Is now a good time to cash buy a house?

easyfansblast

Hi all,

First post, please let me know if I have missed any etiquette.

I have £220,000 ready to cash buy a house or buy a house with a very small mortgage (< £30,000). Assuming I buy a £220,000 house, here are my thoughts:

• From Nationwide, the cost of buying a house is falling by 5.3%. This means I will be losing about £11,000 a year in asset value.
  
• My money is currently in accounts with ~5% interest, which means I makes about £11,000 a year (+£1000 from Lifetime ISA bonus).
• I pay £1000 a month on rent, which means I lose £12,000 a year.

In sum:

• Currently my net yearly change is: £12,000 (interest) - £12,000 (rent) = £0. 
• After buying a house my net change would be: £12,000 (saved on rent) - £11,000 (lost on house value) - £12,000 (lost on interest) = -£11,000.

So, after buying a house in the current market, I would be £11,000 worse off a year. I know this is an oversimplified example, but it seems like a no brainer to keep renting for the time being. I know very little about house buying and am worried I missed some benefit somewhere.

Any help or insight on this would be very appreciated!

Thanks.

Sachs

My advice would be if you want to own the house you live in then buy it. If you don't want to own the house you live in then rent it. To expand slightly, if you want to live in the house for say, under 5 years, probably not worth buying it.

Housing as an investment and not as a home is a cancer on the British psyche.

ProDave

Ignore the "lost in house value" of your sums.  That assumes it will continue falling.  That is certainly not going to be a long term thing.

So it is broadly cost neutral, lost interest is made up for by not having to pay rent.

Look at the big picture. You will never have to pay rent again, and will never be forced to move for example if the landlord wants to sell.

If you treat it as purely a money exercise and you think renting is the same as buying, then my advice is to put a LOT into your pensions so you can continue to afford to rent in retirement.

pieroabcd

Weell, it depends on the pension fund.
In the last 3 years my workplace pension has lost something like 2-3% in value respect to the money that my employers have paid into it.

El_Torro

If you find “the” house, as in somewhere you can see yourself living in for many years then pretty much any time is the right time to buy. This is especially true if you’re a cash buyer. 

Yes, house prices are currently falling. This only really matters if you’re going to sell in a year or two. If that’s the case it’s not worth buying anyway. In the long term house prices will continue to rise at least at the rate of inflation. Certainly faster than the interest you can get on holding cash.

Once you take into account that living in a place you own is far better than being a renter I’d say you’d be crazy to wait. Take your time choosing the right property of course, no point rushing into something if you don’t need to.

dimbo61

You will now pay tax on your savings unless in cash ISA,s 
Your most important thing to do when preparing  for retirement  is to own your own home.
Mortgage Free.
So find a home and buy it.
Consider an offset mortgage 

Bigphil1474

Living in a house that is rent and mortgage free is an awesome feeling. Depends on your lifestyle. Next house we buy is probably going to be our last, and we have no intention of having another mortgage. 
As others have said, house values over a long term go up, so shouldn't be really part of the equation unless you plan to buy and sell over a short term. Our house is worth 4 times what it was when we bought it, but we've lived here 25 years. The same amount of money is worth a little over double over the same period, so the 'investment' part of buying our house performed better than RPI.

MultiFuelBurner

As above messages the feeling of owning fully or even with a mortgage is a nice secure feeling.

One where you are not worried about a rent increase every year or having to move regularly.

With such a small mortgage you can also overpay and get rid of that quickly if you wish.

Savings are nice so maybe go for a slightly larger mortgage to hold some just incase funds back?