London FTB: Rent, Buy or take a risk with Help to Buy equity loan?

londonftbhelp

Hello all,

I've been agonizing over if i should carry on renting, buy a property, or use the help to buy equity loan scheme for months now. Im hoping the helpful people of this forum can give me some insight.

About Me

28 years old, male, single

Civil Servant on salary of 42k p/a

Deposit of approximately 80000k in a S&S ISA, cash, 4k in a LISA, 12k in an ‘old’ Help To Buy ISA

Budget for mortgage per month

10k emergency fund

From 2024 there is about a 50% chance I’ll be posted overseas on government service for three years. Accommodation etc will provided.

Currently saving about £200 pm

Continue to Rent

Currently renting for 950pm excluding bills in Zone 2.

I could continue to rent until 2024 or beyond, and

Advantages: I remain in rental accommodation that I am happy with that is a short commute. I don’t expose myself to a risk of a housing market crash. I don’t have to go through the stress of buying a house.

Disadvantages: Continue to pay 950pm on rent

Help to Buy Equity Loan Scheme in Central London

I could take my 80k deposit, add a 200k mortgage and 40% government loan under the Help to Buy Equity Loan Scheme and purchase a new build property up to 466k, ideally a two bed so I could get a lodger.

Advantages: I can get on the property ladder and stop paying rent. I can remain in central London. I could get a lodger. Can be rented out whilst I am overseas.

Disadvantages: I take on more debt and therefore more risk, particularly on my salary (property value 11x my salary…). I may struggle to sell-on the property after 5 years, if I chose to. Limited range of properties available. Paying 466k for 1-2 bed property is a lot. Service charges. Leasehold. New build properties losing value upon purchase.

Buy on outskirts of London

I could take my 80k deposit, add help to buy bonus, add a 200k mortgage and purchase a new build property up to 285k.

Advantages: I can get on the property ladder and stop paying rent. Likely(?) easier to resell than a help to buy property. Can be rented out whilst I am overseas.

Disadvantages: Lower quality of property. Significant increase to my commuting time.

Thanks in advance

Getting_greyer

Trying to put myself in your shoes.  Also not sure about c/s paybands & promotion etc. My assumption is that it's a job where mobility to move between postings helps with promotion.

Unless dead set on staying in London long term this is probably a scenario where I'd probably rent for time being and do my best to ensure an overseas post.  Especially if accommodation is subsidised and overseas allowances.  You may find a subsequent  opportunity outside of London on return to UK.

Always a danger of being priced out with inflation but you have v. good savings atm.  I suppose in the mean time if a property popped up that was too good to dismiss you could reevaluate then.

With crashes it's all crystal ball anyway. 

MysteryMe

If it were me I wouldn't buy with the "risk" of an overseas posting in the short term.  I would continue to rent until you know one way or another whether you will be posted abroad.  I'll leave those experienced in being landlords or HTB to advise on options 2 and 3.

One of my best friends has just returned from a government posting abroad. They had 6 years away, two 3 year stints in different locations.  They sold up before moving abroad because they had intended to live abroad after the posting ended but circumstances changed and they have now bought here again. They got several months notice of the first posting.  I think a posting abroad may be profitable for you if their experience is anything to go by so you could save up quite a bit more money and buy on your return.

propertyhunter

You'll definitely save a lot of money working for the civil service abroad where your living costs are covered and I believe your salary gets a boost too? I'd take the posting abroad for sure, mainly because of the life experiences. 

I'm personally not in favour of BTL because I don't think it's a tax efficient way of earning money because you're essentially betting on capital appreciation at a time when the economic outlook is uncertain, more so than its ever been. You actually have done the right thing and put your money into a tax efficient vehicle and then invested in S&S which have the best chance of beating inflation. I'd rather keep it in there if I knew I was going abroad for a few years, but that's just me. 

Also, congratulations for saving that amount of money at the age of 28. 

londonftbhelp

Thanks all for the replies so far. Really helpful. I was not expecting the consensus thus far to be that I should continue to rent!

Just to make a few details re employment clearer:

- My role is realistically London-based, or overseas. I probably wont be able to move elsewhere in the country.
- Yes whilst overseas my accommodation would be paid for and id get overseas allowances (depending on location)
- Theres about a 50% chance im overseas 2024-2027, otherwise it would be 2026-2029.

Many thanks for the kind congratulations re my deposit too

So my thinking with buying was that I would buy a 1 bed flat somewhere in London within commuting distance to the office. I'd live there until I got an overseas posting (2024 or 2026), then get consent to let and let it out whilst I was away to continue to pay off the mortgage. Then i'd have somewhere to move back into on my return. I'd be open with future tenants about the timescales and my intention to return. I could then upsize in the future, perhaps with a partner.

Hope the above all makes sense. I just wanted to lay out my thinking as to why I was looking to buy now rather than when i get back (which could be as late as 2029).

If people have any more thoughts, please do let me know

Thanks

[Deleted User]

Thank you for being transparent about your circumstances, this always helps. Also, huge congrats on having saved so much by the age of 28. I wish I was as financially savvy in my 20s! 

I am inclined to agree with the other posters re: renting prior to being posted abroad. Unfortunately, it is not black and white - there are advantages and disadvantages to both renting and buying, but I think buying could potentially complicate things for you if you were to move abroad, and give you a lot of hassle to deal with while you are away.

I suppose there are a few questions to ask which may make a solution more clear: Is there a particular reason you're considering buying at this stage? Are you happy enough in your rental property? How do you feel about a potentially much longer commute if you were to buy outside central London?

londonftbhelp

thanks Deleted_User. What sort of hassle could i have to deal with? If i was renting it out, I was planning to use an estate agent to manage the process. I was hoping this would mean the burden on me would be light. But I may be missing something.

My drivers for buying would be financial - to save on 2 to 4 years worth of rent, and to be able to rent the property out whilst i was overseas. However, i am happy in my rental property (20 min commute). I could happily do 45 mins commute but not much more (I previously commuted 90 minutes each way and have no desire to return to that).

Thanks for the advice all, i know my situation is a bit unusual.

[Deleted User]

I don't have any experience of this situation specifically, but I know that having landlords who are out of the country can be difficult for both parties if something goes wrong. If you will be having an estate agent manage the property, that certainly eases the burden!

I totally understand your position regarding saving rent, especially as you pay so much of it being in London. I think possibly the main factor in holding off buying is the uncertainty regarding whether you will remain in the UK in coming years, but you seem to have a very realistic plan in place. Wishing you the best of luck!

[Deleted User]

Buy a place. It will be small but it’s a step on the ladder. That’s what I would do.