Am I a fool to buy now? FTB

Okinaw

Hi,

I've seen a property I like and have had an offer accepted of 225k. House needs no work doing what so ever, is suitcase ready and decorated to my taste in my prefered area on a really desirable estate

Solo applicant looking at a 3 year fixed Deal at 75% LTV (I thought a happy medium between 2 and 5 and I may wish to move by then)

Either YBS at 5.32% and £935 pm or Leeds BS at 5.42% and 945.47 pm

It is right at the edge of affordability and these are the only two lenders I have a chance with, though I doubt I'll be approved. After all my essential bills (mortgage, CT, utilities, phone, car finance, broadband) and an admittedly quite generous allowance of 600pm to cover food, fuel and non essential spending I'll Be left with approx 300pm

My rent currently is 595, I have a very easy landlord (not increased my rent over the 2 years I've  been here) and I have a very comfortable standard of living

Given the situation am I being a complete fool?

gazfocus

It's a question that unfortunately nobody can answer but you. A few things to think about:
How does your current rent compare with market rents in your area?
Is your landlord likely to want to sell up any time soon?
If your current rent is low compared to others in your area, and your landlord has a mortgage, he/she may be forced to increase your rent in the not too distant future as his/her mortgage rates will be rising.
How does your current home compare to the one you've offered on? 

Personally, the general consensus is that owning your home is better than renting, but you need to bear in mind that you are then responsible for repairs, etc.

Adamc

With it being at the upper limit of what you can afford you will need to consider saving your excess income for emergencies and maintenance. 

MultiFuelBurner

As a first property I would always want one I could add value to not ready move in. This not only gets you into DIY it also means when you do move you don't discount properties that need a little work.

grumbler

Starting interest on your mortgage will be about £760 p.m. - bigger than your rent. Also, you will lose about £190 p.m. interest that you can currently get on your deposit amount.
Based on these figures, renting makes more financial sense, but this doesn't take into account any possible changes in house prices in future.

MEM62

If not now, what change in circumstances would trigger you to do it in the future?  

jimbog

MEM62 said:

If not now, what change in circumstances would trigger you to do it in the future?  

This is a pertinent point. The HPC crowd are always shy when questioned as to what interest rates/inflation/house price index needs to be for them before buying. But you need to factor in criteria unique to you: probable salary increases, family plans, job security and other financial commitments too. Would taking in a lodger be an option if you needed to?

comeandgo

When you say you may wish to move by then, do you mean move mortgage provider or move house.  If it’s move house then I’d say don’t buy.  Prices are in the decline and if you want to sell in a couple of years time then you have to look at moving costs which I think would be higher than any equity you may have got.  Gosh I’m sounding like Crashy.

ProDave

We are heading to a higher inflation / interest rate phase, some would say back to normal after the artificially low rates of the last decade or more.

The big advantage of that (as it was in the 80's) is your wages will be going up, about 7% pa at the moment according to the news last night.  So your repayments may be tight initially but it won't be long before your income goes up and things become easier.  This is just how it was when I bought in the mid 80's, not a penny spare in year one, but by year 3 my wages had risen enough to think about moving to a bigger house.

daveyjp

If you want to buy your first property the best time to buy it is yesterday.

The first 3-5 years are generally hardest, but as long as you maintain employment, get wage rises the cost just becomes something you pay, just as you do now with rent.

GDB2222

MEM62 said:

If not now, what change in circumstances would trigger you to do it in the future?  

For the last 15 years interest rates have been low, so the mortgage has often been lower than the rent. That’s not the case currently. 

It’s difficult to get the timing right, though.