House purchase dilemma

DoDa

I am in a position to be a cash buyer of my next next house but am only planning on staying in the Midlands for 4-years before moving to Cornwall. I am not sure whether to buy or rent for the next 4-years. I had been leaning towards renting, but with such poor interest rates on cash savings am now thinking buying is a better option. Has anyone else had a similar dilemma or thoughts on the best option?

da_rule

If you can afford to purchase a house in cash then you'd need to be wary of the compensation limits if you were going to rent (i.e. spread the money around in £75k chunks in different banks).

It will boil down to a few factors:
1) Do you think house prices will rise at a higher rate than the interest in the accounts?
2) Can you trust yourself to not spend your capital while in rented accommodation?
3) Can you afford the rent without diminishing your capital?
4) if you buy, how confident are you that the house will be easy to sell? This is 4 years away so there is no real way to gauge this.

DaftyDuck

What about buying in Cornwall, as an investment, if you are certain of the later move. Rent in Midlands, let out in Cornwall. You'll need to do your homework on what this involves, but it's a good option.

Davesnave

Depends where you want to live in the Midlands and what funds are available.

I'd say buying in an obvious upcoming area, like King's Heath, would be a good investment and selling wouldn't be too troublesome at the end.

Dafty's option is OK too, but only if you understand what the 'homework' will lead you into with distance renting-out and the legal side of being a landlord.

PS compensation limits have just been raised by £10k, or there's NS&I.

DoDa

Thanks for your thoughts so far....

I not keen to buy in Cornwall prior to retiring and would like to avoid being a landlord generally. I am aware of the compensation limits and would not spent the capital if I rent, as I can afford rent from my salary. I need to live in the Coventry area.

I guess I more concerned about the difference in rent and interest on cash. I'd only get about £2,500 net interest on my savings while paying out £9000+ in rent, which starts to stack up over a four year period.

DaftyDuck

I guess a question worth asking... Are you selling aid, if so, why are you selling?

saajan_12

DoDa wrote: »

I guess I more concerned about the difference in rent and interest on cash. I'd only get about £2,500 net interest on my savings while paying out £9000+ in rent, which starts to stack up over a four year period.

You sound like you know what you're talking about, but basically just balance the costs each way.

RENT:
- £9000 rent
+ £2500 interest on savings
- moving costs during 4 years

BUY:
- purchase costs (legals, surveys, mortgage fees, stamp duty)
- maintenance / repairs
- selling costs (EA fee, legals)

Ofcourse the purchase / sale costs are one offs whereas rent & interest depend on how long you live there, so the longer you live, the more attractive buying becomes.

glasgowdan

saajan_12 wrote: »

You sound like you know what you're talking about, but basically just balance the costs each way.

RENT:
- £9000 rent
+ £2500 interest on savings
- moving costs during 4 years

BUY:
- purchase costs (legals, surveys, mortgage fees, stamp duty)
- maintenance / repairs
- selling costs (EA fee, legals)

Ofcourse the purchase / sale costs are one offs whereas rent & interest depend on how long you live there, so the longer you live, the more attractive buying becomes.

Plus the huge unknown of sale price either way!

ReadingTim

How about a bit property speculation by purchasing off plan?

If a development proves popular, the prices usually go up as each phase of the development is released, which might offset the drop associated with the house not being 'new'. As long as you do your homework on location etc and pick somewhere that's genuinely viable, rather than a marginal development in a less than prime location, I don't see why you won't at least break even...

Cakeguts

Why is the rent as much as £9000 can't you find something cheaper?

caprikid1

My view of these situations is you should always have one house. Never short the housing market to Zero.


Also a 4 year plan easily becomes 8 and that could leave you with a big gap. Brexit could see cornwall funding drop and house prices be more stagnant where as midlands could benefit from extreme London comuting etc.


My thoughts are buy in Midlands as you can never be sure you will do the move and don't want to move between rented every six months.