When would be the best time to move?

redundantmortgage

My decision making when it comes to property has been really bad and costly to date so I want to make sure I don't repeat past mistakes.

At the end of 2011 I was about to turn 30, married, just over £20k in the bank and living in an area I was happy to live in for years to come. A one bed flat in my postcode sold on average for £180k that year which was affordable. It therefore felt like the right time to think about buying.

However I was conscious that you can end up spending more on interest than capital and you need a 25% deposit to get the best interest rates. Therefore I decided to save that 25%. As this was going to take at least a couple of years I went off the basis that prices would be £200k by then so my target was £50k.

In 2012 the average was £183k and in 2013 it was £185k and at the end of 2013 I'd reached £50k. I started looking in early 2014 but they were around the £220k mark which ended up being the average price that year. It meant saving an extra £2.5k to reach 25% but I targeted £70k to make up the £20k difference and hoped the prices would come down when I reached it.

I reached £70k in the summer of 2015 but prices had gone up even further, the average ytd price at that point was £241k. I went to see a mortgage advisor who said I was more than ready with my deposit and that you always end up paying more than you expected to, so I decided to take the plunge.

Then presented the next issue, one bed flats in my postcode weren't coming on the market. It took me over a year to find somewhere and I ended up buying for £260k and moved in at the end of 2016. 

All in all I spent £80k more than I would have 5 years prior and spent around £55k in rent in that period so that's £135k extra I've paid overall. I would have paid more interest, but so far in my mortgage I've paid just under £10k interest which is only a fraction of £135k.

I've overpayed my mortgage as much as possible and have made the maximum overpayments for this year. My deal ends at the end of June. I have £21,083 left to pay and £37,256 in the bank so hopefully on July 1st I can pay off the remaining balance.

The long term aim has always been to move into a house. As my flat was a house converted into 2 flats then the price of a house should be no more than the price of my flat x 2 as it would have been converted to flats in the first place to make a profit. 

What hit me financially when waiting to buy was a combination of property prices increasing and rent paid. This time I have no rent to pay and if property prices do rise then so should mine so in theory I shouldn't be hit financially in the same way if I do wait.

The property I rented before buying which is a similar property in the same area has just come onto the market for £260k so it looks like the price of my flat hasn't gone up at all since I bought it. I know your property value going up doesn't make you richer but it's a real kick in the teeth that it went up so much before I bought and hasn't gone up at all since.

Another thing, there's work that needs to be done on the property to make it sellable.

The main thing that's making me reluctant to take out another mortgage is relying on my job. I was made redundant last year and it took a while to find any work at all and didn't get a permanent job until earlier this year. That makes me just want to save up the difference and buy in cash in the knowledge I'm mortgage free if I get made redundant again.

Basically I worry that if I buy too soon I'll pay a fortune in interest and never get to the end of the mortgage but if I leave it too long it will have a big financial impact somehow and I'll price myself out for good.

Gavin83

You're worrying far too much about the interest on your mortgage. Yes, you'll pay some interest but as you pay it off and your property value increases then you'll get more favourable rates that way. If you can afford a house I'd buy one.

Also, to be entirely honest your timings are terrible. You should have bought back in 2011 when you were in a position to and as you're clearly aware of you'd be in a much better position now. It was also about the worst time to buy a flat possible. You had Grenfell just after you purchased and flats in general are considered a far more risky proposition that they were back then, which'll obviously push down prices. Given where you live a one bed flat is worth £260k I suspect you live in an expensive city too which has seen stagnating prices as people flee to cheaper, more rural areas and take advantage of home working.

However you can't change the past, only decide what you want to do going forwards. It's ultimately a gamble. People could suddenly realise home working isn't as widespread as they expected once Covid is over and flock back to the cities. Confidence in flats could return and the value will go up. Similarly the situation for flats could get worse and you could actually find the value of your flat decreasing as time goes on.

Personally in your position I'd be cutting my losses, selling up ASAP and moving into a house. However there's no way I'd buy a flat at the moment generally anyway. It's your decision though, no one with any certainty will be able to tell you what to do.  

Snookie12cat

redundantmortgage said:

My decision making when it comes to property has been really bad and costly to date so I want to make sure I don't repeat past mistakes.

