Completely confused - buy or rent???

kai1

I've been trying to buy a property for almost 6 months now. For various reasons to do with the properties or the vendors, I've had three properties fall through. I have a mortgage secured until Nov at a rate of 4.99% (repayment) and a deposit of over 12% of the purchase price. I also have some savings and no debts.

I am planning to buy primarily for somewhere to live (and hoped to rent out a second bedroom to help with the mortgage). But it was always supposed to be a first home, something that I'd eventually sell for something better or rent out in future. Basically a stepping stone to something better, not somewhere I want to be stuck the next 20 years.

The more and more I read on these forums, the more worried I become about buying. No one can say whether there will be a crash but it would horrible to buy at the peak of the market and find the property lose value over just a few months.

On the other hand, if I carry on renting, I may have some security (the 12% deposit for starters) but I'll be paying over the odds for rent (if, as people on here say, in a recession, rents go up).

I'll be honest, renting is looking appealing because it would mean I'd have a whole lot more disposable income to do the nice things in life, but I've grown up with the ethos that owning a home in the long term is an investment and renting in the long term gives you no security.

Any thoughts/advice on this??

mountainlioness

Hi there

I'm not an expert so can only give you my personal view - I'd buy somewhere, somewhere that you can afford even if interest rates go up again (you didn't say if it was a fixed rate or no but 4.99% is pretty amazing in this day and age!) Maybe that means downsizing your plans or adjusting your location expectations but if you can afford it owning is a good plan... I haven't really seen any credible evidence for a crash, particularly given recent inflation stats and analysis that suggests interest rates are likely to be held for the rest of the year. Demand is so strong for property that (again not claiming any expertise here!) a crash just seems unlikely - reduced growth, even stagnation - huge regional variation here of course - but probably not a crash.

I guess I just don't like the thought of paying someone else's mortgage! Even if it means a little less disposable income, you're investing in your future... and there's plenty of sage advice on here to help you maximise what you do have.

So in summary - sorry for the long and not v helpful post - how about some serious research on up and coming locations/areas to buy, deals on new properties, available refurbishment properties etc? Some maths on income/expenditure and possible additional sources of income/savings opportunities etc?

cowbutt

kai1 wrote: »

I've been trying to buy a property for almost 6 months now. For various reasons to do with the properties or the vendors, I've had three properties fall through.

That's pretty unlucky; you have my sympathies.

I have a mortgage secured until Nov at a rate of 4.99% (repayment) and a deposit of over 12% of the purchase price. I also have some savings and no debts.

Good, good.

I am planning to buy primarily for somewhere to live (and hoped to rent out a second bedroom to help with the mortgage). But it was always supposed to be a first home, something that I'd eventually sell for something better or rent out in future. Basically a stepping stone to something better, not somewhere I want to be stuck the next 20 years.

The more and more I read on these forums, the more worried I become about buying. No one can say whether there will be a crash but it would horrible to buy at the peak of the market and find the property lose value over just a few months.

If you're buying a home, rather than an investment, a smallish short-term loss probably isn't worth worrying about. I bought in November 2006, and like you, I'm concerned about a large long-term loss, but that's probably somewhat unlikely (not impossible though; Japan's real estate market crashed horribly in the 90s).

On the other hand, if I carry on renting, I may have some security (the 12% deposit for starters) but I'll be paying over the odds for rent (if, as people on here say, in a recession, rents go up).

Not only that, but some buy-to-let landlords may not be as responsible as you're being and may find themselves compelled to sell if they've overstretched themselves. This could potentially result in having to move from rented home to rented home every 6 months or so.

I'll be honest, renting is looking appealing because it would mean I'd have a whole lot more disposable income to do the nice things in life, but I've grown up with the ethos that owning a home in the long term is an investment and renting in the long term gives you no security.

Any thoughts/advice on this??

