First Time Buyer - Assessment Needed

m00m00

rent paid on this flat 360 a month
identical flat in block up for sale for 99,950 (no movement on it since april)

repayments payable on a 100% mortgage at the rate quoted in this thread 6.19% = £656 a month, of which initially £516 is interest. At the end of the 2 year fix (month 25) interest is £425.

so £300 more a month to own somewhere identical to where I'm living, between £156 and £65 of it a month more of that is in pure interest, or dead money. Also there would need to be factoring in of all the legal costs, and the inevitable remortage costs at the end of the 2 year fix.

all this for a property which is obviously at the top of it's value. On the market since April, virtually no interest in it.

renting it really does feel like dead money doesn't it.

I'm certainly not against buying, I just think it's madness to repeat the mantra that buying is always the best option for every possible scenario.

WTF?_2

izzybusy23 wrote: »

OH GOD ... MY THE DREADED 'RENTING IS DEAD MONEY' COMMENT AGAIN.

Don't people understand the current economics of mortgage payments are higher than current rentals in this present climate?????

This comment really gets my goat each time its mentioned. Sod the poor sod whose just going to take out a huge mortgage at the peak of the housing boom with rising interest rates. Yeah, don't rent cos its dead money, buy a house instead, interest rate rises will push people over the edge, repossessions will be on the rise, but so will negative equity.

SO NEGATIVE EQUITY ISN'T DEAD MONEY THEN, NO??? :mad:

Even worse is the rise of the 'Interest Only' mortgage. Whilst they can make sense for investors or BTLers, for a typical homeowner they're about the dumbest idea possible.

Even worse, anecdotal evidence suggests that many people who have an interest only mortgage don't seem to realise that they're not actually paying off any of the loan capital - just a monthly interest payment - and they have no repayment vehicle (endowment or investment fund) in place to pay off the capital at the end of the mortgage.

Unfortunately, many people just look at the monthly payment at the time of taking out a mortgage and if it looks 'affordable' then they go for it. IO mortgages inevitably are lower since you don't have a capital repayment component.


Another con is the notion of remortgaging 'to get a better deal' once the fixed rate runs out. The first years of a mortgage are 'front end loaded' towards fees and other costs, so you're paying very little off of your capital loan. When you arrange a new mortgage, you pay a fee for leaving the old one plus, increasingly, a hefty arrangement fee for the new fixed one. If you add it all up, the chances are that you've reduced your original loan by absolutely nothing so you've just spent an extra two years of paying interest.

If you keep remortgaging to get low short-term fixed rates you are going absolutely nowhere.

olly300

Mr_Mister wrote: »

Thanks guys.
Although ideally I would like to pay off the debts with the savings, we would rather keep the savings for an emergency or otherwise end up taking up more credit. Not touching the credit cards at the moment. Card tarting so either on low apr or interest free and paying off around £500 a month.
The income is NET.
Even though living with parents, paying the utility bills and council tax as both parents are pensioners.
So you saying wait another year or 2 before buying?
I seriously cant see house prices coming down especially when theres huge demand in london and south east - where i live.

If you brought you would be paying the mortgage, insurance, all maintence costs on top of the utility bills and council tax. Plus you would have to furnish the house.

Get rid of your debt, save and then decide what you want to do.

If you are young you have the chance that your salarly will increase over the years or you can choose options i.e retraining that give you a bigger wage in the long term.

abbecer

izzybusy23 wrote: »

Oh I get the picture now.. because you are moving to a new house next week, you want sheeple to copy you just to make you feel like you haven't made a huge big mistake???

I agree with the others, you making assumptions that renting is dead money is dangerous as you are trying to persuade somebody to take on a mortgage which could well ruin them. If thats the choice you made for yourself than good.. don't try to get people to copy your mistakes.

I certainly don't feel like i have made a huge big mistake and if i have i will deal with it as it arises. I am not trying to influence others just giving my opinion like you are and i will not apologise for that. When i first got on the housing market people tried to discourage buying as the area i bought in was fairly unstable. I got lucky with that and consecutive properties and have done very well. I am only 31 and don't have much mortgage left and next week will be moving into a four bed detached so i think i'm not doing too badly. Yes i think the housing market is going to plummet at some point but i think if you are looking for a home and thinking longer term hopefully things will go full circle.

Rebecca x

Lavendyr

Mr_Mister wrote: »

Me and the wife are considering buying a house. We dont know much about mortgages etc. Need to know if its worth buying now or waiting a year later when we will have more money to put towards a deposit. We have no kids as of yet and both are working. Living with the parents at the moment so no rent to pay.
Combined household Monthly Income - £2500
Savings - £7000
Credit Card Debts - £10000 (reducing monthly without spending)

Looking for a property around £200K

Thanks

Hello I would advise you against buying at this time for a number of reasons:

1) You have a substantial debt and the primary focus should be on getting rid of that before buying
2) You have not got enough savings to put up a deposit. On a house of £200k those savings will be eaten up in stamp duty, solicitor fees, surveys etc (not to mention furnishings) very quickly. So you'd need to take at least a 100% mortgage.
3) Based on the info you've given (which I dropped into A&L mortgage calculator), in particular the debt, you may struggle to get a mortgage of the amount you would need, even over 25 years.
4) The housing market is very uncertain at the moment and you could end up losing out if the value of your house drops.

Renting is NOT DEAD MONEY - I get very frustrated with people saying that. Renting is currently very much cheaper than paying a mortgage (whether I/O or repayment). My partner and I rent a lovely house and we save more than the value of our monthly rent in savings each month, between us, towards a deposit. We could not afford to put this kind of money aside if we had a mortgage. But by doing this, we are vastly decreasing the amount of money we will have to borrow when we do come to buy - thereby saving ourselves huge amounts in interest. So by renting and saving now towards a bigger deposit, we are generating no more "dead money" than we would be if we took out a bigger mortgage now.

As far as I can see you are not paying rent currently - you are in a fantastic situation to save up and pay off your debts. Concentrate on doing that first, and on getting up the career ladder & boosting your incomes (as OH and I are also doing) and in another 2-3 years time you will most likely find yourselves in a far better situation to buy.

izzybusy23

abbecer wrote: »

I certainly don't feel like i have made a huge big mistake and if i have i will deal with it as it arises. I am not trying to influence others just giving my opinion like you are and i will not apologise for that. When i first got on the housing market people tried to discourage buying as the area i bought in was fairly unstable. I got lucky with that and consecutive properties and have done very well. I am only 31 and don't have much mortgage left and next week will be moving into a four bed detached so i think i'm not doing too badly. Yes i think the housing market is going to plummet at some point but i think if you are looking for a home and thinking longer term hopefully things will go full circle.

Rebecca x

Fair play to you if you personally have done well but you CANNOT encourage people to jump on the property ladder based on your own personal success. IF you have managed to have very little mortgage left then you obviously timed your purchase before the housing boom. You are advising people to get on the property ladder because you have done well out of it, not seeing that we are in the midst of the biggest credit crunch and housing turmoil in over a decade. Basing the facts on your own personal success is very very dangerous for somebody starting out.. this could encourage somebody to borrow much more than they can afford and push them to financial suicide. And please please please stop saying renting is dead money, because for most who do not have a mortgage, myself included, pay a lot less for rent than we would do on mortgage payments and bank the rest. The whole renting is dead money is a complete fallicy in this current climate and wish people would stop peddling that it isn't and reciting it like its the new catchphrase.

The census of the replies to this thread is DO NOT BUY IN THE CURRENT CLIMATE.