To Buy Or Rent Long Term. Advice Needed Please?

RentOrMortgage101

To Buy Or Rent Long Term. Advice Needed Please?

I would love to get some advice on our currently situation and welcome any feedback.
Please see below profile of our current position:

Live with partner or nearly 10 years, live in SW England.
We are mid thirties and have one child under 5 currently in nursery. We would like another child within 2/3 years.
Both work full time with combined earnings of £45k, I would like to work part time so this may go down by £5k-ish.
Debts high at £25k & would plan to clear these prior to buying a property. No savings & no other means of raising capital for deposit/fees/stamp duty etc..
Rental prices are quite high compared with average earnings.
Average property prices are about £250k in our area.

In an ideal world I would love to be in a position to buy/mortgage a 3 bedroom house for our children to grow up in. To achieve this we would need to use a significant proportion of our earnings to pay off debts, then save alongside paying quite high rent and trying to maintain a decent standard of living.

However, in light of my finances as they stand I have been thinking of taking a more longer term view and renting for the foreseeable future while paying off debts/saving at a much lower rate.
My concerns over this option are the lack of security not owning the property you live in; the landlord giving notice etc.. and not being able to relax and make the place fully your own.
Also, long term I worry about not having an asset to offset retirement, ideally I would like to plan to own a property outright by retirement so no rent or mortgage to worry about in old age. We may never be able to afford to buy anywhere if the rate in which house prices increases keeps outstripping any increase in salaries.

If you'd like more info please just ask. Thanks in advance, I look forward to your responses.

zagubov

Trying to have a kid in your late thirties isn't always as easy as everybody thinks. The longer you delay it the less likely it is to happen. You should not base the timing of this next conception on ownership of a property.

It would be mad to retain this level of debt.

You might like to work part-time but it sounds like you both need to be working full-time if you're both only able to work in this area. Moving elsewhere might be a wise move.

You might want to think about buying a property simply to stop paying excessive rents. But building up an inheritance asset's a different thing entirely.

lika_86

Given that you have no savings and a large amount of debt relative to your combined income, I'm not sure what choice you have other than renting for the foreseeable future.

The fact that you have no savings should be a concern. Do you have an emergency fund? How will you fund maternity leave for this second child? How has the debt been accrued? Living beyond your means? Get yourself over to the Debt Free Wannabe board, post up an SOA and start getting yourself together financially so that buying a house might one day be an option available to you.

[Deleted User]

Obviously don't know you but if the debts are coming from living beyond your means you might benefit not only from doing an SAE but also really looking at your lifestyle.

What are you spending that isn't necessary to keep house and home together?

Can you reduce your food spending by buying non branded goods, batch cooking and freezing it instead of buying quick cook foods (plenty on the net about this and even on here). Can you clothe yourself and your child from Ebay instead of smarter shops (my second son only has ebay clothes, all Next etc and I pay a tenth of what I used to pay for my older son, - he's much smarter dressed lol)?

Can you move to a cheaper, not so nice area, perhaps a smaller place to reduce outgoings?

A long time ago.., I was definitely one of those working professionals who always had an overdraft, if I wanted something I bought it (bought far too much for my son who I parented out of guilt because of my long working hours), I had credit cards etc and yet I had problems buying food at times. Now I'm not working, I laugh at what I used to consider important. It rarely was. All that expensive new furniture that was all the rage, that fell apart within a couple of years (I buy that on ebay or charity shops too, with careful buying you can get very nice things for a fraction of the price.., and these things last).

Nowadays even Sky isn't a must with the ability to download and watch things on demand and I think its unreasonably expensive now.

always_sunny

you earn £45k combined and have £25k in debt and you are thinking to have another child reducing your working hours and increasing your costs?

There's no point asking questions on a forum in your situation, get the good old spreadsheet out and look at where your money is going.

How much net do you bring home? £3k (or shy of?) How much is rent? How much is food?
How much do you save a month? How did you get £25k debt? etc

ruperts

You might still be able to get a mortgage even with the existing debt. You'd still have to save for a deposit, and the mortgage offer might be on the low side and may not get you your dream home, but it would potentially get you out of rented accommodation much sooner than if you had to pay off the debt first. I would think about having a frank chat with a fee-free broker about how much you could borrow and your chances of being accepted taking into account the existing debt.

Cakeguts

Basically it is a choice. Cars on finance or a mortgage. If you are paying car finance you are wasting a lot of money. It seems that many people who say that they can't afford a mortgage can afford to pay finance for a car. Two cars being paid for on finance can cost the same as a mortgage but you can't have both.

Having a mortgage means that you have to be extremely careful what you spend money on.

ruperts

Cakeguts wrote: »

Basically it is a choice. Cars on finance or a mortgage. If you are paying car finance you are wasting a lot of money. It seems that many people who say that they can't afford a mortgage can afford to pay finance for a car. Two cars being paid for on finance can cost the same as a mortgage but you can't have both.

Having a mortgage means that you have to be extremely careful what you spend money on.

Where did they say anything about car finance?

They are already renting so probably paying about the same in rent as they would be for mortgage repayments on a comparable property. The problem here, as is so often the case, is not the cost of the mortgage repayments but the difficulty of raising a deposit.

Cakeguts

ruperts wrote: »

Where did they say anything about car finance?

They are already renting so probably paying about the same in rent as they would be for mortgage repayments on a comparable property. The problem here, as is so often the case, is not the cost of the mortgage repayments but the difficulty of raising a deposit.

They didn't but so many people buy cars on finance these days that I just wanted to make sure that they and anyone else reading this thread in the future understood that you can't rely on being able to buy a new car on finance if you want to save for a deposit.

saajan_12

With no savings, you have no choice but rent for the time being. There's little point in planning for years down the line when it won't affect the best short term plan: PAY OFF THE DEBT.

Then take a look at how you accrued the debt, as well as where your income is going currently.
* Can you rent somewhere cheaper?
* Cut out / reduce monthly subscriptions/services e.g. expensive phone plans, TV packages, magazines..
* Shop in cheaper places / brands for food / clothes / furniture
* Simplify entertainment / days out / holidays costs

Then look to build up savings by allocating enough for rent, bills and necessaries and directing the rest of your money as soon as it comes in, to a savings account (look at HTB ISAs etc). As it may take a while to build up some semblance of a deposit, I'd wait until then to look at property ownership, as rules / prices / mortgage availability may have changed.