Buy home or wait for a few months

MFWannabe

Sarah1Mitty2 said:

MFWannabe said:

Sarah1Mitty2 said:

CSI_Yorkshire said:

MFWannabe said:

grumbler said:

moneysaver1978 said:

darksnake09 said:

Hi Guys,

I am in my late 20's and am very puzzled on what step to take so I home someone can shine some light.

I am looking to purchased my first time home, I know no one knows when the right time is but should I wait till the end of the year or next year and see if there is a crash in the housing market along side if interest rates come down. I am renting at the moment but it really feels like money is getting wasted.

Many Thanks !

  how much rent are you paying vs how much mortgage repayments.

IMO, it makes sense to compare the rent to the interest payments, not to mortgage repayments. Anything you pay on the top of the interest is your savings.
That said, first years interest makes the biggest part of monthly payments and the 'savings' are quite small.

This makes no sense 
Of course you need to compare mortgage payments to rent payments 
If you’re paying £1000 per month for rental over 5 years you’ll have paid 60k in rental as opposed to paying off your own mortgage 

In Grumbler's approach you only compare the 'lost' money - which is either the rent or the interest on the mortgage.

If you're paying £1000pm rent for 5 years, yes, you have paid £60k in rental = this money is lost.  If you are paying £1000pm mortgage for 5 years, you haven't paid off £60k of the loan, but much less - a (possibly large) proportion of it is lost as interest payments.  If this is misunderstood, it makes a mortgage seem much more financially beneficial than it actually is.

Looking at the 'lost' money is a sensible proposition for comparison because it is highlighting exactly that, the 'useless' part of your outgoings.

You are preferring to take the 'cash flow' approach.  Also legitimate.  It isn't the only method though.

£1000 pm mortgaged property at these rates will see similar property rent for less than that a month, maybe a lot less if we hit a recession. In both cases you are paying a "cost", one is a cost for a service (renting) the other is the cost of borrowed money (mortgage) but the main thing to remember is that although you can walk away from a tenancy (rental cost) a mortgage debt follows you, even if you have negative equity, even if you sell the house at a loss etc. you are still liable for the original loan at interest.

How do you arrive at this conclusion when rental costs are massively increasing? Or do you choose to ignore these? 

Also a £1000 mortgage property in our area would be far higher rental costs, usually £1200+
You can walk away from a rental? Where then do you live? 

Last few people who told me they did it went back to parents. When was the last time you rented?

Some people don’t have family to go back to, it’s not always that black and white 
Last time we rented was 7 years ago and thankfully managed to buy then 

Bigphil1474

OP, IMO, you buy now if you can afford it and find somewhere you like. You could get a 2 or more year fixed deal so at least you know what you are paying for the next 2 or more years. Interest rates won't remain high, just as surely as they don't remain low. They'll go up and down over the time you have a mortgage as they always have done.

If you have a 25 year mortgage, the first couple of years will be a distant memory at some point in your life. I was fortunate that we were able to overpay our mortgage from about 2010 onwards due to improved personal circumstances. When we started out in 1998 I remember us feeling lucky that we got a deal for under 8%. It's true that the house price was only about 2.5x my salary then, but you can only deal with the market at the time you want to join. We bought the house within our budget the same as people have to do now.

As others have said, you need to sit down and work out the figures for yourself, but I can't see many situations where renting over the long term is better than buying.

The last time I looked at my figures, I reckoned that this house has basically cost us nothing. What we have paid off in the mortgage has been made up in the house value increasing, maybe a small loss in terms of maintenance costs over the years.

jimbog

Sarah1Mitty2 said:

MobileSaver said:

Schwarzwald said:

grumbler said:

MFWannabe said:

grumbler said:

moneysaver1978 said:

darksnake09 said:

Hi Guys,

I am in my late 20's and am very puzzled on what step to take so I home someone can shine some light.

I am looking to purchased my first time home, I know no one knows when the right time is but should I wait till the end of the year or next year and see if there is a crash in the housing market along side if interest rates come down. I am renting at the moment but it really feels like money is getting wasted.

Many Thanks !

  how much rent are you paying vs how much mortgage repayments.

IMO, it makes sense to compare the rent to the interest payments, not to mortgage repayments. Anything you pay on the top of the interest is your savings.
That said, first years interest makes the biggest part of monthly payments and the 'savings' are quite small.

This makes no sense 
Of course you need to compare mortgage payments to rent payments 
If you’re paying £1000 per month for rental over 5 years you’ll have paid 60k in rental as opposed to paying off your own mortgage 

If you pay £1000 p.m. over, say, 20 years (mortgage term), at the end you paid £240K and you own the house.

If you pay £1000 rent, you paid  £240K and own nothing.

Does this make no difference to you?

let me improve that for you:

If you pay £1000 p.m. over, say, 20 years (mortgage term), at the end you paid £240K and you own the house, but you also spent probably 1-2% pa in maintenance or £100k total over 20 years so the adjusted value is more like £140k, plus if you get unlucky house prices might have dropped in your area, so even less ...