At the end of 2011 I was about to turn 30, married, just over £20k in the bank and living in an area I was happy to live in for years to come. A one bed flat in my postcode sold on average for £180k that year which was affordable. It therefore felt like the right time to think about buying.

However I was conscious that you can end up spending more on interest than capital and you need a 25% deposit to get the best interest rates. Therefore I decided to save that 25%. As this was going to take at least a couple of years I went off the basis that prices would be £200k by then so my target was £50k.

In 2012 the average was £183k and in 2013 it was £185k and at the end of 2013 I'd reached £50k. I started looking in early 2014 but they were around the £220k mark which ended up being the average price that year. It meant saving an extra £2.5k to reach 25% but I targeted £70k to make up the £20k difference and hoped the prices would come down when I reached it.

I reached £70k in the summer of 2015 but prices had gone up even further, the average ytd price at that point was £241k. I went to see a mortgage advisor who said I was more than ready with my deposit and that you always end up paying more than you expected to, so I decided to take the plunge.

Then presented the next issue, one bed flats in my postcode weren't coming on the market. It took me over a year to find somewhere and I ended up buying for £260k and moved in at the end of 2016. 

All in all I spent £80k more than I would have 5 years prior and spent around £55k in rent in that period so that's £135k extra I've paid overall. I would have paid more interest, but so far in my mortgage I've paid just under £10k interest which is only a fraction of £135k.

I've overpayed my mortgage as much as possible and have made the maximum overpayments for this year. My deal ends at the end of June. I have £21,083 left to pay and £37,256 in the bank so hopefully on July 1st I can pay off the remaining balance.

The long term aim has always been to move into a house. As my flat was a house converted into 2 flats then the price of a house should be no more than the price of my flat x 2 as it would have been converted to flats in the first place to make a profit. 

What hit me financially when waiting to buy was a combination of property prices increasing and rent paid. This time I have no rent to pay and if property prices do rise then so should mine so in theory I shouldn't be hit financially in the same way if I do wait.

The property I rented before buying which is a similar property in the same area has just come onto the market for £260k so it looks like the price of my flat hasn't gone up at all since I bought it. I know your property value going up doesn't make you richer but it's a real kick in the teeth that it went up so much before I bought and hasn't gone up at all since.

Another thing, there's work that needs to be done on the property to make it sellable.

The main thing that's making me reluctant to take out another mortgage is relying on my job. I was made redundant last year and it took a while to find any work at all and didn't get a permanent job until earlier this year. That makes me just want to save up the difference and buy in cash in the knowledge I'm mortgage free if I get made redundant again.

Basically I worry that if I buy too soon I'll pay a fortune in interest and never get to the end of the mortgage but if I leave it too long it will have a big financial impact somehow and I'll price myself out for good.

You need to stop overthinking things. 2011 was just after the crash and houses were quite low, now as you said yourself they have shot up. You clearly gave a lot of thought to how much houses tend to increase in value by when making decisions, but that isn't how house pricing works. Lots of things influence the prices.
There is such a thing as overthinking your actions and I think you are doing it. 

Flats tend to increase less in value than larger houses, because houses have a higher demand in most areas. If you want the house, get a small mortgage and get it. You will get it on very cheap interest and it will be paid off relatively quick.

Sometimes in life you need to jump without all the what ifs and take a risk. No one can predict the future, so start living in the present.

akorn77

I'd echo the posters above. Live for the now. Do whatever will make you happy but make sure to stay within your financial means. Any borrowing should be affordable, and you should still be saving at least 20% if your take home pay per month as a buffer. 

You can never ever time the market. 

jimbog

akorn77 said:

I'd echo the posters above. Live for the now. Do whatever will make you happy but make sure to stay within your financial means. Any borrowing should be affordable, and you should still be saving at least 20% if your take home pay per month as a buffer. 

You can never ever time the market. 

As above. Think about your personal circumstances and what you can still afford if interest rates/other commitments were to change and what is right for you

As others who have tried to time the market have found - that time never arrives and they are still where they are. Hindsight is a great thing but you can only do that in the future

lookstraightahead

I bought very early aged 21 - and then general life hit me; divorce, death, debt, negative equity - loads of negative things, which meant me renting for a long time and spending a lot of money.

you can't predict the future, whether you've bought or not, made money or not, have a house or a flat, you have to live life.

if you want to buy a house, just buy. House prices fluctuate don't buy it as an investment, buy it to live in and get on with the rest if your life.

