To Buy or To Save

Darojo65

Good Afternoon,

I am a tenant and have £54k in savings which last year made £3800 in interest for me as its in an investment bond.

Should I continue to keep my money where it is and let it grow in value or put it into a property ? In principle I can afford a £95k mortgage which will take me 10 years to pay off.

Is it better to leave my 'cash' where it is, let it grow and pay rent or change it into bricks and mortar and pay a mortgage? What will make my £54k grow the most and be the best for me expediture wise?

How do I know that if I put my money into a property it will perform better than my current investment? What is the most sensible/ safest thing to do? I dont want to risk losing any of my capital and would like to make the most from it as I can.

Thank you for your help.

HappyMJ

Darojo65 wrote: »

Good Afternoon,

I am a tenant and have £54k in savings which last year made £3800 in interest for me as its in an investment bond.

Should I continue to keep my money where it is and let it grow in value or put it into a property ? In principle I can afford a £95k mortgage which will take me 10 years to pay off.

Is it better to leave my 'cash' where it is, let it grow and pay rent or change it into bricks and mortar and pay a mortgage? What will make my £54k grow the most and be the best for me expediture wise?

How do I know that if I put my money into a property it will perform better than my current investment? What is the most sensible/ safest thing to do? I dont want to risk losing any of my capital and would like to make the most from it as I can.

Thank you for your help.

More information needed...

What rent do you currently pay?

What would the "interest" on the mortgage be?

What would the building cost to insure in the first year?

What maintenance expenses do you expect each year? £500 is a good estimate for a smallish property for boiler repairs, re-painting and a few bits and pieces over time such as carpet, window replacement, roof repairs etc...

Does the property have service charges and what are they?

What are the costs involved in buying the property? Solicitor costs, land registry charges etc for me were 2% of the property value.

How long to you plan to stay in the property? I would recommend at least 7 years to make the choice worth it.

The safest thing is to keep the money in the bank. As you are using debt to leverage your investment a 5% drop in value on £150,000 will cause you to lose £7,500 which is almost 14% of your investment.

dimbo61

Well done on saving £54K and that would be a good deposit in many parts of the country.
Sometimes the cost of renting in an area is cheaper than buying ! and its the other way round in other areas.
Now if you buy a property with a 10/15/20 year mortgage ( depending on age and income ) you will own a property once the mortgage is cleared!!!!
Do you want to pay rent when you are retired?
Do you want to move home every few years because the landlord wants to sell up and use the money tied up in the property to fund his/her retirement plans.
Getting on the property is very important for some people while others are not interested YOUR DECISION good luck

tim123456789

dimbo61 wrote: »

Well done on saving £54K and that would be a good deposit in many parts of the country.
Sometimes the cost of renting in an area is cheaper than buying ! and its the other way round in other areas.
Now if you buy a property with a 10/15/20 year mortgage ( depending on age and income ) you will own a property once the mortgage is cleared!!!!
Do you want to pay rent when you are retired?
Do you want to move home every few years because the landlord wants to sell up and use the money tied up in the property to fund his/her retirement plans.
Getting on the property is very important for some people while others are not interested YOUR DECISION good luck

I don't think there's any dispute that someone should buy a property to be the one that they retire into if they can afford to do so.

But the question really is, should they buy one now when all of the "normal" economic indicators suggest that houses should have fallen in price by 20-30% (like they have in Spain/Ireland and the USA) and have only not done so due to some magic pixie dust at the end of the UK's garden.

Do you think that this magic pixie dust will last forever or that eventually it will run out and common sense will command the UK housing market once again?

tim

SG27

I think if you are buying now you need to be prepared for not being able to sell for more than you paid. If you are buying purely for your money to increase I thinks it's very unlikely that after buying selling costs and maintenance for the time you are there than your property will make you any money.

hello11

Darojo65 wrote: »

Good Afternoon,

I am a tenant and have £54k in savings which last year made £3800 in interest for me as its in an investment bond.

i am interested what type of investment bond you have,but even though buying a uk property may not be a good idea right now as many have mentioned so far,the value of your investment is also at risk and you may well get back less than the value of the capital you invested in depending on the stock market its linked to,when the bond closes!

Darojo65

Thank you all for your replies. I have to say my investment gives me a great feeling of safety but paying my rent ie someone elses mortgage (£750) every month really ticks me off. I thought because house prices were low that if I put my money into a property now and paid a mortgage instead of rent I would have an asset worth around £150k and better security accomodation wise in about 10 years time. Left alone my investment would not be worth as much as this if it continues to grow the same as it did last year. Im still rather confused...

ValHaller

In June, you had £80,000 available as a deposit and and income of £9630 gross. So where is your money going? Any answers given here without fully understanding your finances will need to be taken with a pinch of salt.

tim123456789

Darojo65 wrote: »

Thank you all for your replies. I have to say my investment gives me a great feeling of safety but paying my rent ie someone elses mortgage (£750) every month really ticks me off. I thought because house prices were low that if I put my money into a property now and paid a mortgage instead of rent I would have an asset worth around £150k and better security accomodation wise in about 10 years time. Left alone my investment would not be worth as much as this if it continues to grow the same as it did last year. Im still rather confused...

OK lets try not to be so cryptic this time.

If you are buying this house to live in for a reasonable number of years (and not as an investment), then the answer to whether you should buy a house today or not depends upon the answer to the question:

"Do you think that the price of the same house will be the same, more, or less, next year and the year after that (and the one after that)."

Yes, it is right for you (anyone) to buy for the long term as soon as they can afford to do so, but the reason for not suggesting jumping in now is that we are still in uncertain markets and may not have reached the bottom of that market. There is still lots of bad (economic) news to come, who knows what this will do to house prices. You may buy today for 150K something that you could buy tomorrow for 120K, then again you might not.

Buying just "to get a foot on the ladder" is economically silly in such a market. And doing so because cash is only returning you 3% even siller.

Just my 2p worth.

tim

Darojo65

Thank you all for taking he time to reply to my questions. It seems that buying is not the right option so I will keep my money where it is. Very best wishes to you all for a safe and prosperous 2013 x

hello11

Darojo65 wrote: »

Good Afternoon,

I am a tenant and have £54k in savings which last year made £3800 in interest for me as its in an investment bond.

hi darojo65,

what investment bond do you have?i am just interested because i am thinking of investing some money right now and 3800 on 54000 seemed not a bad return-even though you are'nt guaranteed that every year!