

people on here will bleat on about negative equity, etc but if you're in it for the long haul, then any "negative equity" will be wiped out anyway IF there is a housing crash.

btw if you're looking for a lovely 2 bed flat in South Croydon to rent drop me a mail lol

freebo_2

For a rough guide to repayments see http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

I tried £144,000 for 25 years at 5.5%, repayments where £894.50 per month.

Of course only you know what's affordable to you and please give some thought to what would happen if your circumstances where to change (interest rates go up or a change in employment). You also need to know about the fee's involved in a purchase which you will need to find separately (stamp duty, sols fee's searches, arrangement fee's, insurance etc.)

HTH

mrsc_4

Personally I would pay off the cards and save a serious deposit!

Moving isn't cheap at all you need money for all the fees, plus personally I wouldn't be happy about having 100% mortgage, you need to make sure that you can afford the payments.

But I understand where you are coming from with renting being dead money and house prices rising (my husband is from Croydon so I know the area and its not cheap).

Its a tough one whatever you decide give it lots of thought and work your figures out which I am sure you will.

Good luck

Mrs_Optimist

Hi

From reading your post I can see that you are currently in two minds. Mortgage payments on that sort of money would be around £800 (depending on interest rates) PLUS you would have a loan (as I understand it) on top. On top of that you have all your usual household bills as well as mortgage cover (if you have a repayment) Building Insurance (which you wont have now as you are renting) and of course as a householder you will be responsible for the upkeep of your property, fixing faulty boilers etc. I can see why you think you are wasting money by renting, but in all honesty, in your position, I would stay put, concentrate on paying off your credit cards and having minimal outgoings that you can comfortably afford. By borrowing to pay of your credit cards you are increasing your debt. I know of somene who has an interest only mortgage and will never own her own home. She thinks that because she has a mortgage she is a homeowner, but in actual fact she would be better off renting because the rent would be less then her mortgage and she would not have to pay for the repairs to the house which crop up regularly.

I am sorry if this post sound negative, and I am sure there will be others who come along and disagree but that is my view. House prices may well level off and come down a little, in the future (who knows) PS I am a homeowner but bought 10 years ago before the boom. However we were on a very tight budget back then also (it is all relative) and renting was more expensive than having a mortgage back then. Not so any more.

I hope you make a decision that is right for you.

Andy_L

Monthly repayments on 144k will be about £200/mth more than your rent. Can you afford that much extra & all the other cost of house ownership (insurance, maintaince, council tax etc)

Guy_Montag

Renting isn't dead money - you pay, you get a service. It's a bit like saying to someone who doesn't have a car, taking the bus is dead money.

CB1979_2

Guy_Montag wrote:

Renting isn't dead money - you pay, you get a service. It's a bit like saying to someone who doesn't have a car, taking the bus is dead money.

very true, except I don't know anyone who spends £9k on bus journeys each year, when they could buy a car for the same money!

also an IO mortgage would be about £600 a month on that kind of money.

but YOU have to do all the sums and work out what's best for you.

djdymond

thanks everyone so much for your responses.... too be honest i think 800 roughtly a bit much considering everything on top...

so ok, clear our debt... but, how much do we save or for how long for!? what sort of amount are we looking at for a deposit? obviously we would rather put a deposit down as we know it would be cheaper than a 100 per cent..

CB1979_2

I've got an IO mortgage on £165k and it's £650pcm.

but most will say you need a 10-15% deposit in order to get a good deal, so at the moment you'd need to have £15k, in a years time when you're ready to move who knows?????

I can't personally see Croydon prices dropping in the near future, too close to London for that, so you could be looking at needing £20k in a years time or needing £10k if prices drop, but who knows!

obviosuly if you pay off your CCs then I doubt you'll be able to save too much each month, if your priority is to clear £2.5k.

but good luck in whatever you decide