There is nothing wrong with a flat or a house, buying or renting etc. So much emphasis is placed on the bricks we live inside.

When I was in so much debt with a horrible divorce and children to consider, I would have done anything to not have those problems. Look at the great position you've worked hard to put yourself into 👍

Hedgepigs

Buy for a home, not an investment. If things go your way and it turns out to be a good investment too, well happy days. But as long as it's affordable, just buy somewhere that makes you happy and you enjoy - life's too short to worry about anything else. 

redundantmortgage

Appreciate the comments.

I know my timings have been terrible and I'm trying not to make the same bad decisions. I'm not sure whether Grenfell would have made my flat less desirable. It's the same as a house except I only own 1 floor and its share of freehold so no service charge etc. 

The flat I last rented was listed on Dec 13th and I looked again today and it's been sold. Realistically the only way onto the property ladder in my area is to buy a flat first so there should be demand there. I do get people are moving to cheap areas because of remote working though. 

I'm not trying to get rich out of it, I just want to be able to get to the point where I'm mortgage free in a forever home so I know whatever else happens I have a roof over my head.

If we say I pay the mortgage off at the end of my deal on July 1st and my flat is worth £260k and I need to spend another £260k to buy a house then on paper I can afford it. That doesn't mean I can afford it though. If the interest rate was 5% then that's £13k interest a year which is more than my mortgage costs me at the moment excluding overpayments. I know interest rates aren't that much at the moment, but they could be in the future.

If we say I can save £30k a year once I've paid off my existing mortgage and decide to buy 3 years later and the difference is £170k then I see that as a good decision. If the gap widens to £90k over those 3 years then it's a terrible decision. 

Snookie12cat

redundantmortgage said:

Appreciate the comments.

I know my timings have been terrible and I'm trying not to make the same bad decisions. I'm not sure whether Grenfell would have made my flat less desirable. It's the same as a house except I only own 1 floor and its share of freehold so no service charge etc. 

The flat I last rented was listed on Dec 13th and I looked again today and it's been sold. Realistically the only way onto the property ladder in my area is to buy a flat first so there should be demand there. I do get people are moving to cheap areas because of remote working though. 

I'm not trying to get rich out of it, I just want to be able to get to the point where I'm mortgage free in a forever home so I know whatever else happens I have a roof over my head.

If we say I pay the mortgage off at the end of my deal on July 1st and my flat is worth £260k and I need to spend another £260k to buy a house then on paper I can afford it. That doesn't mean I can afford it though. If the interest rate was 5% then that's £13k interest a year which is more than my mortgage costs me at the moment excluding overpayments. I know interest rates aren't that much at the moment, but they could be in the future.

If we say I can save £30k a year once I've paid off my existing mortgage and decide to buy 3 years later and the difference is £170k then I see that as a good decision. If the gap widens to £90k over those 3 years then it's a terrible decision. 

You are really trying to predict something that can't be predicted tbh.

Interest rates are not 5% and they may very well never get to that limit for decades. If you can afford the payments at 3%-4% interest then there is minimal risk. 

I think you need to think about what you want. If you want to live mortgage free then do not move, if you want a house and you have many years working left then you should do it because the longer you wait the chance the interest rates go up, prices go up etc and your payments go up as the term is shorter. 

As others have said, you only live once. If you don't go for the things you want and can afford then what's the point.

Slithery

Snookie12cat said:

Interest rates are not 5% and they may very well never get to that limit for decades. If you can afford the payments at 3%-4% interest then there is minimal risk.

Borrowers have been stress-tested by lenders against a 7% interest rate for over a decade now.

If you're up against your limit then you won't get a mortgage if you can only handle 3%.....

aoleks

You don’t need a 25% deposit to get a good rate. Even 95% LTV mortgages have a good rate nowadays, lower that to 90% and you’re laughing.

you worry too much about interest rates, especially since you have a habit of overpaying. Buy now, things will only get more expensive (much more expensive!!!).