Worth buying?

ag359

My wife and I are currently paying about 1070 pounds a month in rent for a one bedroom flat in our area, which I would estimate is worth about 250k.

We are looking at buying a similar sized flat in the same area for about 250k. We have just had a quote from HSBC for a 'homestart' mortgage, and the repayments on this (which are interest only for the first three years) are 1227 pounds, based on an interest rate of 6.45%, and borrowing 95% of the 250k.

Does this mean that we would be mad to buy, or am i misinterpreting the numbers?

We could perhaps get a better mortgage deal (I haven't looked into it fully) but the L+C broker sounded sceptical as we are looking to borrow 4 times our joint income with only a small deposit.

darkcloudi

More deposit means you can get a better deal. I am in a process of buying my first home and was going to choose HSBC as a mortgage provider until I spoke to a broker who was able to check a full market and get a better deal for me.

I would advise to go to a fee free broker and see what they can offer before taking the HSBC option.

Guy_Montag

Hmmm, so what you are saying is you can rent off the bank for £150 pcm more than you currently rent off your landlord. On top of that you will now have to pay insurance & repair any problems you have, pay for service charges including possibly large outgoings such as new roof etc.

If you have scummy neighbours move in, or want to move for work, currently it is relatively easy.

Once you have moved onto the repayment phase how much will it cost you? Can you afford it now? What will change over the next three years that will increase your income?

Of course the capital gains in three years may outstrip the costs, but then you'll be stuck in a one bed flat for the rest of your life, because the rungs of the housing ladder will have moved even further apart.

ag359

Guy - thanks, I think you've confirmed my suspicions, buying on these figures would be crazy.

(Incidentally, my salary will go up by 50% at least in about 18 months, because I will then qualify into my profession, so the higher repayments wouldn't be a problem.)

Guy_Montag

I may of course be wrong, but to me it seems crazy

roswell

If is was you (which im not) I would wait for the pay rise, make a concertad effort to put something away each month for a deposit in the future and look at the numbers again in the future, its going to cost you a lot more to buy now than its currently costing you and your going to have repairs maintenance etc that currently arent your problem.

chant1l

Actually I would suggest buying!
The £150 per month is almost irrelevant as it is a very short term gain. I am guessing that the mortgage will be capital repayment which means that you are paying a little off the debt each month, say £150?
The other thing to point out is that the mortgage may indeed go up with interest rate rises, however the rent will probably do so as well.
On a nominal increase in value you may see 5% increase in your investments value = £12500 yearly a good year will see 8-10% which means pretty much every penny you will spend will come back to you possibly more, now ask the landlord if he would be happy to do the same....

lynzpower

I think a bit of perspective needed. Are you really willing to pay 1227 a month to buy a one bedroom flat? Surely theres somethng thats better value for money around???

im in london , and I am about to rent a 2 bed HOUSE for half that!