To buy

funkster7

We have just sold our house is we need 3 bedroom house due to kids sharing.I have £70000 from sale and am wondering do we buy.The property we have put an offer in is one we really like and will be living there long term.We should be fine with mortgage payments £500 month combined income £2200 month.I am concerned if there was a crash and i lose large part of deposit and if we were to rent then this would be around 6000 a year dead money.Any advice would be great?

pinkshoes

If you're buying and intend to stay for a long time, then I doubt a temporary drop in prices will be a problem. Is it a home you're after, or just an investment?

If you don't mind the hassle of having to move into rented (and potentially move again if your landlord sells up), and believe prices will drop, then by all means rent.

You need to compare the cost of renting to the interest portion of the mortgage. If you're paying more interest on your mortgage then it would cost you to rent, then renting is not dead money, but if the interest on the mortgage is less than rent, buying is a worthwhile option.

funkster7

we are buying it for a home.Also cost of renting about 550 month my repayment mortgage would be 500 per month.

Dr_Moe_2

funkster7 wrote: »

We have just sold our house is we need 3 bedroom house due to kids sharing.I have £70000 from sale and am wondering do we buy.The property we have put an offer in is one we really like and will be living there long term.We should be fine with mortgage payments £500 month combined income £2200 month.I am concerned if there was a crash and i lose large part of deposit and if we were to rent then this would be around 6000 a year dead money.Any advice would be great?

Wow! Mortagage payments of £500 for a 3 bed property? Let me know what part of the country you're in and what mortgage provider is giving you that deal. I think I should be relocating to where you live.


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funkster7

am putting down 66000 with mortgage of 77000.Am in Stockport

carolt

pinkshoes reply was great except she forgot to mention that you need to compare monthly rent minus interest on your deposit sitting in the bank, to mortgage interest payments. If the former is more than the latter, then buying is sensible.

To give an example:

Assuming your mortgage repayments are £500/month. But some of this is going towards repaying the capital, say £100? So say your monthly interest payments on the mortgage are £400.

Meanwhile your rent is £550/month. BUT you've not spent your 'deposit money' as you put it. So your 70K is sitting in the bank earning interest for you. At 6%, that's £4200/year or £350/month. So £550 minus the £350 is only £200.

So the monthly rental is clearly better value at £200/month instead of £400.

Obviously, if you think house prices are going to rise, then it makes sense to buy now anyway, as otherwise your £70K deposit would have less and less buying power. BUT if you think prices will stagnate or fall, let alone crash, then it makes more financial sense to rent.

Two more caveats, however: firstly, as pinkshoes correctly says, buying a house is not only about the money, and if you have a large deposit and take out a long-term fixed rate, you can be pretty sure of not needing to worry about negative equity or repossession. Yes, you might lose some of your existing equity, but you have the advantage of probable security of tenure and not having to put up with annoying landlords. Secondly, it is possible that even with falling prices, the credit crunch could make mortgage rates higher and thus property paradoxically more expensive to buy, at least in the short/medium term.

Only you know what is best for you.

funkster7

the house we have had offer accepted on is one we were ging to buy 8 months ago at reduced price of 2.5%.Now i am thinking am i paying too much and should i consider other properties putting in low offer say 10% below asking price.What do people think?