FTB Joint Mortgage with a Student

stu1892

Well, i think you've all put me off the idea mainly because if one of us screw up financially it affects both.

Will have to dampen the idea now as he still thinks it's a good idea.

stu1892

PasturesNew wrote: »

Rent then. Renting is the new "smart money" lifestyle.

Pardon my ignorance, but how is renting smart money? Always assumed that renting was effectively throwning my money away.

N79

If you can rent a property for less than the interest you would pay on a mortgage for the same property then you a quids in by renting. You can always save the "repayment" part of the mortgage and have it earn interest for you.

I am a landlord with a small portfolio of properties. However, the house I live in I rent. Why? This is because the area where I live has low rents and high prices. In order to buy the flat I live in I would have to borrow (or sell other property). However, the interest on that load would be more than the rent I currently pay. Thus I save money by renting and can put the money I would have spent repaying a mortgage into other investments.

The downside to renting in the UK is the disadvantages of being a tenant, principly the lack of security of tenure. If you can live with this and save money then renting is indeed "smart money"

I hope this helps explain

N79

stu1892

Great post, thanks. had to read it a few times and i think i understand!

Had a quick look at local properties to let and it must be high rent prices round me as the vast majority are awful with prices higher than i'd pay for mortgage repayments.
So i must be better off buing in my area unless i'm completely missing something?

sarah_elton

Going to inject a little positivity.

Yes this is a money *saving* forum, but sometimes you want your own home, and that's an emotional decision. I bought two years ago (also aged 24) and I don't regret it for a moment. I had been renting an identical flat beforehand, and the mortgage plus service charge actually worked out more expensive than renting for me, but I wanted *my* place, not to be borrowing someone elses.

If you go in, eyes wide open to the financial risks, and it's what you want to do, then go for it.

Things to consider beforehand:

1) If the market goes down, you could lose some of your deposit if you're forced to sell. Worse still, if it goes down far enough, you could be stuck with the flat if you're in negative equity. Make sure you choose a place that you could deal with living in for the longer term, if you have to. You're right that, in theory, there's actually no problem for you in the event of a crash so long as you don't have to sell. Just think about how you'd feel if that came to pass, and you were sitting there knowing you definitely couldn't move.

2) Your salary outlook. I got called crazy two years back because I took out a 100% mortgage, at 4.2 times my salary (before HSBC got stricter lol). With repayments made, a small increase in value, plus (most importantly) two good job moves, it's currently an 89% mortgage (still higher than ideal, I know), at 2.5 times my salary. I knew when I bought that my monthly budget would be very tight for a while. Now I have plenty to put into savings, spend on holidays etc. If your salary isn't likely to rise significantly and you're stretched now, consider whether you'll be happy living with very little to spare each month for the longer term. If not, you may want to look at renting in a house share (I know you said renting by yourself would cost more than a mortgage).

3) Do a realistic costing of (a) the costs of buying, and (b) your monthly budget with all bills etc. There are always threads on here asking about these, so you'll find all the figures you need.

4) How well do you know the area and flats? I did rent a flat in the development I now own in, and in the time there I learnt that I'd fallen on a nice area to live, that the flats were quiet, well sound insulated etc. I also learnt though that what little sound there was came through from above rather than below, so I made sure I bought top floor. Although you may feel like it's throwing money away, it can be money well spent to rent if you don't know enough about an area or property to commit to owning it.

SquatNow

To clarify.... it's not 10 years, property is an 18 year cycle... peak to trough, and the peaks don't always exceed the rpevious peak... it may take 2 cycles... 36 years for prices to reach the current levels again.