what would you do ... house or save?

sunny_skies

Hi guys

Just wondering what your advice would be on our situation.

We have saved a 5% deposit (£10k). I earn £35k and my husband earns mid-£20sk. We are currently paying on rent the equivalent of what we'd look to pay in home repayments (£1100/month) and I am saving about £450k each month towards a deposit.

At the moment I'm hearing a lot about "buy now buy now". I'm not convinced that house prices won't drop further next year?

I have spoken with 2 mortgage advisors who suggest that if they were in my position, they would take out a loan to top up the deposit and buy now to secure a house at a good price, still be eligible for the stamp duty exemption (some people seem to think this might not be around for much longer?) and take advantage of the low interest rates.

It would be no trouble at all (I've already worked this out) to afford repayments on a maximum £200k house and a £10k loan.

What would you do? Take out the loan and buy now, or wait another year, have the deposit in cash and potentially either miss out on good prices (maybe the housing market will improve by then) or if not get it even lower?

I do want to start a family soon and would prefer to be in my own house before I do so.

Thanks!

USM

Lenders won't accept a loan as a source of deposit so that idea is out.

BitterAndTwisted

Keep saving. I don't think house-prices are going to soar any time soon. Taking out a loan to add to the deposit sounds really dodgy to me

sonastin

Work out what you can afford on your finances now. Find out what 95% mortgage deals are out there (I believe there are one or two). Start looking for houses. Keep saving (£405,000 per month - you could buy a house with that!!!! - I presume you mean £405?!). When you find your "ideal house" look at the sums again and see if you can afford it. Chances are you won't find what you're looking for straight away - especially if you are choosy, which you can afford to be in this climate. Your deposit will be growing while you are looking and you don't have to feel like owning your own home is always going to be somewhere in the future.

~moneysavingnovice~

sunny_skies wrote: »

It would be no trouble at all (I've already worked this out) to afford repayments on a maximum £200k house and a £10k loan.

Really? I earn £35k and my partner earns £60k and I would definitely not describe affording our repayments on a £190k flat as 'no trouble at all' (~3% interest, yours will probably be higher as we had a 20% deposit).

Plus, what will you do when interest rates go up (when, not if). We worked out we can go to 12% before we're in trouble. What can you withstand?

brit1234

The simple fact is your deposit is not big enough and a lender will not allow you to use a loan as a deposit. You mortgage advisors are corrupt :mad: and seems like nothing has changed since the Panorama 2003 program where they were telling people to lie about the wages. Do not trust them and go else where, infact best to report them.

On the plus side house prices are falling every month and set to continue falling. So every month you save the house will be cheaper. Houses are going to fall for the long term so no need to rush.

sonastin

~moneysavingnovice~ wrote: »

Really? I earn £35k and my partner earns £60k and I would definitely not describe affording our repayments on a £190k flat as 'no trouble at all' (~3% interest, yours will probably be higher as we had a 20% deposit).

Plus, what will you do when interest rates go up (when, not if). We worked out we can go to 12% before we're in trouble. What can you withstand?

£190k over 25 years at 5% is approx £1150 per month. They are already finding £1100 in rent so an extra £50 per month might really be "no trouble at all".

~moneysavingnovice~

sonastin wrote: »

£190k over 25 years at 5% is approx £1150 per month. They are already finding £1100 in rent so an extra £50 per month might really be "no trouble at all".

Plus a loan. Plus interest rates are historically low..

doire_2

I have spoken with 2 mortgage advisors who suggest that if they were in my position, they would take out a loan to top up the deposit and buy now to secure a house at a good price

And in other news turkeys vote for christmas to be banned

sunny_skies

Hello again,

moneysavingnovice - I don't know your situation so I'm not sure why you find that unaffordable. If I bought a house for 200k, and put down 20k deposit, I have been quoted between 900-1150 repayments. That, for me, is affordable.

The loan repayments over 7 years maximum would be around the £450 mark - so, again, what I'm already saving.

My priority would be to get off the renting market, which does feel like a bit of a waste of money - although I know not everyone agrees with that view - and buy when the prices are good. My only real emotional motivator is that I feel it's important to buy before I start a family, and at 31 next year I'd not like to leave it much later.

USM - I was also surprised re the loan, which is why although we've not started seriously looking for the house I asked two different mortgage advisors. What they have said is, because we don't have any debts, the bank would deduct what we owe on the loan we get out from the amount we could borrow for the house. As we would ideally like to spend 200k or less, and because this is well below what I have been quoted as being eligible for, it should be fine. I'll do a bit more research though before losing a heart on the property!

In fact, one of the mortgage advisors said that banks actually give loans specifically for deposits and that he'd done a couple this year already!!! Did surprise me, but at the end of the day as long as everything is above board and honest, and as long as the sums stack up, I guess those are the two things that count most.

I think I've realized my answer here - you guys have all been informative and I take on board everything you say. But owning a house is so important to me ... I will see if I can make it work via loan. If not and I have to save ... well, everything happens for a reason; maybe house prices will in fact come down next year! :T

~moneysavingnovice~

sunny_skies wrote: »

Hello again,

moneysavingnovice - I don't know your situation so I'm not sure why you find that unaffordable. If I bought a house for 200k, and put down 20k deposit, I have been quoted between 900-1150 repayments. That, for me, is affordable.

I didn't say it was unaffordable, I said it wasn't "no trouble at all". If it were unaffordable, I wouldn't have bought the house.

Anyway, you're clearly going to buy a house (or attempt it anyway) whatever is said on this thread.

I would do two things:
-work out what IR you can afford to pay on your mortgage, and whether you have enough spare capacity in your budgets to meet a potentially sizeable increase in that rate in the medium term
-do not get a loan to act as a deposit. Save, save, save. I totally understand the frustration with renting and the throwing money down the drain thing, but to get a loan, and a mortgage, when you'll have all the extra costs involved in buying then owning a house, seems absurd.

Good luck, though.