dont know if i should be buying?

CB1979_2

erm think i'd rather live opposite Ikea than in Thornton Heath! lol

and i wouldn't choose to live near Ikea either, but when on a budget you may have to make sacrifices.

cwcw

My partner and I are in a similar situation and we're going for it.

We're 23 and 21 so we're even younger than you, but I don't see why worrying about what the average age is matters. Our situation is probably a little bit easier in that our combined income is £46k and, despite both being recent graduates, we have £25k savings behind us, part of which will be going towards a 10% deposit.

We're buying in Sheffield, which may sound cheap, but if you want to live in the leafy south west of the city (as anyone who knows Sheffield would do..) it's certainly anything but cheap. We're buying a 2 bed flat at £135k - the compromise being that it's ex-council - a smaller 2 bed flat in a private development within about 100 yards is currently for sale at £189k.

The moral of the story is that you have to make a compromise, unless you're a multi-millionaire of course, to get that first step on to the property ladder. As long as you choose a genuinely sought-after location, there should always be a demand and prices will have a long term, upward trend. Paying rent IS dead money - paying a couple of hundred more for a capital repayment mortgage over 25 years is worth it - you have something to show for it at the end, you will invariably 'climb the ladder', and property as an investment should prove more profitable in the long term than any returns gained from putting the monthly saving from renting into a 5% ISA. Go for it!

Mrs_Optimist

As far as the OP is concerned she has everything going for her, both partners in full-time empoyment, and have relatively low debt that can be cleared with a little effort. Concentrate on paying off debt first, THEN think about buying. It is all about affordability - you could be earning £100k a year but have £80k debt, you may earn the money but your outgoings are higher. You are in a good position and if you really put your mind to it, and make sacrifices, you WILL get on that first rung if you still want to. Mr O and I sat in EVERY WEEKEND for 18 months to save for our deposit. Prices were a lot cheaper 10 years ago but it was still a lot of money to us back then. My parents paid £3k for their first house but that was a huge amount of money them to them as well. We did without a social life, holidays, boozy nights etc whilst our mates were out having a whale of a time. We were both relatively low wage earners but we had no debt so we would afford the cost of a mortgage. It took us 18 months of hard saving, taking extra jobs etc but we did it. (When did I become so OLD - I'm only 33!!)

I sincerely hope you get to where you want to be, and try and focus on the positive!

PropertyGuru

There is every chance a major correction is coming circa Q1 2007. Can't you wait till then?

If the falls don't start materializing by then, maybe buying would be the right thing fo ryou.

PoorDave

PropertyGuru wrote:

There is every chance a major correction is coming circa Q1 2007. Can't you wait till then?

If the falls don't start materializing by then, maybe buying would be the right thing fo ryou.

But there's every chance people have been predicting it for 3 years at least, always " a few months away"

An easy way to sit back and find you can no longer afford the same house/flat you could a year ago, as it's gone up out of your range.

tobedifferent

Lynz said: yes but what will you have paid in interest payments over 25 years?

Dead money?

CB1979 wrote:

the same as anyone else who has a 25 year repayment mortgage

Not true, as your capital goes down you pay less in interest. If you got a 100K mortgage at 5.5% over 20 years. With an Interest only mortgage you pay £110K in in interest, with a repayment mortgage you pay £165K in interest and capital. You have a £100K house for a £55K extra payment.

If you save the difference between repayments in a 'safe' savings account you would end up with just over £80K, providing you had never touched a penny. Still £20K short of repaying the loan. You've forked out the extra £55K but your still down £20K. You could invest it but then you run the risk that investments could lose money, or still not make enough. And remember that you have paid extra tax on these savings, giving more money to our darling government.

True your £100K house may now be worth £300K but as everythings relative most other homes will have increased by the same amount. Whats £200K if your back at the starting block £100K short?

In my opinion my home is not something I wish to gamble with, and I do choose to rent until I can afford a decent deposit and can safely cover my repayments without being terrified of rise in rates. Paying out for an over 100% mortgage, and then solicitors fees etc. only to find that an rise in interest rates means I can't afford my payments and my house being repossessed and sold for less that market rate (and repos nearly always are) is a lot more dead money and stress than renting is.

Personally I don't give into the hype, so many people have said to me if I don't buy now I will be forever priced out. Well duh!! If no one can afford to buy then sellers can't sell and have to reduce prices. Somethings worth only what someone is willing to pay for it. I'm not saying the market will crash as nothing is certain but it has to become sustainable. I may then be quite a few years behind everyone else but I'll have a big fat deposit and no debt.

Rosie75

PoorDave wrote:

Nationwide will lend 4.25 times joint income and they're fairly mainstream...

That's why I said "a lot of" mainstream lenders rather than all of them

mystic_trev

If you're buying with an Interest only mortgage (with no repayment vehicle) your're in effect renting, your Bank being the landlord. The only difference is that you will almost certainly be paying more in Interest repayments than you would be by renting! Believe me? My landlord's mortgage is 25% more than I'm paying in rent! No doubt they're hopping for cap app on the property, which is highly unlikely as it's a newbuild apartment which (at the moment) could be bought for 10- 15% less than she paid for it two years ago!

wockawocka

A couple of things disturb me in the OP, and I recommend that the OP'er think about this.

'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'

Ah, well ok. House prices are speculative, debt is real. I think you have your priorities the wrong way around there. House prices are too high right now, the fundementals aren't there to support the prices so there is more of a chance they will fall than rise. You would be better to pay off your cards and using the interest saved to build up a deposit.

'we pay 650 a month rent and have done for 2 years which we know is dead money'

Renting isn't dead money, dead money will be the negative equity you fall into if your house price drops to a value lower than your mortgage, then you will owe more than the house is worth...haha you'll be doing that anyway as it's overpriced.

It's all down to if you think you can really really really afford it...job loss, pregnancy, seperation...all can throw a spanner in the works regarding affordability. Personally switch off the voices of friends, partners, family and especially the TV and estate agents.

Ask around on these forums and elsewhere for a real take on things...

Best way to put it is like this, sure house prices go up long term, but adjusted for inflation they stay static...i.e. they don't go up in value when put in line with inflation however right now they are massively overpriced.....EVERYWHERE.

I bought my place for 64k in 2001...Sold it last month for 180k....that's a 300% increase in less than 5 years...somethings wrong there.

freebo_2

wockawocka wrote:

I bought my place for 64k in 2001...Sold it last month for 180k....that's a 300% increase in less than 5 years...somethings wrong there.

Its actually a 181% increase, still not to be sneezed at!