Head or heart? Close to exchange on FTB but should we pull out?

macaque_2

Jimuth

This has to qualify as one of the wierder reasons for buying a house. So you buy a house for £159K. You over pay by £400 a month over 5 years but the price drops by 20% over the same period. At the end of 5 years you will still be in negative equity (to the tune of £7,800 plus purchase cost) despite having paid out all that money.

This might be saving Jim but not as we know it.

If you could just get your act together and pay £400 a month (plus the difference between a mortagage and rent and the buying expenses) into a diversified share portfolio and you could find yourself sitting on a share portfolio of 40 or 50 K.

ruggedtoast

Commonsensesearcher wrote: »

Interest rates are currently below the historic norms - it is this cheap credit that has been the cause of the housing bubble to carry on as it has. But it can't carry on - you may or may not be aware that property in the states is falling despite the Fed slashing rates. Here we see the lenders hiking rates and tightening their lending criteria - again despite rates reducing. So in the longer term, it is likely that rates will be higher than they are today. Shortage of supply is the age old spin of the property industry - just do some research on Japan and you will see that the overcrowded nation, not making any more land etc argument is futile. And then we have the old low unemployment chestnut - if ever there was a figure that is fiddled by this government then that is it yet even Brown & Co will admit this to start rising over the coming months. So, the easily trotted out 'fundamentals' line is complete !!!! in my opinion and could mean that prices drop and stay dropped for many years to come...

I agree with that in most parts. There are some fundamental differences between Japan and the UK though, they have a declining population and builds arent meant to last more than a few decades meaning owners usually only end up with the value of the space they occupy rather than the building itself.

However very few people I've met understand what supply and demand actually means. "Prices wont drop round here theres too much demand" Is a mantra I seem to hear from every mortgagee these days. Demand is irrelevant unless you factor in ability pay!

AMILLIONDOLLARS

macaque wrote: »

Jimuth

If you could just get your act together and pay £400 a month (plus the difference between a mortagage and rent and the buying expenses) into a diversified share portfolio and you could find yourself sitting on a share portfolio of 40 or 50 K.

Put your money in shares:rolleyes: even riskier than buy the house:D

This situation with house prices is not as bad as it was in the 70s, and I lived through that!! we continued to buy and sell houses no matter the price. Yes there were winner and losers but house prices did bounce back in a big way!! If you are looking at this purchase as a home and not an investment, it will be swings and roundabouts but buy it anyway, and yes your rate is rubbish, but where in the marketplace will you find an 100% mortage offer, these are officially dead.

If you're worried about the price it not too late to renegotiate rather than pull out, not nice but it can be done.

Everyone one is talking about how much you would be losing, think in terms of what you and your partner would be gaining and then you'll have your answer.

AMD

macaque_2

AMILLIONDOLLARS wrote: »

Put your money in shares:rolleyes: even riskier than buy the house:D

This situation with house prices is not as bad as it was in the 70s, and I lived through that!! we continued to buy and sell houses no matter the price. Yes there were winner and losers but house prices did bounce back in a big way!! If you are looking at this purchase as a home and not an investment, it will be swings and roundabouts but buy it anyway, and yes your rate is rubbish, but where in the marketplace will you find an 100% mortage offer, these are officially dead.

If you're worried about the price it not too late to renegotiate rather than pull out, not nice but it can be done.

Everyone one is talking about how much you would be losing, think in terms of what you and your partner would be gaining and then you'll have your answer.

AMD

That I'm afraid shows your ignorance.

Tozer

AMILLIONDOLLARS wrote: »

Put your money in shares:rolleyes: even riskier than buy the house:D

This situation with house prices is not as bad as it was in the 70s, and I lived through that!! we continued to buy and sell houses no matter the price. Yes there were winner and losers but house prices did bounce back in a big way!! If you are looking at this purchase as a home and not an investment, it will be swings and roundabouts but buy it anyway, and yes your rate is rubbish, but where in the marketplace will you find an 100% mortage offer, these are officially dead.

If you're worried about the price it not too late to renegotiate rather than pull out, not nice but it can be done.

