House or flat

lil_miss_insanity

Hi, I'm a FTB looking at properties for the first time, and I'm confused as to whether to go with a cheaper flat, or a more expensive house. The whole leasehold thing is worrying me, with maintenance charges, depreciating value due to shortening lease, stories of really restrictive lease conditions etc.

I've got a good credit rating (age of account is only negative factor on Experian report) and a deposit of around £20k. I'm looking to stay in this house for 3 or 4 years, before moving up north.

In the area I'm looking I can get a decent sized 2 bed flat with long-ish lease (over 80 years) for £140k asking price. I could also get smaller 1 bed houses, or 2 beds in need of a fair bit of cosmetic work for between £160-170k asking price.

So, there's 2 questions, really.
1) Is it worth the extra to get a house rather than a flat so the freehold's mine?
2) Is it dangerous, even with a decent credit rating, to go for a mortgage with a LTV between 86-90%? If I'm turned down, would I have ruined my chances of getting a mortgage for a lower LTV down the line?

Thanks for your help - apologies for being clueless.

tom9980

lil_miss_insanity wrote: »

I'm looking to stay in this house for 3 or 4 years, before moving up north.

You should not buy ANYTHING for this reason alone. A home is just that a place for putting down roots on a long term basis, buying and then selling just 3-4 years later is putting you in a poor position especially in a stagnant/potentially crashing market.

lil_miss_insanity

tom9980 wrote: »

You should not buy ANYTHING for this reason alone. A home is just that a place for putting down roots on a long term basis, buying and then selling just 3-4 years later is putting you in a poor position especially in a stagnant/potentially crashing market.

I understand your point, but renting I will pay a minimum of £1500/year more (and that's on a below-market rent currently) than a mortgage that would give me a larger property than the rented one. Yes, mortgage rates will increase, but the same will happen to rents when they do. Whilst renting I have no control of what I do to the property, can't improve, extend, refit or even redecorate. Even if I end up with barely-to-no equity after 4 years, I'd not be in a worse position than I am now. Plus, I'd have enjoyed 4 years in a home I could make my own.

Anyway, assuming I'm a fool to myself and am going to buy anyway...

lincroft1710

Just buying and later selling the flat or house could easily cost you £4,000 or more in fees, which may put you in a worse position. When you move north, if you've nothing to sell, you don't have to wait to move and as a first time buyer may be seen as a better bet by a vendor as you are chain free.

kyana

lincroft1710 wrote: »

Just buying and later selling the flat or house could easily cost you £4,000 or more in fees, which would put you in a worse position.

but if rent is for example £500/month and mortgage the same then she has 'saved' £12,000 by having it now in equity rather than the landlord's pocket.
that is how i view it but i don't own and i know people take umbridge with this view so i guess it's wrong. but i do understand that moving within a few years of buying could well leave you out of pocket as house prices as still falling.

martinsurrey

lincroft1710 wrote: »

Just buying and later selling the flat or house could easily cost you £4,000 or more in fees, which would put you in a worse position.

being served an s21 notice every 6 months (for 4 years) and having to find a new place to live could mean 8 sets of moving costs 8 sets of reference fees and EA fees (rents rose by 5% last year, house prices didnt).

I would go for a house and as big as you can comfortably afford (consider getting a lodger in as well).

lincroft1710

martinsurrey wrote: »

being served an s21 notice every 6 months (for 4 years) and having to find a new place to live could mean 8 sets of moving costs 8 sets of reference fees and EA fees (rents rose by 5% last year, house prices didnt).

This would surely only happen in exceptional circumstances.

lil_miss_insanity

Thanks for everyone's comments. I appreciate them. However, I am set on buying this year, so would be grateful if anyone could shed any light on the house vs flat issue. Cheers

grifferz

I would normally say that flats are harder to shift and less likely to increase in value compared to houses so you should always try to get a house if you can. But if buying a house is going to severely stress your finances then maybe it is not such a good idea. There is a very real risk of negative equity after only four years.

You could protect against that by overpaying your mortgage a fair bit, but if you had already stretched yourself then this may not be possible.

I have to say I would tend to agree with other posters that if I intended to move in four years I personally would not be considering buying.

I don't think you are going to be able to find many who can claim it is a dead simple case of "buy a flat" or "buy a house". You don't like the answer of "don't buy at all".

If you can find a house that is cheap for the road (you can buy it for significantly less than sold prices of similar properties around it), if you can add value to it in only four years, and you've taken into account all the extra fees you will encounter in both buying and later selling, then MAYBE it is not a bad idea to buy a house.

It sounds like a lot of ifs and maybes compared to renting for four years though.

jee

Buy a house if you can afford it. You own the land and building, with a flat you own part of the building and are renting the land for a given number of years and are always ruled by your freeholder.
Flats are a nightmare start to finish...this is from my own experience and I own three that are rented out.

katejo

jee wrote: »

Buy a house if you can afford it. You own the land and building, with a flat you own part of the building and are renting the land for a given number of years and are always ruled by your freeholder.
Flats are a nightmare start to finish...this is from my own experience and I own three that are rented out.

I agree. My first place was a flat because I couldn't afford a house but i wouldn't return to leasehold. Freeholders/management companies can be an absolute pain in the backside. Mine refused to provide proof of building insurance. He once said to me "What the f...ing hell do you need it for?". I also had problems with the leaseholder in the ground floor flat.
Don't overstretch yourself and perhaps buy somewhere with room for improvement (perhaps a 2-3 bedroom terrace).