Rent or Shared Ownership

aldino2015

I know this has been asked before numerous times and I have read a few threads but I am still undecided what to do...

FTB currently living at home and I need to find my own place within the next 2/3 months for a number of reasons. Staying for longer than that is not an option. So either way I have to either rent or buy.

I earn about £55k-£60k so between £3.1k-£3.5k a month after tax. Have about £10k outstanding on credit cards. My mortgage pot is only currently £1.5k.

If I rent a 1 bed where I am looking in West London, it is about £1000/£1100 a month. Deposit would off course be needed as well. After all additional expenses I could put £1k/m into my mortgage pot. After 1 year hopefully have £15k in mortgage pot, which would allow me a 5% deposit on a ~£250k property outside of London. Would be bigger property but longer commute time.

If I go SO (similar locations to the renting options) then looking at 25% of about £330k so £82.5kish, 5% deposit minimum so about £4.2k, which I could have within the next couple of months. Monthly total payments would also be about £1000/£1100 a month. Again I could put £1k/m to the side, to staircase if I wanted, or add to the next deposit if I wanted to sell/move in the future. Would be smaller property than the one I could buy outside of London, but better commute times.

So both options have similar monthly costs, and also initial costs. Benefit of renting is no responsibility to household issues and could purchase in a year without the need for SO, but would be tied in to a property that is a lot further away from my work for a number of years. Benefits of SO is I am not just throwing money away for 12 months but at least putting a part of it (maybe £400 or so) into equity. Off course SO is normally overpriced if a new build, so the future equity amount, if selling, is questionable.

I'm really stuck what option is best for me, can anyone help me decide?

Owleyes00

I would vote Option 3: rent for 2-3 years and focus on paying down your CC debt and getting together a deposit greater than 5%. On £60k you could borrow Circa £270k assuming affordability met (paying off your credit card would help here!). Get together £30k and you would be able to buy a £300k property all to yourself 👍🏻

Sunsaru

Owleyes00 said:

I would vote Option 3: rent for 2-3 years and focus on paying down your CC debt and getting together a deposit greater than 5%. On £60k you could borrow Circa £270k assuming affordability met (paying off your credit card would help here!). Get together £30k and you would be able to buy a £300k property all to yourself 👍🏻

I'll second that. 

Pixie5740

aldino2015 said:

I know this has been asked before numerous times and I have read a few threads but I am still undecided what to do...

FTB currently living at home and I need to find my own place within the next 2/3 months for a number of reasons. Staying for longer than that is not an option. So either way I have to either rent or buy.

I earn about £55k-£60k so between £3.1k-£3.5k a month after tax. Have about £10k outstanding on credit cards. My mortgage pot is only currently £1.5k.

If I rent a 1 bed where I am looking in West London, it is about £1000/£1100 a month. Deposit would off course be needed as well. After all additional expenses I could put £1k/m into my mortgage pot. After 1 year hopefully have £15k in mortgage pot, which would allow me a 5% deposit on a ~£250k property outside of London. Would be bigger property but longer commute time.

If I go SO (similar locations to the renting options) then looking at 25% of about £330k so £82.5kish, 5% deposit minimum so about £4.2k, which I could have within the next couple of months. Monthly total payments would also be about £1000/£1100 a month. Again I could put £1k/m to the side, to staircase if I wanted, or add to the next deposit if I wanted to sell/move in the future. Would be smaller property than the one I could buy outside of London, but better commute times.

So both options have similar monthly costs, and also initial costs. Benefit of renting is no responsibility to household issues and could purchase in a year without the need for SO, but would be tied in to a property that is a lot further away from my work for a number of years. Benefits of SO is I am not just throwing money away for 12 months but at least putting a part of it (maybe £400 or so) into equity. Off course SO is normally overpriced if a new build, so the future equity amount, if selling, is questionable.

I'm really stuck what option is best for me, can anyone help me decide?

I wouldn’t rush into buying something especially if you need to leave home in the next 2-3 months as the purchase might not complete in time. 

What about a house share or being someone’s lodger for a few months, although maybe not ideal due to covid, and then look at buying again? If you decide to rent on your own is working from home an option? 

I don’t think there’s necessarily anything wrong with SO but as with all these HTB schemes you need an exit strategy i.e. could you afford to staircase to 100% ownership in the future, are you even allowed to staircase to 100% as you can’t with all SO properties. 

I’d be wary of buying any flat in London at the moment following Grenfell and the cladding issues. 

aldino2015

Pixie5740 said:

I wouldn’t rush into buying something especially if you need to leave home in the next 2-3 months as the purchase might not complete in time. 

What about a house share or being someone’s lodger for a few months, although maybe not ideal due to covid, and then look at buying again? If you decide to rent on your own is working from home an option? 

I don’t think there’s necessarily anything wrong with SO but as with all these HTB schemes you need an exit strategy i.e. could you afford to staircase to 100% ownership in the future, are you even allowed to staircase to 100% as you can’t with all SO properties. 

I’d be wary of buying any flat in London at the moment following Grenfell and the cladding issues. 

Good point about not rushing to buy, I do feel if I went the SO route, I would be settling for whatever is available at the current time, as opposed to waiting for the right property.
House share etc is not an option, need own place as my wife will be joining me next year. WFH not an option unfortunately.
True about the potential cladding issues, and the idea of having a leasehold instead of a freehold is also very off putting. Hmm.

Owleyes00 said:

I would vote Option 3: rent for 2-3 years and focus on paying down your CC debt and getting together a deposit greater than 5%. On £60k you could borrow Circa £270k assuming affordability met (paying off your credit card would help here!). Get together £30k and you would be able to buy a £300k property all to yourself 👍🏻

Did not think of this option as I figured 1 year of throwing rent money down the drain is bad enough, let alone longer. Just hate the thought I am paying off someone else's mortgage instead of my own for an extended period of time. Although as you state longer term it may work out the best option. I will give it some more thought.

wjr4

I’d all work on spending less if you are spending a lot currently! You will also need an emergency fund if you buy a property. 

Leggitte

In my opinion, Shared Ownership is not a short term solution. Long term it can be great. In your situation (reasonably high earner) I would also suggest to rent for a few years to pay of debt and increase your savings and the world is your oyster.

csgohan4

rent money is not throwing money down the drain. The notion pf paying rent is paying some else's mortgage is like paying for any other service. Gym fees, food e.t.c. Which you are paying for the company to rent out the space and other costs.  Or leasing a car and paying interest on it. 

It's not like you could buy the house when you first started working, your paying for  a roof over your head. There is no shame in renting, I did it for just under 15 years. 

Ramouth

The main advantage of shared ownership over renting is security.  You are not at the whim of your landlord selling up or deciding to air bnb.  

These advantages are likely to be outweighed by the higher costs and relative difficulties of buying and selling if you are looking at it it as a short term solution.  Renting while trying to maximise savings seems a better plan IMO.  

Good luck whatever you decide.

aldino2015

It's clear what the general consensus is, and the reasons for it, which I agree with. I guess my personal pride got in the way regarding renting.

Will rent for at least one year, which was my original plan, try to maximise savings then reassess.

Thanks for all of your replies.

SavingPennies_2

Going to make some assumptions here based on your post but if you're living with parents, presumably not paying much for housing expenses, you could be saving way more than what you have on your (high) salary. I'd spend the next few months you have living there saving every single penny you can towards a deposit/ paying off the debt, because when you move out and have rent/ bills to pay you'll find it a lot harder to save, good luck.