does buying at the top or bottom of a market really matter?

borntobefree

Turnbull2000 wrote: »

Though it would be a pity for your mortgage to be like a noose round your neck for those intervening years - an age when you may wish to have children and enjoy the prime of your life. Mortgage costs don't ease after a fews years anymore. 20 years is now the time it take for mortgage costs to half, not 5 or 7 like it used to.

When wasn't a mortgage a noose around your neck?:D - it was the same for my parents they were born in the 1930's.;) Before that people's lives were extremely tough - that's why the victorians had so many work houses.:rolleyes: We don't know we're born - that's for sure.:cool:

PasturesNew

setmefree2 wrote: »

Pastures new you don't seem to have factored in the cost of rent.

No, because that is so variable across the country.

However, looking at the figures again, if a house fell from £250k to £150k over 5 years, would somebody have spent £100k in rent over that period? £20k per year (£1600/month)? You might say "yes", but anybody saying yes is most likely living in an area where the houses won't be £250k/£150k, but £400k/£300k or more.

*Louise*

I think buying at the bottom of the market is certainly better.

We bought a 2-bed flat in 1999, prices were rising, but the millenium 'boom' hadn't happened at the time.

When we sold last autumn, prices were at a premium and we got 3x what we had paid for the flat. Although we bought our 3-bed house at the peak last year, it will be a long time before we go into negative equity, thankfully. And as we plan to live here for the next 10 years, I'm not going to worry about any drop. (Although prices here don't seem to be dropping like other areas, 2 houses the same as mine just sold for 5k more than I paid 5 months ago.

If we had bought at the top of the market, I doubt we would have been able to move home tbh.

WTF?_2

borntobefree wrote: »

I knew a number of people who had negative equity. Mostly they were living in flats. So they just made the next jump on the ladder and rented out their flats. They were the first "accidental" landlords, perhaps. They all the sold the flats in the mid 90's and made a packet. I remember feeling quite jealous:p. But don't suppose that is what !!!!!!? wants to hear - sorry:o

Sigh :rolleyes: What is it about the HPI cheerleading team on this forum that they feel the need to constantly make personal jibes? Could it be a lack of a rational argument?

WTF?_2

*Louise* wrote: »

I think buying at the bottom of the market is certainly better.

We bought a 2-bed flat in 1999, prices were rising, but the millenium 'boom' hadn't happened at the time.

When we sold last autumn, prices were at a premium and we got 3x what we had paid for the flat. Although we bought our 3-bed house at the peak last year, it will be a long time before we go into negative equity, thankfully. And as we plan to live here for the next 10 years, I'm not going to worry about any drop. (Although prices here don't seem to be dropping like other areas, 2 houses the same as mine just sold for 5k more than I paid 5 months ago.

If we had bought at the top of the market, I doubt we would have been able to move home tbh.

Absolutely - where do the "It doesn't matter when you buy your house, prices always only ever go up in the long run" squad think that the equity to move up the ladder comes from?

If you buy your house at the peak vs holding off until prices have subsided a year or two later then you will see nothing like the same increase in equity over any period of time and could well face a protracted period of negative equity.

The only issue is when the boom goes on for a lot longer than could reasonably be expected and you'd have been better off buying rather than renting all the time. eg. If you bought around 2002/2003 you'd likely come out ahead of someone who held off then, expecting a correction around 2003/2004.

Given the balance of probabilities on the basis of the available evidence buying right now on the notion that prices will eventually recover at some undefined point in the future is just plain stupidity.

Reds-on-Sea

It's all about the repayments surely. Do interest rates always go up when property prices come down?

crunching some numbers (as I don't seem to have anything better to do with my time) I've calculated that a 1% rise in mortgage rates, equates roughly(repayment wise) to a £20,000 drop in property. I don't know the market history well enough to know whether these things automatically balance themselves out. The only real winners are cash buyers eh?

