When does saving become more beneficial than getting on the ladder?

shireknight

At the moment you're paying your landlords mortgage when you could be paying your own off, that's fine if you plan on changing location anytime within the next year or two but if you're ready to put down roots in a particular area then I would buy as soon as possible and start paying towards your families future rather than your landlords

brit1234

shireknight wrote: »

At the moment you're paying your landlords mortgage when you could be paying your own off,

On the flip side you will be buying at the peak of the housing bubble and if you rent the landlord will get the negative equity rather than you.

Some deposit is better than a minimum, it gives you a buffer zone if things go wrong.

Toryas

brit1234 wrote: »

On the flip side you will be buying at the peak of the housing bubble and if you rent the landlord will get the negative equity rather than you.

Some deposit is better than a minimum, it gives you a buffer zone if things go wrong.

Interesting. I take it you think we're at the peak of a bubble now? What makes you think that?

dgtazzman

Britt is well known for calling things a housing bubble. Reality is prices have only recently started rising again with the market picking up. Help to buy has been extended, so that stimulus hasn't been removed. There is news of economic growth etc.

Even if we look back at 2008 when the 'bubble burst', property prices never really crashed that much and they are now already above the level of 2008, in other words, if you are buying a property to stay in for a while, ignore the doom thinkers, the chances that the property is worth less when you come to sell compared to when you bought it are slim at best.

There is a reason the government wants to build a lot of new homes, there is a shortage and it is only going to get worse if they don't get off their behinds, so unless they suddenly manage to build a gazillion new homes, offer and demand economics dictate the price is going to go up.

People might argue that mortgages becoming harder to get will see prices drop, I suspect it will at best only slow growth down a little.

Yes, the will eventually be a 'crash', there always is at some point, but historically these are temporary blips in an otherwise rising price trend.

ed110220

SG27 wrote: »

True, forgot about the rent. Although it will probably still be less than the mortgage interest over a 25 year term.

I doubt it, usually the mortgage repayments will be considerably less than any equivalent rent. We were paying £700 rent for a two bedroom flat and now pay £390 in mortgage payments for a three bedroom house. No brainer really.

Ed

brit1234

Toryas wrote: »

Interesting. I take it you think we're at the peak of a bubble now? What makes you think that?

The main reasons are:

1. US tapering (reducing) QE, this will push up borrowing cost internationally.
2. Funding for lending on mortgages ended, once the stock pile of cheap cash they got is spent UK borrowing costs will rise.

Then you have the 2015 stuff such as possible interest rate rises, Capital Gains Tax for foreign buyers comes in, Recession in China and their property melt down.

Already the stronger £ is deterring foreign buyers, with out constant investment from them the London prices are unsustainable. Prices in London are 18% higher than the peak of the bubble in 2008.

Housing bubbles are mainly caused by access to cheap money, take that away and bubble prices fall.

SG27

ed110220 wrote: »

I doubt it, usually the mortgage repayments will be considerably less than any equivalent rent. We were paying £700 rent for a two bedroom flat and now pay £390 in mortgage payments for a three bedroom house. No brainer really.

Ed

If the op was to buy now with a 10% deposit on a £150k house assuming an optimistic 4% interest rate for the term it would cost £78,774 in interest over 25 years.

If the op saves up for 7 years to buy outright the rent would cost around £42,000.

dgtazzman

But then there is nothing stopping OP from overpaying the 20k a year he can save on the mortgage, thus still being mortgage free in 7 years, while not paying any rent and paying nowhere near 78k interest, something your little calculation omits.

shireknight

Plus if the house price rises over those seven years (which is highly likely) then every pound it goes up gets added to that £42,000 as well.

SG27

shireknight wrote: »

Plus if the house price rises over those seven years (which is highly likely) then every pound it goes up gets added to that £42,000 as well.

Or if they fall which is just as likely...