Cheap mortgage-free flat vs house

_Peter_

Hello,

I'm in a process of buying my first property and I I'm not sure if I should buy a flat or a house. I own some cash (around 400k) and I would appreciate your advice regarding which kind of property would be the smartest choice:

1. Buying a flat for cash- around 300k and keep the rest in saving accounts and in some small investments (shares etc).
2. Buying a house with 5 year mortgage. The house price would be around 480k which means I would have to take 80k (probably 5 years) mortgage.
3. Buying the same flat for cash (300k) and then a second one for mortgage (100k is enough deposit to buy 300k flat). The second flat would be purely for investment (renting).

We're in our early 30s and we don't need much space as we have no kids. From other side, in the house it's usually more quiet and that's the most important criteria for us - we don't like noise. However, the houses are usually more expensive and having additional 150k in savings would allow us earlier retirement which is very tempting.

Additional questions:
1. What can I deduct from my rent income? If I have 1k rent income and 800 mortgage rate, can I deduct it from my income? We're both in 40% income threshold so I wonder how much money we would actually have from the rent (mortgage is expensive and 40% tax on rent is high).
2 It looks like many people buy a house as expensive as they can afford in hope that the price will appreciate in the future. I was always thinking more about buying a cheap flat for cash rather than taking mortgage up to my affordability. Do you think it make sense to buy a house for 500k in my case?

csgohan4

being a Ll has legal and tax implications, void periods, maintenance costs e.t.c, I wouldn't want to be a LL and the recent interest rate changes for LL makes it even less appealing.


I would buy a house as your family may expand in the future

_Peter_

We're not planning (can't) have kids so I'm pretty sure it's just two of us.

jonnygee2

I'm guessing you are in London?

I'd buy a house for yourselves if I were you, you can't live in a savings account. A house will have the most impact on your lives now. Seems unlikely you will regret the extra space and convenience.

If you subsequently want to retire early, one option would be to sell and move to a cheaper area of the country to release the extra. Few people want to retire in London anyway.

Moneyminded

You say your number one criteria is that a place is quiet and that you are more likely to get this with a house, I think you answered your own question there.

Yes it is important to have savings and ensure you have money put aside for your future/ retirement however you don't want to put up with living somewhere noisy that you will hate in order to pursue future dreams.

If you are certain you want to buy somewhere, you don't have to, then I would take my time to find the place that is right for you both. By this I mean somewhere peaceful, close to work, close to friends/ families and any hobbies you like to do. You have a great amount of money but you are also talking about spending a lot of it, make sure you spend it on something that will make you happy.

Worse case scenario based on what you posted you have a 5 year mortgage. After that you can always save more for retirement/ reduce your hours at work.

I hope you find somewhere great, good luck!

_Peter_

jonnygee2 wrote: »

I'm guessing you are in London?

I'd buy a house for yourselves if I were you, you can't live in a savings account. A house will have the most impact on your lives now. Seems unlikely you will regret the extra space and convenience.

If you subsequently want to retire early, one option would be to sell and move to a cheaper area of the country to release the extra. Few people want to retire in London anyway.

We will definitely retire outside of London - in fact I would move out from LDN now if not the job... Not the best place to live for people who don't like noise, that's why these properties are in suburbs but within commute distance to LDN. Anyway, by the time we retire, the houses will be more expensive everywhere...

House comes also with higher maintenance costs than a flat.I wonder how much higher because:
- it has quite high EPC - >80
- a flat comes with ground fee (200 per year) and a service charge (150 a month)
- council tax is a little bit higher for a house.

I know there will be more repairs in a house but I wonder how much (there is no a service charge). I hate the fact that in flats you pay a service charge and communal areas look sometimes bad. In the house, if there is something wrong on my wall I can fix it immediately. In many flats I can see external wall covered with some white limescale and nobody wants to fix it.
I may be wrong, but if I consider that there is no service charge (and I won't have to extend a lease in the future) then maintaining a modern house (epc >80) is not much more expensive than a flat). What do you think? The house is 90m2 and the flat is 55m2.

Mrs_Soup

If quiet is important to your quality of life I would stay away from flats- buy the house and then later in life you could always sell it and downsize- releasing the equity into savings or for other things if you want to. Being a landlord sounds like a lot of grief if you don't have to so I would buy what you want to live in now.

Retired_Mortgage_Adviser

If you are focused on early retirement then the obvious advice is to buy the minimum that you can live with. How many working years does it take to add 150k to your early retirement pot?

Otoh, given that you will move out of London (and into a significantly cheaper house) for retirement, you can always sell the house and recoup any extra that you spend now, which is more likely with a freehold house than a leasehold flat (which has a lot more variables).

_Peter_ wrote: »

We're in our early 30s and we don't need much space as we have no kids. From other side, in the house it's usually more quiet and that's the most important criteria for us - we don't like noise. However, the houses are usually more expensive and having additional 150k in savings would allow us earlier retirement which is very tempting.

_Peter_

Retired_Mortgage_Adviser wrote: »

If you are focused on early retirement then the obvious advice is to buy the minimum that you can live with. How many working years does it take to add 150k to your early retirement pot?

Otoh, given that you will move out of London (and into a significantly cheaper house) for retirement, you can always sell the house and recoup any extra that you spend now, which is more likely with a freehold house than a leasehold flat (which has a lot more variables).

If I consider the current cost of living or a mortgage (10 years, not 5 years) then it would take about 18 months or max 2 years. With a flat it would be faster as there would not be any cost associated with mortgage.

I agree that I'll be able to sell a house but I will have to buy also something for that (in a cheaper place).

We also consider a different option - a house in cheaper location (for example Welling rather than Bromley) which would be around 400-425k rather than 475k). The area seems to be nice as well but not as much as Bromley (I may be wrong as I live in a completely different part of LDN but that was my feeling).

csgohan4

Welling can be a bit rough in my experience, but you need to go see for yourself

kinger101

I'd always buy a house instead of a flat. Generally more space (including outside). Fewer walls shared with neighbours. You own the freehold. And no service fees.