On the 'rent is money down the drain' adage, I take the view that you can either rent your home or rent your money (i.e. pay interest on a mortgage). There's a little bit in it, but renting also shifts the responsibility for repairs to your landlord, so I think it's a wash. YMMV.

ailuro2

Can you afford the mortgage payments at double what they would be now,even if it meant eating Lidl beans on toast for tea to afford to pay it?

If you can, then buy,but if you are running very close on a budget, then perhaps a part ownership scheme through a housing association could be a halfway house for you?

I remember buying my first flat and the mortgage interest rate going up to 14%:eek: People were posting their keys through the letter of the bank/building society because they couldn't get their house sold, and they couldn't afford to pay the mortgage.

Always stick with what you could pay for.;)

firesidemaid

i also would say buy - especially if you are planning on renting a room out anyway. surely that would make your costs cheaper than renting.

when i first bought, the prices went down when i needed to sell - so i rented it out for 7 years and then took the cash when the prices rose.

back then when prices fell, folks were not really interested in the housing market the way they are today.

i have no thoughts on whether there will be a crash or not. what i do know is that if there was a crash, i (and probably a lot of others) would buy a load of cheap properties and rent them out. i'm sure no crash would last long for that very reason.

you also say that renting is safer - but you can be asked to leave your home at anytime.

just check that you don't have to complete on your purchase by nov. to get that great 4.99 deal. start looking again now!

Sapphire

mountainlioness wrote: »

Hi there

I'm not an expert so can only give you my personal view - I'd buy somewhere, somewhere that you can afford even if interest rates go up again (you didn't say if it was a fixed rate or no but 4.99% is pretty amazing in this day and age!) Maybe that means downsizing your plans or adjusting your location expectations but if you can afford it owning is a good plan... I haven't really seen any credible evidence for a crash, particularly given recent inflation stats and analysis that suggests interest rates are likely to be held for the rest of the year. Demand is so strong for property that (again not claiming any expertise here!) a crash just seems unlikely - reduced growth, even stagnation - huge regional variation here of course - but probably not a crash.

On the other hand, take heed of what many sources are saying, for example:

http://news.goldseek.com/GoldSeek/1187794950.php

In my view buying at the top of the market - unless you have lots of surplus income and don't care about making a loss on your property - is foolish. If the OP is querying whether he/she should be buying on an Internet forum, my guess is that they can't really afford to buy and know they shouldn't. :cool:

cupofassam

4.99% is a good rate. Given the recent troubles with sub-prime lending causing stock adjustments worldwide, it is currently unlikely, in my view, that the BOE will now contemplate a further rate increase this year. Before that, I would have guessed another rise before christmas. Certainly, given the whole sub-prime debacle, it is also likely that house prices deflate as more sensible (and therefore more difficult to get) lending is again practiced. But the value of your house is only really important at the point you want to sell it. It is possible that to buy now is to buy near the top of a market but a.) if it goes down it's more likley to be a dip than a permanent drop b.) that dip won't last longer than you'll own your house and c.) what you'll 'lose' if it does go down in value (and that's only a paper loss, until you sell) is not likely to be higher than the money you'd just give away, and not see again, if you rented. Renting is 100% loss, from one point of view.

getmore4less

Timing the market is tough I had to ride out the drops last time, as long as the mortgage is affordable then you can just sit tight.

The problem then is income, if your job at risk, can you get another in the same area, if not you may have to move. Selling could become difficult and rent may not cover the mortgage.

You have good rate but when it goes up can you still afford it?

A two bedder in a good rental location would be the stepping stone approach.

The other thing is you plan to get a lodger so why not look for a house share (cheaper than renting) and just keep saving up a bit longer.

To me shared ownership are the devils creation worst of both world. You get trapped by being part owner and you still have to pay rent.

Currently in a lot of locations it is cheaper to rent(just comparing the interest on a 100%) and thats what people should do, buying has loads of other costs and issues and you take on a load of debt. The only reason prices have been going up is because mugs keep paying.