to buy or not to buy

JeffMason

need_an_answer wrote: »

The bond that the money is invested in,is that a static £7k per year or is it something where the interest rate will rise or fall when next invested?

I would always be in the camp that suggests you buy your own property however if you are looking to move around the country for employment then renting does provide more flexibility as its easier to move without having the hassles of selling etc.

Will there cone a point in life where you may want to settle in one place and buy something? If so that's when to do the buying thing however you do need to be mindful that your capital amount is not increasing so as pries rise on property it may become less of a cash purchase and need to be supplemented with a mortgage.


You don't give an indication of your age and how you maty feel as you near retirement and I guess that's for you to decide if its your home or a rental home you wish to while away the days in.


One thing to consider is also the stability of your rental agreement now and also in the future which again leads me to suggest that if you own your property then no one can ask you to leave within a given notice period.


In rented property as a tenant you always have someone else potentially controlling the timeframe in which you stay there.

I'm told that 7k is a solid amount I can take out a year without reducing the current total. I'm not exactly sure how it works yet.

JeffMason

steampowered wrote: »

Remember that inflation will eat away at the value of your savings, and will increase the cost of rent over time.

Inflation is currently running at about 2.5% a year - about £5,000 a year on a £200,000 pot. So you'd need to keep £5k of interest in the savings account for your account to keep the same 'real' value.

I'm not sure what you mean by this, could you explain it like I'm an idiot?

JeffMason

FYI - I'm just gone 40 and so have a while before I'll be thinking of retirement. But yes, I don't want to be renting by the time I get to that point.

need_an_answer

JeffMason wrote: »

I'm told that 7k is a solid amount I can take out a year without reducing the current total. I'm not exactly sure how it works yet.

so at todays money its almost covering rental payments with an easy top up.

In 5 years time if rent increases and the bond return does not you end up with a higher proportion to self fund

Fast forward 10 years and that may be the point that the initial investment hasn't increased,neither has the return,but the chances are that house prices will have at least risen some and possibly disproportionately to the bond.

And in 20 years time or retirement time


Decisions decisions

No one has the crystal ball but if you look at the cost of housing over the last 20 years you could buy a damn sight more with your money back then compared to now.

tlc678910

Hi
I think you should buy and keep aside 10k as an emergency fund as well as the buying fees and expenses. This means you might require a small mortgage to get the property value you have quoted.

Of course property prices can go down as well as up but generally over a longer period they do go up. (The 10 years or so they haven't gone up in many areas at the minute is very unusual). So it's likely if you decide to buy in 5 years that the same property would cost you more and (as pointed out above) you are spending the interest on your bond so the gap between your money and what it will buy you will widen. If you buy a flat/house and prices do fall generally it will still be worth 1 house/ 1 flat.

As your small mortgage will be less than your rent you could try to save more so you are financially secure should you have an emergency or need moving expenses etc. I think keeping 100k in the bank (your half and half idea) is probably not necessary and might be more tempting to dip into it so you end up with less savings but still the bigger mortgage.

Good luck with whatever you decide
Tlc

eidand

you can't look at it in a simple "rent costs me X, mortgage costs me Y".
By paying rent you pay someone else's mortgage and have nothing to show for your money. With your own property you build up equity and you invest in something which is yours. Big difference, if you ask me.

JeffMason

Just wanted to say thanks all - very helpful and much appreciated!

Crashy_Time

steampowered wrote: »

Remember that inflation will eat away at the value of your savings, and will increase the cost of rent over time.

Inflation is currently running at about 2.5% a year - about £5,000 a year on a £200,000 pot. So you'd need to keep £5k of interest in the savings account for your account to keep the same 'real' value.


Remember that taking a mortgage does not change the return you get from the property. The value of the property is the same whether it is mortgaged or not.

If you are tempted to take a half mortgage rather than buying outright, the true calculation you should be running is whether the interest rate you'd get on your savings (after tax) would exceed the interest rate on your mortgage. Mortgage rates are at record lows right now so if you get a good rate on your mortgage this is entirely possible.

I think if you are looking to stay put for more than 3 years or so, for a £200k property the maths works in favour of buying.

Why are we still on emergency interest rates in that case? When the 200k goes into a house it is no longer a liquid cash cushion, what happens if you lose your job?

buggy_boy

Crashy_Time wrote: »

Why are we still on emergency interest rates in that case? When the 200k goes into a house it is no longer a liquid cash cushion, what happens if you lose your job?

There is no such thing as "emergency rates" its made up by the media, we are and have been for a long time on historic low interest rates.

Just do what you think is best, yes you might lose your job, rents might rise, house prices might rise, house prices may fall, interest rates may rise. Just make sure you have enough of a buffer so you are not stretching yourself too much.

If you try to gamble yes you can win if house prices do crash and you could be laughing, the problem is Crashy and others on HPC tried doing this a decade or more ago, house prices increased and they have lost out by thousands apon thousands of pounds. Crashy comes on here in some vein desperate attempt to stop people buying to somehow change "sentiment" which he thinks will somehow cause a crash and he can say he was right (Even though financially it was still the wrong decision)

Crashy_Time

buggy_boy wrote: »

There is no such thing as "emergency rates" its made up by the media, we are and have been for a long time on historic low interest rates.

Just do what you think is best, yes you might lose your job, rents might rise, house prices might rise, house prices may fall, interest rates may rise. Just make sure you have enough of a buffer so you are not stretching yourself too much.

If you try to gamble yes you can win if house prices do crash and you could be laughing, the problem is Crashy and others on HPC tried doing this a decade or more ago, house prices increased and they have lost out by thousands apon thousands of pounds. Crashy comes on here in some vein desperate attempt to stop people buying to somehow change "sentiment" which he thinks will somehow cause a crash and he can say he was right (Even though financially it was still the wrong decision)

Some of your predictions are more likely than others IMO.