Need to start thinking about this malarky!

boinging_2

Okay lets take a basic look.

You buy a flat tomorrow for £120,000 - mortgage on this would be about £530 interest only and £712 if you pay capital off as well (this assume you have a 5% deposit - £5000).

Could you rent a similar property for less than £712?

Plus the likely hood is that in 1 years time the £120,000 flat is worth £108,000 probably putting you in negative equity. So if you want to move to a bigger place, settle down with a girlfriend etc you are pretty much stuck.

On the other hand you put your £5000 in a bank and earn some interest and save the difference between rent and mortgage (c£150 a month?). You then have a deposit of £7000 and can buy the same flat for £108,000 thus also giving you a cheaper mortgage.

southernscouser

boinging wrote: »

Okay lets take a basic look.

You buy a flat tomorrow for £120,000 - mortgage on this would be about £530 interest only and £712 if you pay capital off as well (this assume you have a 5% deposit - £5000).

Could you rent a similar property for less than £712?

Plus the likely hood is that in 1 years time the £120,000 flat is worth £108,000 probably putting you in negative equity. So if you want to move to a bigger place, settle down with a girlfriend etc you are pretty much stuck.

On the other hand you put your £5000 in a bank and earn some interest and save the difference between rent and mortgage (c£150 a month?). You then have a deposit of £7000 and can buy the same flat for £108,000 thus also giving you a cheaper mortgage.

But, and I know they are big [STRIKE]butts[/STRIKE] buts what if the price doesn't drop? Or lets say it does but I'm not looking at moving. Then it won't really affect me. Well I know it will/could if interest rates soar. :think:

I just think that lets say your scenario happens. I would have spent nearly £8,500 in a year on rent. So should I factor that into that equation? :think:

southernscouser

Can I just apologise if I'm sounding really dismissive of peoples posts. I'm genuinely not. I'm taking it all on board and am trying to see it from all angles and am very appreciative of everyones input.

pinkshoes

southernscouser wrote: »

OK 2 bed it is!

Only 3 times my salary? :eek: Bloody hell, I've got no chance. I don't think I could get a garage for that! :rotfl: Seriously, there is nothing, and I mean nothing for that sort of money around here or either further afield! I live in Greater London/Essex! :undecided

How did I get £38k of debt? It was well easy! Paying it off is much harder! :rolleyes:

You joined MSE in September 2005, and have made 21,647 posts, which works out at 25 posts a day for the last 29 months!! Stop posting so much and find a 2nd job to pay off the debt faster, and then save for a big deposit! If it takes about 2 mins to read posts then reply, you've lost 721 hours of your spare time! On the minimum wage, that would be nearly £4000!

I'm guessing your credit rating isn't perfect with such debt... so realistically, wouldn't get offered more than 3x your salary for a mortgage, so perhaps you should look at changing job for something better paid!?

Paying out £8500 a year in rent is irrelevant if you can't get a big enough mortgage to buy, so unless you have some rich relatives who are willing to lend you lots of cash....

boinging_2

southernscouser wrote: »

But, and I know they are big [strike]butts[/strike] buts what if the price doesn't drop? Or lets say it does but I'm not looking at moving. Then it won't really affect me. Well I know it will/could if interest rates soar. :think:

I just think that lets say your scenario happens. I would have spent nearly £8,500 in a year on rent. So should I factor that into that equation? :think:

I was thinking your rental costs would be about £600 a month = £7200 a year

If you buy a flat and only pay the interest of the mortgage = £6360

So the difference is -£840 over a year, which you will easily spend in solicitors fee and costs to buy a flat. I understand your desire to get out of your parents house, but in a falling market you are better starting in rented and saving like mad before plunging into the market.

southernscouser

pinkshoes wrote: »

You joined MSE in September 2005, and have made 21,647 posts, which works out at 25 posts a day for the last 29 months!! Stop posting so much and find a 2nd job to pay off the debt faster, and then save for a big deposit! If it takes about 2 mins to read posts then reply, you've lost 721 hours of your spare time! On the minimum wage, that would be nearly £4000!

I'm guessing your credit rating isn't perfect with such debt... so realistically, wouldn't get offered more than 3x your salary for a mortgage, so perhaps you should look at changing job for something better paid!?

Paying out £8500 a year in rent is irrelevant if you can't get a big enough mortgage to buy, so unless you have some rich relatives who are willing to lend you lots of cash....

Ahhh but I'm currently earning over £1,000 tax free a month thanks to this site so much more profitable than a 2nd job!

To be honest my credit rating isn't that bad! I've never missed a payment and have closed all the old credit cards. Applied for one recently for cashback and got accepted so I don't envisage any problems there.

pinkshoes

southernscouser wrote: »

Ahhh but I'm currently earning over £1,000 tax free a month thanks to this site so much more profitable than a 2nd job!

Earning or saving?!?!

southernscouser wrote: »

To be honest my credit rating isn't that bad! I've never missed a payment and have closed all the old credit cards. Applied for one recently for cashback and got accepted so I don't envisage any problems there.

Well in that case, you might get 3.5x your salary then!

I'd still advise you to stay at home and live with your parents until your debt is paid off and you've saved a fair amount of money. Don't forget the other costs of living on your own:

gas £50/month
elec £30/month
council tax £90/month
food £150/month
internet, tv license, water bill, phone line, insurance....

My parents live in the middle of nowhere where there's very few jobs in my line of work going, so I had to move where the work was, but I certainly would have lived with them for a bit after uni to save up money if I had the chance!!!

SaveTheCheerleader

I'll get slated for putting this but you can borrow more than 3.5 X your income. We did two years ago on just my partners income (£21,000 borrowed 120,000). We just remortgaged to another fixed rate with no problem. Obviously we are on a higher interest rate than we would like and an interest only mortgaage BUT if you are happy with that then why not.

Like you we are in Essex, which is unbelievably expensive to buy and rent, and got fed up with renting and just wanted a home to bring up our children. We're not in it for investment just living!!

Good luck

southernscouser

SaveTheCheerleader wrote: »

I'll get slated for putting this but you can borrow more than 3.5 X your income. We did two years ago on just my partners income (£21,000 borrowed 120,000). We just remortgaged to another fixed rate with no problem. Obviously we are on a higher interest rate than we would like and an interest only mortgaage BUT if you are happy with that then why not.

Like you we are in Essex, which is unbelievably expensive to buy and rent, and got fed up with renting and just wanted a home to bring up our children. We're not in it for investment just living!!

Good luck

You won't get slated from me!

So is it a case of if you borrow more than say 3.5 times your salary, you pay a higher interest rate? :think:

Doozergirl

Here's a borrow amount calculator:
http://www.charcol.co.uk/knowledge-resources/calculators/borrow-amount/

And here's a calculator to work out how much that might cost you a month:
http://www.charcol.co.uk/knowledge-resources/calculators/loan-cost/

I don't know why people pretend a bank won't lend you more than 3x your salary - there's plenty that will lend 4x (but many would agree that more than 3.5x salary would be a bit risky) and at least until recently there are lenders that will lend 5 or 6 times :eek: I'm not remotely suggesting you do it, but only being able to borrow 3x salary is misinformation. Considering that you're a true moneysaver these days and managed to fight your way out of considerable debt, I think you are allowed to be treated like a grown up and we can furnish you with the whole truth, the correct tools and let you make your own mind up about what is sensible.

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