Should I rent or can I Buy

Penny_Saver90

Hi, first time poster here.

Just after a few opinions really. As I am really struggling with what to do.

I earn £16,000 (self employed)
and my partner earns £11,500 (employed)

We have saved a deposit of £35,000 so far.

Now the dilema is. Our current rent it £425 a month so we can stay here and easily keep saving money.
But we've seen a house we like to rent at £550 which is much nicer but we wouldn't save quite as much.

Houses in our area that we would like are £150,000 do you think we would ever get a mortgage with such low wages and me being self employed even if we saved a bigger deposit.
Or do we face facts and keep saving what we can but live in the more expensive house and perhaps buy in 5 or 10 years when we have more money?

Just after opinions really, so what do you think?

dimbo61

Have you spoken to a " whole of market mortgage broker" who would at least tell you if you stand a chance?
We know nothing about you !
Age, how long self employed, how long have you got accounts ? Credit score, where have you saved the £35K so far?
The questions go on and on and only sitting down with an expert and having all the paperwork with you can he/she see if you can get a mortgage.
As for moving from one rental to another and paying more that depends on the Landlord/tenancy agreement, references, how you spend your money!!!
Well done on having £35K in savings and not £35K IN DEBT !!!

Plasma_2

First of all with a Mortgage (Making some assumption on interest rate etc) you would be looking at re-payments of around £620 per month (assuming 5% interest, and a 30 year term, and £150k purchase price. So is that affordable?

Assuming you could borrow 4x joint income, that would mean you could potentially borrow £110000 assuming you dont have any other debts etc. Plus your £35k deposit would mean a purchase price of £145k and a pretty decent 20% deposit!

Something to think about i would say!

Jimby509

I have been looking into getting a morgage myself recently. It seems that your credit file being clean is a bigger factor than ever in weather people can obtain a morgage or not. Have you checked yours? Late payments? No defaults?

Penny_Saver90

I haven't spoken to anyone yet. Didn't know if It was worthwhile if there was no chance.

Well we are both 22.

Not checked credit score but never had a late payment or anything like that. And I have a credit card that I always pay back in full every month.

I've been self employed for 3 years.

The £35,000 is with a nationwide online account earning 2.5%

£620 is affordable but I guess you have to factor in alot of extra costs when you own a home as opposed to renting.

So it worthwhile talking to someone I guess.

HappyMJ

Penny_Saver90 wrote: »

I haven't spoken to anyone yet. Didn't know if It was worthwhile if there was no chance.

Well we are both 22.

Not checked credit score but never had a late payment or anything like that. And I have a credit card that I always pay back in full every month.

I've been self employed for 3 years.

The £35,000 is with a nationwide online account earning 2.5%

£620 is affordable but I guess you have to factor in alot of extra costs when you own a home as opposed to renting.

So it worthwhile talking to someone I guess.

How long have you been self employed for? edit: 3 years somehow I missed that sentence....Where did the £35,000 come from? You said you earn £27,500 between you and you pay rent of £5,100 per year. Less living costs of assuming a frugal lifestyle similar to benefits (£111.45 a week) of £5,800 a year less council tax of £1,200 less travel to work costs of £2,400 a year leaves you with £13,000 a year disposable income. You would have had to have saved diligently for the last 3 years from when you left school to now. If you can provide bank statements proving the money has been gradually saved over time rather than given to you in a lump sum then that will improve your chances tremendously.

Penny_Saver90

Yeah me and my partner have been together since we were 15 and started a joint account as soon as we started working. So the £35,000 has been amassed over time and completly earnt by us.
We saved a load of it in the first few years as we lived with my parents.

so will this help my chances.

Abatement

Penny_Saver90 wrote: »

Yeah me and my partner have been together since we were 15 and started a joint account as soon as we started working. So the £35,000 has been amassed over time and completly earnt by us.
We saved a load of it in the first few years as we lived with my parents.

so will this help my chances.

'Fraid I can't comment on your mortgage chances, but to have saved £35k by that age, on those salaries, is very well done indeed.

Best of luck!

Jazzyjeff_2

Everyone wants different things out of life, my advice would be don't feel pressured into doing anything your not ready for just because it might make sense.

Purely talking about my partner and me - we met not quite as young as you but have rented flats for 8 years and are just buying now, which means we can now afford our 'lifetime' home and have enjoyed the last 8 years with no responsibilities and living in nice flats.

dimbo61

We have a much better picture of you now!
Again well done on saving the deposit
Time to sit down with your other half and talk about what you want?
Buy a £145/150K property with a 20% deposit or rent for another year or two?
House prices in many areas have not increased or decreased much in the last 18/24 months.
If you move to the better/ More expensive flat you will save less each month BUT enjoy a bigger place to live.
Costs of buying a property and then buying all the furniture on top is something else you need to budget for
Good Luck

Pitchshifter

http://office.microsoft.com/en-us/templates/loan-amortization-schedule-TC001019777.aspx
Above is a link to an Excel spreadsheet template that I found really useful when trying to work out what it would cost to have a mortgage when I bought my house.
It gives you a really clear idea of how a repayment mortgage works, so you can see the full breakdown of the monthly payments including the principal and interest. (This is the bit that made me decide it was really worth buying, as you can see in black and white the principal amount gets bigger and the interest amount gets smaller every month as you gradually pay off your loan.)

You can change all the figures to see the difference it makes, such as how many years, the interest rate and the amount you borrow, etc.
IMO, you've got a decent joint income and a very good deposit. If you stick to a £150K house I don't think you'd be overstretching yourselves, but lenders may think otherwise. My suggestion would be to try and borrow as little as possible and aim to be mortgage free sooner rather than later.
I would say use £32k as a deposit and keep £3k for fees and furniture and everything else.
The housing market is a bit depressed at the moment, you could be in a position to make low offers and push the price down as much as possible. Every £K helps.
1st thing to do is find out how much you can borrow then you know straight away whether you can afford to buy or not, simples.