Renting flat versus buying

paulburns1984

Hi all,

I was hoping for some advice from you experienced and knowledgable folk.

I am starting a new job in a nearby city in September and was wondering whether to rent or buy when I move over.

I'm on a decent wage 31k, and my partner will be looking for a job (but for now lets not count her in for much as we don't know what her situation will be. Although at the very least she would bring 4 or 5k in as well from part-time work)

Problem is I don't have much of a deposit. Maybe 3-4k.

Edit: My current circumstance is I'm living with parents. I also have very good credit rating and have about 4k debt on CCs.

So the dilemma is, either

1) we rent and end up paying £500 per month to live in a pretty naff flat while attempting to build up a mortgage to buy a house somewhere

OR

2) I use help to buy and our 3-4k deposit to buy a small flat to live in. Looking at mortgage calculator and help to buy scheme, I should be able to buy a 50k flat and pay around £150-200 per month mortgage.

With option 2, the extra money per month can be saved to build up a deposit over two or three years before buying a house and potentially selling or letting the flat.

A few questions, is it possible to do this? It was just an idea and I'm very green/new to the buying market so don't know if its feasible/accurate?

Also if I use help to buy as a first time buyer for this flat, then can I use help to buy later when buying a house? I would have thought I will be in a position to buy again before 2020 when help to buy is supposed to end?

Thank you for any advice.

Pixie5740

No such thing as a universal credit rating. If you live with parents and earn £31k, how have you managed to accrue £4k of CC debt? Is it general overspending or do you know what you spent the £4k on? It's important to get a handle on your budgeting before going for either Option 1 or Option 2.

What kind of flat would you be able to buy for £50k? Would it be a naff flat? How easy would it be to sell on? Maybe talk with a mortgage broker to get an idea of budget and affordability.

I think HTB is going to end in 2016 but I could be wrong.

Jon_B_2

If you have £4k saved an £4k on a credit card, you basically have no deposit.

paulburns1984

I've lived with parents for the last year to reduce debts.

3k of debt was accrued while at university studying for my degree (even though I was working 10-20 hours per week part time alongside).
Since graduation, I've lived away from home for several years building up my career, which included having to move away to Manchester (due to competition for jobs within my career) where I earned 13k a year so some debt was accrued just surviving there. Furthermore, as part of my career progression I took out a career development loan to complete a masters so another 5k was added there.

Over the last year, I have been able to reduce around 15k of debt down to 4k currently.

Is 4k of debt on CC considered when looking into a mortgage? Would it cancel out the 4k I would have for deposit?

There are plenty of nice small flats in the region I am looking for 50k and the city has two universities. Therefore, I would imagine that letting out the flat when I am ready to move on would be possible. Obviously I would have to research much further. I am simply on here to get some clarification of this as an idea. Very much in the preliminary stages here just to see if the idea has potential legs.


Essentially, I was staring at renting a flat out for £500 a month and seeing my money drip away while saving less for a deposit to buy.

And wondered if buying and paying a much smaller (than £500 a month) mortgage while saving much more per month would be a better idea. I came here to get a better idea of the feasibility of this idea.

DD265

We had a similar dilemma except it was "do we save for a deposit to buy or start looking around for the right rental?".

The kind of mortgage we would be offered would've bought us a decent flat. But it would've been a stop gap. We didn't want the hassle of having to rent a flat out later. Also we may be leaving the area at some point and didn't want to get tied in. Plus there is the fear of mortgage rates shooting up which I appreciate could happen any time but with the repayments we'd be looking at to begin with we didn't feel that we were in quite the right position to cope.

Another thing to consider is if you buy a flat you'll be responsible for all the repairs etc so you may not be able to save as much as you thought. Once we'd decided to rent we are perfectly happy with the idea and are moving in to our new home on Friday.

rexmedorum

The one good thing about renting is that you're not committing for the long term, you can always move again after 6 or 12 months

Pixie5740

Yes, your CC debt will be taken into account when calculating your affordability. Your plan to buy is dependent on getting a 95% LTV mortgage which is why I suggested you speak with a mortgage broker.

A 95% mortgage would probably have an interest rate of circa 4.45% giving monthly repayments of £263. On top of this you'll have service charges, maintenance, etc.

You may or may not be able to let the property and buy another property in the future. That will come down to affordability at the time.