To buy a house, or not to buy a house?

Jim19993

Hello, new member so any help would be great.

We have a deposit, yay, and we have a mortgage in principal, yay, and there are places we can buy, yay!

HOWEVER, in the current climate, we house prices rising as is everything and the inevitable recession and housing crash. Is it better (in your opinion) to buy somewhere soon or do we wait, save more, and buy in 1/2/3 years time when the market (potentially) goes down?

We currently rent and with that, are currently throwing money down the drain on a monthly basis whereas with a mortgage, we wouldn't be.

Advice and opinions please

seradane

How much are you spending per year on rent? Is it likely the properties you are looking at go down by this amount or more each year?

Lots of people claim that a crash is just around the corner. At some point they will be right. But for the vast majority of people, the vast majority of the time, buying when they can afford to do so is the right approach.

Anecdote: I bought in Feb 2020. At the time it was, oh, prices will definitely drop because of Brexit. Shortly thereafter, prices were definitely going to crash because of Covid. We bought anyway because we were at the stage in our lives when we wanted to. Not sure anyone would have predicted it would actually go up by 17%.

movilogo

Keep on looking - if you get something in your budget buy it. No one can predict whether and when there will be a crash. In all likelihood while price may go down little bit, there won't be any crash.

Countrysider

We currently rent and with that, are currently throwing money down the drain on a monthly basis whereas with a mortgage, we wouldn't be.

Banks don't issue mortgages for free. They earn interest which is quite substantial over the term of the loan. Have you ever worked out how much a house costs you to buy, not in terms of agreed price + fees but in terms of amount you pay over 25 + years?

Paying interest for 25 years (often near the rent amount) could also be seen as 'throwing money away', but giving it to a bank instead of a LL. Plus everything is your responsibility and risk. New boiler/windows/roof = your cost.

The trade off is that if house prices go up then so does your investment, but obviously this is reversed in a downturn and those of us old enough to remember 2008 know who quickly sentiment goes from a house being an asset to a liability. 

Jim19993

Thanks for the advice so far, more advice the better. To answer the 1 question, the difference between rent and mortgage is about £100 (but will then be spending more on insurance so likely not much difference)

Grabs39

seradane said:

Anecdote: I bought in Feb 2020. At the time it was, oh, prices will definitely drop because of Brexit. Shortly thereafter, prices were definitely going to crash because of Covid. We bought anyway because we were at the stage in our lives when we wanted to. Not sure anyone would have predicted it would actually go up by 17%.

Similar - We found somewhere in Feb 20 and moved in May 20 buying for £178k.  We were concerned (and I had to take a break from this forum due to the constant threads that it was about to happen) that the economy would collapse and house prices would plummet due to covid. You can’t buy a house on our estate for less than £200k now.

I don’t know what will happen over the next few years, but I know that hesitating would have cost us an awful lot over that last 2 years.

blocpartyfan

What a fantastic question to be asking when you are at a huge crossroads in your life. For most of us that are lucky enough to, a house purchase is the largest amount of money we will ever spend personally using a form of long term debt (the mortgage). 

Everything I proffer here is an opinion, even the questions are based on my experiences of buying at the crest of the last peak before the 2008 recession, and opinions. So please feel free to poo-poo and ignore! But if as I intend you find this helpful, then feel free to pontificate...

1. Are you first time buyers? It really can be a very exciting time! Do enjoy that sensation, it's such fun considering and going through the process, whatever happens from here. 
2. Are you buying because you love the place and the location? Helps...a lot!
3. Do you intend on staying there for 10 years? 
4. What if things don't work out as you hope? For example, how might you cope if you need to leave the house in a few years and the price hasn't increased, or perhaps has decreased slightly? After a year you don't like the area, your work situations change for the worse, your life circumstances change (deaths, births, injuries, etc). Would this knock you so far that it would cause significant stress? Or would you be able to lick your wounds and move on?
5. What if the house is worth the same as it is valued at now in 10 years?
6. Can you wait? If so, is it reasonable to wait 2-3 years to see how things work out? If not, you know the answer to this question...

Am sure there are hundreds of other things you could consider. In my own experience, our first purchase did not work out from many perspectives. It decreased in value, I couldn't find work that made me happy, we didn't drive and the house was in a village, ugh so many things. But we did keep the property, and it caused quite some emotional turmoil. But...last year, just over a decade later we sold it and paid off the mortgage on what is our forever home. 

simon_or

Jim19993 said:

Thanks for the advice so far, more advice the better. To answer the 1 question, the difference between rent and mortgage is about £100 (but will then be spending more on insurance so likely not much difference)

If it's an interest only mortgage, comparing the rent and mortgage payment would make sense. But for repayment mortgages, a large portion of the monthly payment goes towards repaying capital, which would more like savings rather than a cost.

Slithery

Debating house prices and the economy isn't allowed on this forum...
https://forums.moneysavingexpert.com/categories/debate-house-prices-the-economy

thegentleway

if you're going to move around in the short term then you're better off renting, if you're planning to stay put it's better to buy.

aoleks

Countrysider said:

We currently rent and with that, are currently throwing money down the drain on a monthly basis whereas with a mortgage, we wouldn't be.

Banks don't issue mortgages for free. They earn interest which is quite substantial over the term of the loan. Have you ever worked out how much a house costs you to buy, not in terms of agreed price + fees but in terms of amount you pay over 25 + years?

Paying interest for 25 years (often near the rent amount) could also be seen as 'throwing money away', but giving it to a bank instead of a LL. Plus everything is your responsibility and risk. New boiler/windows/roof = your cost.

The trade off is that if house prices go up then so does your investment, but obviously this is reversed in a downturn and those of us old enough to remember 2008 know who quickly sentiment goes from a house being an asset to a liability. 

completely irrelevant. the moment a mortgage is cheaper than rent, even at a high interest rate I keep most of the money for myself as the alternative is 100% wasted. also, with a house, I have the option to overpay and speed things up. I can release equity, invest, raise my quality of life, slowly add value and so on. can't do that while renting, I'm afraid.

and at the end of those 25 years, if I deduct the value of the house from all the payments (+ interest) I made, I will conclude that the house was a bargain and a financial engine that built me and my children wealth.

a renter will realise the same thing... except it's not their wealth they generated .