If you pay £1000 rent, you paid  £240K and dont own the property, but you also saved the deposit, say 10% or 24k initially, so if you manage to grow that deposit (opportunity costs) at 8-9% pa you end up also around 135k in value.

So you see ... many people will tell you buying is universally the better option, but it really just depends .....

Oh dear! Where to start with your fundamentally flawed and misguided attempt to deter people from buying...

The elephant in the room is that you've paid £240,000 and own the house but twenty years later that house is now worth over £500,000! So even on your skewed figures buying means you would be more than £300,000 better off!

As for suggesting that 20 years on house prices might have dropped... how often in history has that happened?

This is the sort of thing people believed before interest rates started going up, back to historically normal levels last seen 20 years ago, I would expect house prices to start moving back to those levels

a 55% drop in house prices is indeed a bold prediction. Best not to wait for that to happen OP  

GDB2222

This is the weirdest thread. The OP asked whether to buy now or delay a few months. And, that’s been turned into a slanging match as to whether renting is better than buying, or vv.  

Why not give the op the advice he asked for?

Sarah1Mitty2

jimbog said:

Sarah1Mitty2 said:

MobileSaver said:

Schwarzwald said:

grumbler said:

MFWannabe said:

grumbler said:

moneysaver1978 said:

darksnake09 said:

Hi Guys,

I am in my late 20's and am very puzzled on what step to take so I home someone can shine some light.

I am looking to purchased my first time home, I know no one knows when the right time is but should I wait till the end of the year or next year and see if there is a crash in the housing market along side if interest rates come down. I am renting at the moment but it really feels like money is getting wasted.

Many Thanks !

  how much rent are you paying vs how much mortgage repayments.

IMO, it makes sense to compare the rent to the interest payments, not to mortgage repayments. Anything you pay on the top of the interest is your savings.
That said, first years interest makes the biggest part of monthly payments and the 'savings' are quite small.

This makes no sense 
Of course you need to compare mortgage payments to rent payments 
If you’re paying £1000 per month for rental over 5 years you’ll have paid 60k in rental as opposed to paying off your own mortgage 

If you pay £1000 p.m. over, say, 20 years (mortgage term), at the end you paid £240K and you own the house.

If you pay £1000 rent, you paid  £240K and own nothing.

Does this make no difference to you?

let me improve that for you:

If you pay £1000 p.m. over, say, 20 years (mortgage term), at the end you paid £240K and you own the house, but you also spent probably 1-2% pa in maintenance or £100k total over 20 years so the adjusted value is more like £140k, plus if you get unlucky house prices might have dropped in your area, so even less ...

If you pay £1000 rent, you paid  £240K and dont own the property, but you also saved the deposit, say 10% or 24k initially, so if you manage to grow that deposit (opportunity costs) at 8-9% pa you end up also around 135k in value.

So you see ... many people will tell you buying is universally the better option, but it really just depends .....

Oh dear! Where to start with your fundamentally flawed and misguided attempt to deter people from buying...

The elephant in the room is that you've paid £240,000 and own the house but twenty years later that house is now worth over £500,000! So even on your skewed figures buying means you would be more than £300,000 better off!

As for suggesting that 20 years on house prices might have dropped... how often in history has that happened?

This is the sort of thing people believed before interest rates started going up, back to historically normal levels last seen 20 years ago, I would expect house prices to start moving back to those levels

a 55% drop in house prices is indeed a bold prediction. Best not to wait for that to happen OP  

Interest rates hitting 5% used to be a bold prediction.

Sarah1Mitty2

Bigphil1474 said:

OP, IMO, you buy now if you can afford it and find somewhere you like. You could get a 2 or more year fixed deal so at least you know what you are paying for the next 2 or more years. Interest rates won't remain high, just as surely as they don't remain low. They'll go up and down over the time you have a mortgage as they always have done.

If you have a 25 year mortgage, the first couple of years will be a distant memory at some point in your life. I was fortunate that we were able to overpay our mortgage from about 2010 onwards due to improved personal circumstances. When we started out in 1998 I remember us feeling lucky that we got a deal for under 8%. It's true that the house price was only about 2.5x my salary then, but you can only deal with the market at the time you want to join. We bought the house within our budget the same as people have to do now.

As others have said, you need to sit down and work out the figures for yourself, but I can't see many situations where renting over the long term is better than buying.

The last time I looked at my figures, I reckoned that this house has basically cost us nothing. What we have paid off in the mortgage has been made up in the house value increasing, maybe a small loss in terms of maintenance costs over the years.

Until recently they have not gone up or down for 14 years, why would they start doing that now when central bank policy is to make them high and keep them high? 

Sarah1Mitty2

GDB2222 said:

This is the weirdest thread. The OP asked whether to buy now or delay a few months. And, that’s been turned into a slanging match as to whether renting is better than buying, or vv.  

