Shared ownership scheme or continue to rent?

J_i_m

I wasn't suggesting you ought to move back to your parents

But yes, downsizing to a "cheaper" flat could be a good way of reducing your current outgoings.

jobug

Oh I know, wish I could though!!

Fire_Fox

jobug wrote: »

What I mean by throwing away money on rent is I am pretty much paying my landlords mortgage at the moment. Would it not be better, even if it is just for say 5 years, to be paying a shared mortgage so I am paying in at least 40% into something I own.

If I was to sell up 5 years down the line, would I get any money back from the sale? (Sorry if these questions seem stupid, I really don't understand how mortgages work)

Thanks

Not necessarily: when you sell a property you receive the sale price MINUS the full outstanding mortgage, legals and estate agent costs. So if house prices go up loads you make a profit, if they stay the same, go up a little or go down you make a loss.

If you had bought my flat five years ago you would have paid at least £90K. Say you put down £9K as a 10% deposit so borrowed £81K, spent £2K on legals and surveys and mortgage application.

If you sold it today you would get perhaps £60K. Out of that you would have to pay £1K in legals, £6K in estate agents (1%) and maybe £75K of mortgage that you still owe. :eek: In other words you would be short by £22K plus the £2K you spent to buy. So you would have gone from having savings to being in massive debt to the bank.

And in the mean time you would have paid your mortgage every month (if 3% over 25 years ~£380 a month) AND £1500 a year in service charges, ground rent and buildings insurance. Or you could have rented currently ~£380 a month. Oh and the fire escape collapsed within the last five years and they tried to charge each leaseholder an extra £2K to repair it.

So you would have lost
- £9K deposit
- £2K cost of buying
- £22K shortfall in sale price
- £2K repair of fire escape
- £5K+ service charges etc.

Unless I have double counted anything a total LOSS compared to renting of £40,000!!! :eek: I forgot to include life insurance.

Obviously these numbers vary loads around the country and the percentages in my area are horrifying, but you honestly would have lost out anywhere you lived. Luckily I own outright and bought for a good price in 2004. :cool:

Gordon_Hose

House prices are unlikely to rise by all that much in the near future.