Everyone one is talking about how much you would be losing, think in terms of what you and your partner would be gaining and then you'll have your answer.

AMD

I think you also have to remember that, traditionally, British people regard property ownership as incredibly important. This isn't the same throughout the world.

I think providing the OP overpays the mortgage, the downside risk - assuming a fairly long term ownership - is pretty minimal.

I'd be interested to know how the mortgage repayment compares to renting a similar property in this case?

AMILLIONDOLLARS

I don't think it does, not everyone is ruled by the almighty pound!! you could get run over tomorrow and where will having the paper stuff get you. The reason why we are in this almighty mess, is that everybody was jumping on the gravy train, shares were taking a dive, yet and again, and houses were seen as the next best bet, a house has stopped becoming a home, a place to live and is only seen as investment.

How many of us really see our mortgages to the end? and when we do, we are forced to sell off to pay for nursing homes so where will making all this money get us. Buy a house live in it and enjoy, when its taken away from through death, taxes or the government as least you had a real good time living in it no matter what it costs.

Ignorant, No just a realist!!


PS. Total repayment figures, I don't worry about those until I get the the end (if I do), and by then it does'nt really matter!!!

Jimuth

Tozer, it's about 350 - 450 more a month on our mortgage deal. Rent would be about £600pcm to £750 tops on a place like that round here.

Thanks for all your advice MSE dudes! :beer:

carolt

You sound like you really, really want to buy, but at the same time want to be talked out of it as you know id doesn't make sense financially.

Funnily enough - contrary to the others - I would say sometimes there are more important things than money.

I very much doubt you're going to get any better at saving just because you've got a house, and think that TBH, this is not the board you need - you'd be better off on some of the other boards - Old Style (shopping, food), Savings (obvious) etc, to find out where you're currently overspending and can cut back.

But if it's driving you mad renting and owning your own place is your path to sanity...then there are more important things than money.

It may well be a lousy investment. But if you go into it with your head firmly screwed on, knowing that fact, and knowing you're going to be up **** creek without a paddle in 3 years time (probably) unless you save like mad, it could still be the right decision for you.

Hope it works out for you, whatever you decide.

merlinthehappypig

carolt wrote: »

You sound like you really, really want to buy, but at the same time want to be talked out of it as you know id doesn't make sense financially.

Funnily enough - contrary to the others - I would say sometimes there are more important things than money.

I very much doubt you're going to get any better at saving just because you've got a house, and think that TBH, this is not the board you need - you'd be better off on some of the other boards - Old Style (shopping, food), Savings (obvious) etc, to find out where you're currently overspending and can cut back.

But if it's driving you mad renting and owning your own place is your path to sanity...then there are more important things than money.

It may well be a lousy investment. But if you go into it with your head firmly screwed on, knowing that fact, and knowing you're going to be up **** creek without a paddle in 3 years time (probably) unless you save like mad, it could still be the right decision for you.

Hope it works out for you, whatever you decide.

That post looks dangerously close to you suggesting that buying now might not be a bad thing..........;)

Who are you and what have you done with carol?

Jimuth

All

Just want to say thanks for the advice on here - I'm waiting for our solicitors to open to ask her to pull us out of this move.

The OH and I have agreed to save like mad, stay renting over the next 2 years to try and get us a good 12.5% + deposit on a home that will serve us for potentially the rest of our lives. It took a LOT of long discussions and a lot of poring over Excel spreadsheets, but I think we've made the right decision.

Lessons I've learned...

Don't presume the IFA/broker will tell you NOT to get a mortgage (even if it's in your best interests NOT to get one) - they are there to sell mortgages after all.

DO look at properties anything up to 10/20/30 % more expensive than you can afford straight off at the moment. If prices do come down, then saving for a better home makes sense, even if at the end of the day you still can't afford it, as the bigger deposit on a "stepping-stone" house means you can get to dream home quicker. (This is what convinced my OH over the weekend)

DO read sites like this from head to toe on a regular basis!

I'm just glad that there was a credit crunch after we'd got our mortgage offer and I had my "lightbulb" moment. Thanks everyone for your valuable advice.