The next 18 months?

TeddyT_2

I really am getting second thoughts of buying myself some property now.

With the wage I am on (Average 25K)there is no way I can afford the house that I want so am looking at buying a smaller property right now (possibly buy to let on an interest only) and hope I don't get into negative equity. Ideally I want to move on in a couple of years time and also make some money on the house.

Now I keep reading the threads about house crashes and the like and its getting me thinking. Should I really commit now. Obviously no one can predict what will happen with the current housing boom but I'm looking in the short term 18-24 months. I just want to get on the ladder.

Will I be hit hard If it all does goes belly up so to speak? Maybe it will be slow gradual decline?

I have been trying to work out if I should just carry on saving for a bigger deposit or go out and get a house now. I am 25 at the moment and I promised myself I would like to be mortgage free before I'm 35. Waiting will not help

Any advice most appreciated.

Cheers

herbiesjp

What kind of property prices are you looking at?

If you are going to let it out, what kind of rental income will those properties give you?

What amount of deposit do you have?

JoeK_3

Have you thought about a shared ownership property?

If you are unable to buy a property outright on the open market, then shared ownership is the ideal solution for you. Shared Ownership is a part buy, part rent scheme, which enables purchasers to buy a home in stages. Purchasers can buy an initial share between 25% and 75% of the value of the property and pay a subsidised rent on the remaining value of the property. Shared ownership properties can be provided by housing associations, housing trusts and local authorities. These organisations try be as flexible as possible with regards to the initial share purchased, but this may be as much as 50% of the market value at some of their developments.

A service charge will normally be payable to cover the cost of communal maintenance. The service charges payable can remain the same whatever percentage you own of your home and continues to be payable should you purchase your home outright where possible. You will need to have sufficient savings to cover the initial cost of home ownership: legal fees and stamp duty for example. You will need to be able to meet the costs of rent, mortgage, service charges and other associated outgoings.

As your income increases, you can buy further shares of your home until you could own 100% of the value and no longer share the ownership with the housing association or trust. The greater the percentage you own, the lower the percentage on which you pay rent. However, if you do not wish to buy more shares in the property, you do not have to. Obviously, the more you own, the less you pay in rent. And, if you can buy your home outright in the future, then no rent will be payable.

Check shared ownership in your area.

JoeK

TeddyT_2

Cheers. haven't looked at shared ownership so will read more into that.

I am looking at purchasing a house for about the £200K mark. Now I was hoping to buy a smaller house which was in a good rental area for £110K, along with my 15% deposit (£20K). Have an interest only mortgage and have rent which will cover the monthly mortgage bill. Aprox £500 which is the going rate.

Now I'm just worried that this is a bad move as I want to make a profit but cant tell what is going to happen in the next 18 months or so. Do that or just go straight in the buying the larger house but struggle with the payments.

All the signs of a crash i keep reading and I don't want to be in the middle of it.

MortgageMamma

The way I see it is like this

if you are buying a property for the long term you will be ok, as even if the market does crash at some stage it will correct itself over time

If you are looking short term then think long and hard before you do it

I guess you are on middle ground as you have to compromise on your ideal property due to your budget

I rent my property at the moment with a view to purchasing it or one of the attached houses/nearby barns in the future, but i am not buying now because I cannot afford the type of property I current;y live in and lifestyle is far more important to me

JoeK_3

TeddyT wrote: »

Cheers. haven't looked at shared ownership so will read more into that.

I am looking at purchasing a house for about the £200K mark. Now I was hoping to buy a smaller house which was in a good rental area for £110K, along with my 15% deposit (£20K). Have an interest only mortgage and have rent which will cover the monthly mortgage bill. Aprox £500 which is the going rate.

Now I'm just worried that this is a bad move as I want to make a profit but cant tell what is going to happen in the next 18 months or so. Do that or just go straight in the buying the larger house but struggle with the payments.

All the signs of a crash i keep reading and I don't want to be in the middle of it.

No one should be looking to make a killing in the property market unless they are skilled and get in and out in quick succession.

Most property developers see the potential in a property, make improvements over a 3-6 month period and it's back on the market.

Stay out of the market if you are looking over a short term or get in if you are looking over the long term.

The best advice that I can give you is buy one that you can comfortably afford.

JoeK

herbiesjp

TeddyT wrote: »

Cheers. haven't looked at shared ownership so will read more into that.

I am looking at purchasing a house for about the £200K mark. Now I was hoping to buy a smaller house which was in a good rental area for £110K, along with my 15% deposit (£20K). Have an interest only mortgage and have rent which will cover the monthly mortgage bill. Aprox £500 which is the going rate.

Now I'm just worried that this is a bad move as I want to make a profit but cant tell what is going to happen in the next 18 months or so. Do that or just go straight in the buying the larger house but struggle with the payments.

All the signs of a crash i keep reading and I don't want to be in the middle of it.

The problem is, on the £25k income, you are not likely to be able to get towards the mortgage figure for the more expensive property, unless you have other funds to put down as a deposit.

In relation to the BTL, you would need also to see what rental income/yield the property will give you. Do you have any idea of these figures?

Making a profit is about timing - unfortunately no one here will be able to tell you what is going to happen. If rates do indeed go up as predicted, then that could further impact on house prices, but could also push up demand for rental property

So it needs careful analysis on all fronts

TeddyT_2

Thanks for the top advice guys.

Well the reason i wanted to buy a smaller house first was because of two reasons:

- Get my foot in the door and on the property ladder.
- Make some money when it came to sell to cover the cost of the larger house i wanted.
Considering the current circumstances of the housing market I'm wondering if its going to be any beneficial for me at all. Like people say just go for it if you can afford it.

I know rent for the house I am looking at comes in at about £500 PM. This would be the same mortgage payment for an interest only mortgage for £100K borrowing. So I wont be making money in rent however I still will be saving my wages.

I was working out some figures:
House - Buy for £120K
Deposit - £20K
Borrow - £100K
Mortgage Payment @ 6.00% IR (Worst Case) - £500 PM
Rent - £500PM
Sell? - Now this is the worrying bit Hoping to make at least £15K. So sell for £135K?
This is for a duration 1 year. Obviously this is all just simple figures but you get the idea. So will get £35K back and savings for the year from wages about £15K. Sounds just too easy.

kingkano

make 15k after EA fees so really talking of making about 16.5k. Without spending to improve at all?? Your asking for around a 14% increase I think. Id say that could be asking for alot in the current climate... (Im assuming 120k isnt central london lol). Even foregoing a crash, or stagnation in the market, 14% was alot for the last few heady years surely?

TeddyT_2

Yeah thought it may be a little optimistic really. That's why i was looking at maybe waiting, save up for a larger deposit and hope prices fall for that house that I am looking for. Still I'm not getting any younger and my plan of being mortgage free before I'm 35 is losing steam.

kingkano

Are your savings just in bog standard savings accounts? You could always look to invest that more aggressively. Can't be anymore risky than playing short term property Id have thought

The other way for your goal is to find something that needs doing up and try to get it cheap. Spend the cash needed and then sell it on marked up. These opportunities do seem hard to come by now as its such a popular sideline.....