To Buy or Not to buy...

smc103

so reading through the posts I would assume the simple answer is not.

But I thought I'd ask for advice anyway. I'm a first time buyer and me and my boyfriend have been renting for a while now. We currently pay £525 a month and just feel like it's going down the drain.
We've seen a place we like which is £121000 and we have about 12-13k deposit. I would be thinking of getting a fee free tracker mortgage with repayments of about 530 a month. It's an apartment and the last one was sold in October so I think if we went in with a low offer and blamed the current crisis they might accept.
It's impossible to save whilst renting and we want to get a place to call our own so the longer we wait the more our money gets wasted on rent.
What would people's advice be? Is a tracker the right choice with the chances of the base rate being cut? Should we just keep paying rent or should we go in with a low offer and hope they accept?

Any advice would be appreciated.

neilp

Buying an apartment now would be a huge risk, especially if it is a new-build. There was a feature about this on Channel 4 news last night. It didn't say anything new, but seeing it set out the way it was really brought home to me that this is a disaster waiting to happen.

I can understand your frustrations, and share them, but you would be in serious danger of negative equity, and are likely to get the same/a similar flat in a year or so for significantly less. In this context, renting should not be seen as dead money, particularly as you may well be able to rent an apartment for less than you would pay in mortgage interest!

boinging_2

not.

Buying a house is a good idea. Buying today is not. Wait and you will be rewarded with cheaper prices and thus a cheaper mortgage or bigger property.

bunnydrumming

I would wait a while.

Although you are paying roughly the same in rent as you would on your morgage your rent is getting you more for your money at the moment as your landlord is reponsible for any major work in your home so boiler, heating, roofing issues are not your concern. The money may not be going anywhere while you rent but at least you are not panicking about morgages and house valuations, renovations, household issues etc.

I think there will be a big fall in flat prices as the market is being saturated with flats. Also if you are a young couple you decide you want a family you will probably want to move to a house and may find it hard to sell a flat in a few years as there will be so much competition.

A friend of mine recently bought a flat in Leeds and now finds that his complex is full of council tenants as the sellers cannot sell so are renting cheaply to the council. There are now loads of issues with nuisance neighbours and they are not impressed that they now feel they are living in council accomodation.

neas

Obviously wait at least 3-6 months to see how this 'crash' goes... if it goes away then buy else... if it looks to be getting worse just wait some more and take advantage of better priced houses.

SouthCoast

It's impossible to save whilst renting

Why? I would argue that it is much easier to budget when renting.

If we assume that you could buy this flat for 100k and you put down 10k deposit that would leave you a mortgage of 90k

I understood that 90% mortgages on new build flats/apartments no longer exist.

Nenen

smc103 wrote: »

It's impossible to save whilst renting and we want to get a place to call our own so the longer we wait the more our money gets wasted on rent.

I know from bitter experience that renting can feel very like living in limbo and insecure to say the least... but please don't think of rent as 'dead' money in the current financial climate.
In one year from now the money you have 'wasted' on rent will be £6,300. If house prices fall even by 10% (conservative estimate) then the flat that is now priced at £121,000 will fall by £12,100 which is almost double what you would have 'wasted' in rent! You will also have wiped out all your deposit and, should prices fall by more than 10% then you'll be in negative equity........ a horrible situation if you need to move for any reason.

If prices fall by 20% (not out of the question and predicted by many) then the price of the flat will fall by £24,200 and you will be in considerable negative equity!:eek:

Unless you are absolutely certain that you will not want/need to move for at least 5-8 years (the time it took many people to get out of negative equity during the last crash) then personally I would not risk it.

What we are doing is keeping a careful eye on local prices (using Firefox with property-bee) and waiting until such time as we see something we either feel certain we can afford and will stay in for many years..... or prices fall low enough for us to find the house of our dreams!

inthe80s

If your after a flat or apartment id definately wait, when prices fall they will be hit first.

smc103

thanks for all the comments guys.

so you dont think its worth even putting in a cheekily low offer?

pickledtink

dolcevita wrote: »

If we assume that you could buy this flat for 100k and you put down 10k deposit that would leave you a mortgage of 90k

90k on a repayment mortgage over 25 years at 6% would mean a mortgage of about £580 pm

An interest only mortgage (which is renting off the bank) would cost about £450 pm

This may seem cheaper but doesn't take into account the other costs associated with buying the flat.

Trust me - you will end up out of pocket.

Cut your costs, keep saving and wait for at least a year before you buy.
And don't buy a newbuild flat.

Agree 100%.
In fact I am just about to let my dream house go and stay in rented because the cold hard facts are that the house will go down in value and not up. Meanwhile I earn interest on my deposit/ equity from sale.
Your deposit invested will gain interest and go towards buying something later. If for example in a year said £100,000.00 flat is £93.000.00? You'll be approx £7,500.00 better off including your interest on deposit. Which could buy you something better or be spent/invested otherwise.
Unless of course you're so loaded 7.5 grand is a mere nothing?!
Buy a small freehold house instead if possible. Flats can be a nightmare.....

macaque_2

smc103 wrote: »

so reading through the posts I would assume the simple answer is not.

But I thought I'd ask for advice anyway. I'm a first time buyer and me and my boyfriend have been renting for a while now. We currently pay £525 a month and just feel like it's going down the drain.
We've seen a place we like which is £121000 and we have about 12-13k deposit. I would be thinking of getting a fee free tracker mortgage with repayments of about 530 a month. It's an apartment and the last one was sold in October so I think if we went in with a low offer and blamed the current crisis they might accept.
It's impossible to save whilst renting and we want to get a place to call our own so the longer we wait the more our money gets wasted on rent.
What would people's advice be? Is a tracker the right choice with the chances of the base rate being cut? Should we just keep paying rent or should we go in with a low offer and hope they accept?

Any advice would be appreciated.

Rent for 1 year with £12K in the bank
Rent £6,360
Income from bank interest £600
Net change in wealth = minus £5,760

Buy a house for 1 year with £109K mortgage (no House inflation)
Mortgage payments £7,630
Purchase costs £2,000
Maintenance costs £1,000
Building insurance £500
Income nil
Net change in wealth = minus £11,130

Buy a house for 1 year with £109K mortgage (10% house fall)
Net change in wealth = minus £23,230

As you can see, you will waste an awful lot more by owning than renting if house prices stand still. If house prices fall, you will lose even more. Mortgage interest payments do nothing to reduce the capital debt and are more expensive than rent.