Rent or buy - Interest only or Repayment?

keither2003

Hi all, apologies moderators if this is in the wrong place, I wasn't 100% sure where to post it as it's a bit of a wooly question I guess. 

In short, I'm a FTB, recently back from a year away so have an employment break in my history for any potential lender, but I (will) have a secure job hopefully in the not too distant future, I'm a social worker. I've been renting for years in the same house, which is incredibly cheap, though am super keen to have my own place. I'm also extraordinarily lucky to have a large deposit of up to 70k plus another 140k in an investment thing. When my parent's died I freaked out, saw a financial dude and put 140k from the sale of their house into a mixed portfolio so it was doing something other than sitting in a bank account somewhere. 

I'm looking at all the headlines (arn't we all) about house prices and what they predict might happen to them, and wonder if this might be a good time to buy my first place. I've looked at interest only versus repayment and wondered if interest only might be a good option - I have the means to pay the loan back, have no dependants and if I snuff it I guess the just sell the house to repay the loan. I'd like to ultimately let the investment's keep on doing their thing for the time being, then either pay off the loan altogether in the future before the term ends, and/or pay it off in some big ol chunks. 

I've stacks and stacks of questions but for now I'd like some advice from anyone that might some good advice to share! 

Thanks all! 
x

Slithery

Buy a place with cash for the full £210k and then pump the money that you would have been using to pay off a mortgage into your pension?

Thrugelmir

Options for new interest only mortgages are very limited. Whether your investments will continue to perform well in the short term is open to debate. Only time will tell. 

steampowered

Interest only mortgages were a disaster for a lot of people and not recommended. They are also very hard to get now for residential property (except for buy-to-let).

If you are looking to live in the property, you'll be wanting a repayment mortgage. The most important thing is to get a reasonably low interest rate. I would use the £70k as a decent deposit; and take on a mortgage I could comfortably afford. Leave the £140k invested.

Crashy_Time

Slithery said:

Buy a place with cash for the full £210k and then pump the money that you would have been using to pay off a mortgage into your pension?

Let the effects from the virus/Brexit/Trump V China squabble become clearer first though, don`t waste money. 

keither2003

Thanks for all the advice so far! Slithery did you want to say a bit more about the squabble? I mean I've read/heard a bit about it but don't know an awful lot. I know it's hard to predict but any suggestions as to what wasting of money would entail ? 

Charlieshep

Can anyone advise is there a way for a private landlord to arrange a 'Right to Buy' scheme for their tenants, to takeover their house they are living in?

davidmcn

Charlieshep said:

Can anyone advise is there a way for a private landlord to arrange a 'Right to Buy' scheme for their tenants, to takeover their house they are living in?

You've posted this on a thread about a completely different topic - you'd be better to start a new thread.

saajan_12

PERFORMANCE: Its up to you really on whether you want to invest in property / stock portfolio / both. Depends on which you think will perform better in terms of value appreciation from the current level If you have very strong convictions about either, then borrowing will effectively leverage up your investment (ie you effectively have 210k, if you borrow another 210k, you're taking risk on 420k). In theory, you don't have to buy a property to borrow money - there are loans secured on an investment portfolio. The borrowing could be invested in property or upsize your stock portfolio. 
FEASIBILITY: The other side is what is actually available to you - most residential mortgages are on a capital repayment basis, and require you to have an income. Alternatively you could secure a loan on the investment portfolio - you'd need to speak to a broker to see what's available and how the interest rates compare to a conventional mortgage. 

Basically there are lots of options - speak to a financial advisor and broker to work out what suits you. 

boonkoh

There are three things you need to consider, in my opinion:

1. Opportunity cost. You have the cash to buy outright, but want to use the money for investments. Your opportunity cost is therefore the interest you're paying on the mortgage. Are you confident that your investment of your cash will yield more than you're paying in mortgage? Bear in mind you'll also have to pay income tax / capital gains tax on earnings on your investments, and that the value of them could go down as well as up, so there is extra risk.
2. Interest only vs Repayment. Interest Only mortgages are limited in range, and also usually come with a higher interest rate, so bear that in mind. Also if you go for a fixed rate mortgage for the initial term (eg 2 years or 5 years), those normally only allow you to repay a certain percentage of the outstanding mortgage every year, usually 10% only.
3. Your freedom. I infer that you're currently single, and focused on your career? In which case, mobility and flexibility might be key. Home ownership does not help either, but renting does. What if you meet your dream partner, but for whatever reason you need to move to somewhere else convenient for the two of you? Hard to when you're owning, easier when renting. What if you find a dream job in another city, or 2 hours commute from where you currently live?

As a starting point, I'd advise you to do a financial analysis of buying vs renting, just to see if it stacks up financially first, and then consider all the non-financial pros and cons of buying vs renting.