Anxious about buying - any help hugely appreciated.

housebuyer143

Sarah1Mitty2 said:

Putting "most of your savings" into a property is a very very bad idea.

Most FTBs sink all their savings into their first house. It's only when you are older you have the luxury of holding money back. 

Schwarzwald

SprostonGreenHead said:

Sarah1Mitty2 said:

Putting "most of your savings" into a property is a very very bad idea.

Really?

Surely the vast majority of people do this. Your house is likely to be (for most people) the most valuable asset you own (or are paying off a loan on, to own). Seems to me entirely normal and not at all a bad idea to put "most" (which is any amount over 50%) of your savings into a deposit for a home.

SprostonGreenHead said:

Sarah1Mitty2 said:

Putting "most of your savings" into a property is a very very bad idea.

Really?

Surely the vast majority of people do this. Your house is likely to be (for most people) the most valuable asset you own (or are paying off a loan on, to own). Seems to me entirely normal and not at all a bad idea to put "most" (which is any amount over 50%) of your savings into a deposit for a home.

There is a difference, especially in this uncertain (employment) climate between 

Having 92k savings and using 90k for a deposit with no emergency funds and

Having 110savings and using 90k with 20k emergency funds.

Otherwise agree with most comments:

If upgrading/saving the additional deposit takes you <1 year, hold out.

If you have an unstable job with the risk of getting laid off in next 12 months and limited prospects to find employment in your local area given lack of alternative employers, act cautiously.

If you have stable employment but limited income growth prospects and limited savings ability, progress as planned.

jrawle

When I was moving to an area to start work, I was looking for somewhere to rent initially, and adamant that I wanted to live in a house, as I'd never lived in a flat. Just before travelling for viewings, I also arranged to see a couple of flats, to make the trip worthwhile. I found that a one bedroom flat offered more space than even a two bedroom house, and was much better value for money. I rented one, and ended up buying it from the landlord after 18 months. I'm glad that opportunity came up, otherwise I'd probably not have bought a flat, yet it proved to be a good move. This was just before the financial crisis in 2008, too. I stayed there just over 10 years, by which time I'd paid the mortgage off, and was able to buy a decent, detached house.

I don't know about Hertfordshire, but I'm in Oxfordshire (not Oxford) and not London, and I haven't found that the price change in flats has been proportionally different from houses. If you are not on the housing ladder, price increases will always hit you worse. Also, if you buy and mortgage rates do drop, you'll benefit once you take out a new mortgage deal.

So I'd make these points. Don't be put off a flat just because it's a flat. Yes, you might hear the neighbours, but that's true of a house unless you can afford a detached one. Certainly, don't be put off by leasehold, etc. If you stay where you are and rent, you are wasting money every month that you could be building equity with or saving towards your second step on the housing ladder if you bought a flat.

On  the other hand, you probably shouldn't buy anywhere with the aim of moving in two years' time. I think the usual rule of thumb is five years. I would plan to be in the flat for 5-10 years. (Of course, if you found yourself in a good position to trade up before then that made financial sense, you could still go for it.)

Jonboy_1984

Something to bear in mind is that selling the flat and buying a house will probably cost circa £10-15k (based on £3k legal, £2-3k estate agent, £3-4k stamp duty, £1k mortgage fees, £1k moving costs etc etc).

Sarah1Mitty2

If you buy now and prices drop heavily (that is what interest rate rises do to prices) you will have lost all your savings, a house isn`t a savings account where the money is guaranteed to be there when you need it.

Cambsalex

Hi all,

Thanks so much for your thoughts and incites on this. It's really, really helpful to have this from people who know the process much better than I do. It seems most people here would advise against buying this flat. Does the interest rate of 2.2% not mean I'd be passing up a great opportunity to be on the ladder? I would be saving around £230 a month from a mortgage on this as opposed to renting, meaning I could save money monthly after buying. I am concerned though that most people think the property price would fall and that living somewhere 2-3 years is not advisable? I didn't even consider the costs of selling and buying a house as Jonboy put it. Really torn on what to do here but thanks all for your help! 

Ath_Wat

SadieO said:

Sarah1Mitty2 said:

Putting "most of your savings" into a property is a very very bad idea.

Genuine question - why? And how else would people become homeowners other than by saving up and then using that money as a deposit?

The poster you are replying to has, in various guises, spent 14 years trying to talk the market down.  They revealed many years ago that they had sold up to go into rented to wait for the market crash, which never happened.  Their stock reponse is just telling people their houses are over valued and they should pay less, without any supporting evidence.

Ath_Wat

Schwarzwald said:

SprostonGreenHead said:

Sarah1Mitty2 said:

Putting "most of your savings" into a property is a very very bad idea.

Really?

Surely the vast majority of people do this. Your house is likely to be (for most people) the most valuable asset you own (or are paying off a loan on, to own). Seems to me entirely normal and not at all a bad idea to put "most" (which is any amount over 50%) of your savings into a deposit for a home.

SprostonGreenHead said:

Sarah1Mitty2 said:

Putting "most of your savings" into a property is a very very bad idea.

Really?

Surely the vast majority of people do this. Your house is likely to be (for most people) the most valuable asset you own (or are paying off a loan on, to own). Seems to me entirely normal and not at all a bad idea to put "most" (which is any amount over 50%) of your savings into a deposit for a home.

There is a difference, especially in this uncertain (employment) climate between 

Having 92k savings and using 90k for a deposit with no emergency funds and

Having 110savings and using 90k with 20k emergency funds.

While this is true, it is hardly a point of dispute. 90K out of 92K might strictly literally be "most of my savings" but to 99% of people, in common usage, that's "all of my savings".  It's possible the OP only has 92K in all but extremely unlikely.

UnderOffer

Cambsalex said:

Hi all,k

Thanks so much for your thoughts and incites on this. It's really, really helpful to have this from people who know the process much better than I do. It seems most people here would advise against buying this flat. Does the interest rate of 2.2% not mean I'd be passing up a great opportunity to be on the ladder? I would be saving around £230 a month from a mortgage on this as opposed to renting, meaning I could save money monthly after buying. I am concerned though that most people think the property price would fall and that living somewhere 2-3 years is not advisable? I didn't even consider the costs of selling and buying a house as Jonboy put it. Really torn on what to do here but thanks all for your help! 

2-3 years is a fairly short time to be investing and then having to start again but this time also having to factor in you need to sell your current flat, pay EA fees, solicitor fees etc. It’s always advisable to try and aim for a longer term plan so 5 years plus. Also, I think you said you had a fixed rate for 5 years so will have to factor in the additional cost of an early redemption fee or similar if you were to sell before the 5 year expiry. 

I’d avoid the 1 bed flat and try and save and invest in a 1 or 2 bed house, what would be the difference in price for a small house? You have a nice large deposit so that’s good. 

gwynlas

If buying a flat do not forget ground rent and service charges. Also buy in a purpose built block with solid floors as less likely to have noise transference. If you can stretch to a two bed you could always let a room for passive income.