LittleMissAspie

We could use my house as an example. I'm renting.

It was last sold in 2006 for £137,500. We are paying £630 rent. A repayment mortgage (say 25 years at 6% and no deposit) would be £896.34.

Okay so in 5 years time, Mr Buyer will owe £122,641 (according to snowball calculator). Let's say that prices drop just 10% in that time. The house is now worth £123,750. So Mr Buyer owes £122,641 and has 1% equity.

Meanwhile, Mr Tenant has been saving the difference between the rent and would-be mortgage. He saves £266.34 per month for 60 months. This gives him a deposit of £15,980. (I've assumed that Mr Tenant's rent stays the same. But I also didn't include any interest from his savings. They would probably cancel each other out.) He now goes to buy my house for £123,750. Mr Tenant now owes £107,769 and has 12.9% equity.

Looking at it even longer term, Mr Buyer will take 290 months (24.1 years according to snowball calculator, not sure why it's not 25 precisely) in total to pay off his mortgage. Mr Tenant can also pay £896.34 on his smaller mortgage and pay it off in 183 months. Add on the 60 months that he spent saving and Mr Tenant is mortgage-free in 20.25 years. 4 years earlier than Mr Buyer, and he didn't pay a penny extra.

borntobefree

!!!!!!? wrote: »

Sigh :rolleyes: What is it about the HPI cheerleading team on this forum that they feel the need to constantly make personal jibes? Could it be a lack of a rational argument?

It wasnt a jibe it was a joke;), I didn't realise you had no sense of humour dude._pale_
and I wasn't havn't an argument I was merely explaining what my friends did when they had negative equity if the 90's.....:rolleyes:

setmefree2

LittleMissAspie wrote: »

We could use my house as an example. I'm renting.

It was last sold in 2006 for £137,500. We are paying £630 rent. A repayment mortgage (say 25 years at 6% and no deposit) would be £896.34.

Okay so in 5 years time, Mr Buyer will owe £122,641 (according to snowball calculator). Let's say that prices drop just 10% in that time. The house is now worth £123,750. So Mr Buyer owes £122,641 and has 1% equity.

Meanwhile, Mr Tenant has been saving the difference between the rent and would-be mortgage. He saves £266.34 per month for 60 months. This gives him a deposit of £15,980. (I've assumed that Mr Tenant's rent stays the same. But I also didn't include any interest from his savings. They would probably cancel each other out.) He now goes to buy my house for £123,750. Mr Tenant now owes £107,769 and has 12.9% equity.

Looking at it even longer term, Mr Buyer will take 290 months (24.1 years according to snowball calculator, not sure why it's not 25 precisely) in total to pay off his mortgage. Mr Tenant can also pay £896.34 on his smaller mortgage and pay it off in 183 months. Add on the 60 months that he spent saving and Mr Tenant is mortgage-free in 20.25 years. 4 years earlier than Mr Buyer, and he didn't pay a penny extra.

You have not included:-
1) any sales costs from the sale of your house which wouldn't have happened if you hadn't sold it
2) the loss of the amount of money that you would have made in 2006 & 2007
3) any fee for arranging a new mortgage (now 4 figures)
4) the cost of the loss of interest because last year you could have negotiated yourself a much better interest rate (much better than 6%)
5) any purchase costs of buying your own house back again

I'm not saying you can't make money but the above will eat into alot of your profit.

abaxas

setmefree2 wrote: »

You have not included:-
1) any sales costs from the sale of your house which wouldn't have happened if you hadn't sold it
2) the loss of the amount of money that you would have made in 2006 & 2007
3) any fee for arranging a new mortgage (now 4 figures)
4) the cost of the loss of interest because last year you could have negotiated yourself a much better interest rate (much better than 6%)
5) any purchase costs of buying your own house back again

I'm not saying you can't make money but the above will eat into alot of your profit.

Also add in..

Maintainance and building insurance.