buy or carry on renting??

lkmc01

Hi

We are currently renting a house at £500 a month. Its 3 bed detached with garage and conservatory and in a nice spot. Only my partner is working at the moment on 19.5 grand a year pre deductions. We have a 20 grand deposit and have been told my mortgage advisor that we could get mortgage for up to 70 grand plus our 20 grand deposit on a rate around 4%, fixed for 2-3 years paying back around £380-£400 a month.

But.... the houses we could get for 90 grand aren't in as nice as area, an ok area, but not as nice.

We are struggling to afford where we are now due to the cost of everything else (food, petrol) going up.

I would be quite happy buying, but it would mean closing 4 regular savers accounts and our rent contract (at 500 a month) doesn't end til end of August.

What do you recommend???

Catblue

I'd sit tight for now. Presumably you intend to be working soon? You might get offered a job in an area that is too far to commute to and you and your partner would like to relocate. Much easier to make that decision if you are in a rental house.

Even if you do get a local job then you can then start to build up your savings for a couple of years whilst staying in the rental house.

£500 per month is a good deal for a really nice house. Just enjoy it for now.

lkmc01

but at the moment we are starting to eat into our savings as our deposit is my student loan!!

and if I did find a job elsewhere and moved my dad would be able to rent the house out for us and carry out any maintainance as it would be his third rental property. Our rental income on the house could easily be more than our mortgage then

casper_g

So, at the moment you pay £500 in rent each month, and your expenditure exceeds your income (as you say you are eating into your deposit). You propose spending all your savings on buying a house that would cost you c. £400 a month. You would also lose the interest on your savings (say about £40 a month net interest on £20,000?). You would be "saving" £60 a month on your housing costs, but from this you would have to pay all the costs that the landlord bears when you're renting: buildings insurance, repairs, maintenance. How would you cope if the roof or boiler needed to be replaced? I really don't think you would save much even with interest rates as low as they are. Once your fixed-rate deal ended, you should expect that your monthly payment would rise significantly. Also, you need to factor in a few thousand quid for the one-off costs of buying a house -- conveyancing fees, survey etc.

Buying a house will almost always be the best option in the long term. If your aim is to reduce your expenditure during the next few years while you're studying, I don't think the numbers you've given support the idea that this will work.

CloudCuckooLand

Get a job, then make a decision.

Honest_EA

I have to agree with the other posters in this case - it would make more sense to continue to rent as you are currently eating into your savings so are likely to have trouble paying a mortgage and all associated costs of owning a property unless you get a job to supplement the household income. If 90k only buys you a house in a less desirable area then why downgrade your living standards and happiness just to own a property. As I said in another thread, owning a property isnt your god given right and you shouldn't let it lead you down the road of financial ruin in pursuing this goal right now. Improve your financial position and then rethink it in the future.

gingertips

lkmc01 wrote: »

but at the moment we are starting to eat into our savings as our deposit is my student loan!!

and if I did find a job elsewhere and moved my dad would be able to rent the house out for us and carry out any maintainance as it would be his third rental property. Our rental income on the house could easily be more than our mortgage then

Everything you are saying suggests you cannot afford to buy. your deposit is your student loan? How do you mean? you are a student & you applied for a loan for studying & that money is what you are expecting to use for a deposit?! please tell us that isnt what you mean.

Interest rates are going to increase by at least a couple of points - what impact will that make on your repayments assuming you do manage to get a mortgage?

You say you really like where you live? £500 a month for a nice house in a nice area is brilliant & consider into the equation that there are no nasty upkeep surprises either - thats another huge benefit of renting - its someone elses problem!

I would agree with earlier author, who suggests waiting until you are also working & with joint income you could afford to borrow more & buy a house that you want to live in (no one is forcing you to live in a not-so-nice area, so why are you even thinking about it?!)

evoke

Jeez. A £20K student loan being used for a deposit on a house???

lkmc01

just to confirm i took the student loan to save it for a deposit. we do not need the money. i live off what my partner earns!!

westlondonbuyer

You do know, don't you, that the bank takes SLC borrowings into account before offering you a mortgage? It's just like any other loan - the fact that you haven't spent it is immaterial, it's the fact that you have another creditor to satisfy that will make the bank nervous about lending.

lkmc01

well we have gone through all the credit checks and its all go ahead and of course at the moment I'm not paying back my student loan