Why not give the op the advice he asked for?

My advice would be to use forums for more or less entertainment purposes (with the expectation of an occasional titbit of useful knowledge) and to actually apply for a mortgage and go to view properties, make offers and then see what the lender valuations come back as, then decide on what you can buy and how much is appropriate value for the current economic situation, THEN come back to the forum with feedback, that is interesting real world info rather than people with mortgages and people who rent shouting "My way is best!" DYOR is always best.

CSI_Yorkshire

Sarah1Mitty2 said:

Bigphil1474 said:

OP, IMO, you buy now if you can afford it and find somewhere you like. You could get a 2 or more year fixed deal so at least you know what you are paying for the next 2 or more years. Interest rates won't remain high, just as surely as they don't remain low. They'll go up and down over the time you have a mortgage as they always have done.

If you have a 25 year mortgage, the first couple of years will be a distant memory at some point in your life. I was fortunate that we were able to overpay our mortgage from about 2010 onwards due to improved personal circumstances. When we started out in 1998 I remember us feeling lucky that we got a deal for under 8%. It's true that the house price was only about 2.5x my salary then, but you can only deal with the market at the time you want to join. We bought the house within our budget the same as people have to do now.

As others have said, you need to sit down and work out the figures for yourself, but I can't see many situations where renting over the long term is better than buying.

The last time I looked at my figures, I reckoned that this house has basically cost us nothing. What we have paid off in the mortgage has been made up in the house value increasing, maybe a small loss in terms of maintenance costs over the years.

Until recently they have not gone up or down for 14 years, why would they start doing that now when central bank policy is to make them high and keep them high? 

Yes, clearly interest rates haven't changed?  Given that these are the rates that actually matter to people.

Or were you just picking the BoE rate because it suits your argument?

Sarah1Mitty2

CSI_Yorkshire said:

Sarah1Mitty2 said:

Bigphil1474 said:

OP, IMO, you buy now if you can afford it and find somewhere you like. You could get a 2 or more year fixed deal so at least you know what you are paying for the next 2 or more years. Interest rates won't remain high, just as surely as they don't remain low. They'll go up and down over the time you have a mortgage as they always have done.

If you have a 25 year mortgage, the first couple of years will be a distant memory at some point in your life. I was fortunate that we were able to overpay our mortgage from about 2010 onwards due to improved personal circumstances. When we started out in 1998 I remember us feeling lucky that we got a deal for under 8%. It's true that the house price was only about 2.5x my salary then, but you can only deal with the market at the time you want to join. We bought the house within our budget the same as people have to do now.

As others have said, you need to sit down and work out the figures for yourself, but I can't see many situations where renting over the long term is better than buying.

The last time I looked at my figures, I reckoned that this house has basically cost us nothing. What we have paid off in the mortgage has been made up in the house value increasing, maybe a small loss in terms of maintenance costs over the years.

Until recently they have not gone up or down for 14 years, why would they start doing that now when central bank policy is to make them high and keep them high? 

Yes, clearly interest rates haven't changed?  Given that these are the rates that actually matter to people.

Or were you just picking the BoE rate because it suits your argument?

There is a clear pattern between `08 and Dec `21, whatever rate you want to pick.

CSI_Yorkshire

Sarah1Mitty2 said:

CSI_Yorkshire said:

Sarah1Mitty2 said:

Bigphil1474 said:

OP, IMO, you buy now if you can afford it and find somewhere you like. You could get a 2 or more year fixed deal so at least you know what you are paying for the next 2 or more years. Interest rates won't remain high, just as surely as they don't remain low. They'll go up and down over the time you have a mortgage as they always have done.

If you have a 25 year mortgage, the first couple of years will be a distant memory at some point in your life. I was fortunate that we were able to overpay our mortgage from about 2010 onwards due to improved personal circumstances. When we started out in 1998 I remember us feeling lucky that we got a deal for under 8%. It's true that the house price was only about 2.5x my salary then, but you can only deal with the market at the time you want to join. We bought the house within our budget the same as people have to do now.

As others have said, you need to sit down and work out the figures for yourself, but I can't see many situations where renting over the long term is better than buying.

The last time I looked at my figures, I reckoned that this house has basically cost us nothing. What we have paid off in the mortgage has been made up in the house value increasing, maybe a small loss in terms of maintenance costs over the years.

Until recently they have not gone up or down for 14 years, why would they start doing that now when central bank policy is to make them high and keep them high? 

Yes, clearly interest rates haven't changed?  Given that these are the rates that actually matter to people.

Or were you just picking the BoE rate because it suits your argument?

There is a clear pattern between `08 and Dec `21, whatever rate you want to pick.

And that pattern is not "they have not gone up or down for 14 years" as you so confidently asserted.  They appear, in fact, to have gone mainly down but sometimes up.  Entirely the opposite of your point.