Seniors Please Advice

mazibee

Hi All,

I need advice from seniors / finance experts as have two choices and need to make a decision

1) Buy a home worth £250,000 with 10% deposit fixed for 2 years @ 3.89 and that SVR 3.99% with Nationwide.
As the interest rates are at their lowest

2) Wait for 5 years and buy the property with 100,000 deposit.
No idea of house prices going or down in these 5 years.

I am in a real perplex as I don;t want to make a wrong decision.

Thanks in advance.

R_P_W

In next five years prices could go up or down or stay same.

Interest rates will very likely have increased.

I assume you will also have five years of living costs elsewhere?

If you can afford to buy now, I wouldn't wait personally.

mazibee

First of all extremely thankful for a very quick reply ( which i was not expecting)

Obviously its a very difficult decision but keeping in mind that interest rates are on their lowest and have to rise soon.


If i buy with 10% (225,000 mortgage 2years fixed at 3.89 and 3.99 thereafter) after 5 years still the balance on my account will be 195000.


If save during 5 years and then buy with £100,000 after 5 years I am starting with £150,000 as compared to £195,000 balance.

Hope some further discussion on this to clarify.

R_P_W

mazibee wrote: »

First of all extremely thankful for a very quick reply ( which i was not expecting)

Obviously its a very difficult decision but keeping in mind that interest rates are on their lowest and have to rise soon.


If i buy with 10% (225,000 mortgage 2years fixed at 3.89 and 3.99 thereafter) after 5 years still the balance on my account will be 195000.


If save during 5 years and then buy with £100,000 after 5 years I am starting with £150,000 as compared to £195,000 balance.

Hope some further discussion on this to clarify.

So your assuming the same interest rates will be on offer in five years and the house price will stay the same?

Where would you live for five years? What would it cost?

mazibee

Due to interest rate hike , house prices will be stable , remain same or decline. (assumption)

We will be paying rent which we are still paying and plan to save more.

With every passing day its becoming difficult to decide now or after 5 years

dimbo61

What happens if the house you want to buy is £265K/£275K or £295K in 5 years time !
Where are you living now ? Are you renting ?
If you can save £20,000 every year then you can afford a £225,000 mortgage and overpay every month.

mazibee

dimbo61 wrote: »

What happens if the house you want to buy is £265K/£275K or £295K in 5 years time !
Where are you living now ? Are you renting ?
If you can save £20,000 every year then you can afford a £225,000 mortgage and overpay every month.

Again its an assumption seeing the market and the BOE rate history. To me it looks a downward trend which can start any time just need a trigger.

What I am seeing is due to interest rate hike (when ever it will be) the house prices going down and installments going up and it will will create a selling pressure.

I am renting at the moment.

Yes you are right about overpaying but when comparing 90% LTV (now) and 60% LTV (after 5 years) one can get better rates even after the stabilized interest rates.

Thrugelmir

mazibee wrote: »

If i buy with 10% (225,000 mortgage 2years fixed at 3.89 and 3.99 thereafter)

No certainty that follow on rate will be 3.99%.

mazibee

Thrugelmir wrote: »

No certainty that follow on rate will be 3.99%.

Its more than likely that 3.99% will increase as its being quoted when the base rate is 0.5%, the moment base rate moves up the SVR will also move up increasing the installments creating the selling pressure in the market.

averageish

I'll go contrary. To me, £225,000 is an enormous mortgage. Not because it isn't affordable for me, but just because I'd be uncomfortable with it unless the property was worth over £1m and there was income to suit.

I would suggest that as well as the other aspects that you are looking at, you consider your income and the likelihood it will remain stable over the term of the mortgage, before committing - and be realistic.

Prices may rise, but that is not something which you should rely on financially for several reasons which I'm sure you already know.

A two year fix is hardly something which should force your hand, in my opinion.

I'm not saying you do, but if you have any worries at all about your ability to repay a mortgage at an interest rate of 10%, walk away, such a rate has been seen before and will very likely be seen again.

getmore4less

Have you done the numbers....

mazibee wrote: »

Hi All,

I need advice from seniors / finance experts as have two choices and need to make a decision

1) Buy a home worth £250,000 with 10% deposit fixed for 2 years @ 3.89 and that SVR 3.99% with Nationwide.
As the interest rates are at their lowest

£25k down £225k mortgage interest is £730pm(first 2 years then guess but at least £750pm)

What's your rent?

2) Wait for 5 years and buy the property with 100,000 deposit.
No idea of house prices going or down in these 5 years.

So you have a surplus of (100-25)/(5*12) £1260pm

I am in a real perplex as I don;t want to make a wrong decision.

Thanks in advance.

The key here is the rent you currently pay

using 3.99% over 25 years(which matches your £195k left after 5 years) mortgage would be £1187 so covered by your planned savings and you still have the saved rent to overpay.


IMO rates will go up slowly

The trend has been for quality property to hold prices in good areas, if prices drop people just won't sell unless they have to or can move cheaply so the supply dries up which has the tendency for prices to sort of stay about the same, if buying the right place for you the prices are not that relevant till you want to move, make it at least a 10year house and you can ignore prices, except if you really believe they will drop then a wait makes a bit more sense if you can wait for the drop.