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bobobski
Posts: 771 Forumite
Until now my plan has been to save desperately for approximately 5 years before I can afford my "ideal" (still in a cheap area) house and that assumed the market didn't continue to rise at 8%-10% per year as it has been (*cries*). That would be house that in today's money would be worth approximately £325k.
Various people have suggested that I buy a "starter" home, around the £250k mark in today's money (there really isn't much for less around here). Given that my "long term" plan was 5 years, and the earliest I could achieve this "short term" plan would be about 2 years, I question whether it's worth it. What with moving costs, SDLT, agents' fees and not much time to pay down the mortgage, my dodgy maths suggests that I would be no better than if I'd just waited, continued renting and saving, and sticking with Plan A.
Now my head hurts and I thought I'd turn to you lovely chaps to offer your own experiences. Is a "starter" home worth it and, if so, under what conditions?
Various people have suggested that I buy a "starter" home, around the £250k mark in today's money (there really isn't much for less around here). Given that my "long term" plan was 5 years, and the earliest I could achieve this "short term" plan would be about 2 years, I question whether it's worth it. What with moving costs, SDLT, agents' fees and not much time to pay down the mortgage, my dodgy maths suggests that I would be no better than if I'd just waited, continued renting and saving, and sticking with Plan A.
Now my head hurts and I thought I'd turn to you lovely chaps to offer your own experiences. Is a "starter" home worth it and, if so, under what conditions?
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Hi bobobski,
I bought my starter home a year ago with a 10-year fixed (20 year term), portable mortgage. I initially wanted a bigger place but the area I bought in was ideal for me right now. Mortgage and bills are very affordable and leave me a nice amount of disposable income and/or money to save.
House price rises may mean that I lose out in the long run compared to if I'd bought a larger place to begin with. However as there's just me at the moment a starter home is all I need, and the money I'm saving allows me to do other things in life.
So for me, buying a starter home is definitely worth it in the short and medium term. Whether it turns out to be the best long term... that remains to be seen!
Hope this helps
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The benefits of a starter home are two-fold:
1. It helps you keep pace with the property prices in your area in the event that property prices rise
2. Assuming a repayment mortgage, with each mortgage payment you are increasing your equity in your property, in effect 'saving' money that otherwise would have gone to the landlord
Combined, these two factors will in theory put you in a stronger financial position to buy your next home when you are ready to move on. I say 'in theory' because there are always exceptions (property prices may fall instead of rise and leave you in negative equity, or your particular property may be hit by large bills which you wouldn't have been liable for as a tenant). By and large, though, if you are relatively secure in your financial position and you know you want to own a property in the near-medium term, getting on the property ladder as soon as possible is usually the way to go. Good luck! 0 -
When you say "starter home", what sort of thing do you mean?0
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Really not sure what you mean.
I wouldn't buy a home with a plan of just spending 2 yrs in it, if thats what you mean. I think it would be best to save a bit more and buy something that you plan staying in much longer.0 -
Really not sure what you mean.
I wouldn't buy a home with a plan of just spending 2 yrs in it, if thats what you mean. I think it would be best to save a bit more and buy something that you plan staying in much longer.
Respectfully, I think there is a significant gap between 'forever home' and 'buying a place you hate purely for the purpose of reselling'. I would never advise anyone to buy a place they could not see themselves living in for at least 5 years, but equally very few people can afford their dream home right out of the starting block. The trick is to to be realistic about what you can afford and then try to find something in that bracket where you think you'll be comfortable living for a good long while.0 -
Thank you for all the replies.Bossypants wrote: »Respectfully, I think there is a significant gap between 'forever home' and 'buying a place you hate purely for the purpose of reselling'. I would never advise anyone to buy a place they could not see themselves living in for at least 5 years, but equally very few people can afford their dream home right out of the starting block. The trick is to to be realistic about what you can afford and then try to find something in that bracket where you think you'll be comfortable living for a good long while.
This is sort of my problem - my "forever" home is actually on the cheap end of the market here, but not the cheapest, so right at the top end of that sweet spot. So the price gap (at today's rates) between the starter home and the "forever" home is only about £75k, being 30%ish of the cost of the starter home. That's why the maths isn't clear enough that getting on the property ladder would be worth my while in the long run - when I ran the numbers I would break even compared to how much I would expect to save over the same period. Both calculations involve more assumptions than facts though, hence asking the question on here.
Maybe the answer is to keep saving, wait til I would be ready to buy a starter home and see what the market is like at that stage? Reducing the assumptions, I suppose...0 -
I took the chance when I had it of getting a starter home (though somewhat different circumstances to yours).
1. Yes - there will be "swop-over costs" to move up the ladder. However, it's counterbalanced by money saved on rent.
2. You're more secure with the home being your own. No landlord deciding to kick you out when it suits them.
3. You've made sure you've got a home of your own and, if things go belly up subsequently to how you've planned for your life to be, at least you've still got somewhere of your own while you wait/hope/etc for the chance to move on. That one is "voice of experience" time - because that's exactly what happened to me and I was in that starter home for way longer than I had planned for. But at least I wasn't in rented accommodation whilst waiting for a better house - I had a house of sorts.
4. If you get made redundant at any point - no worries about landlords refusing to take on DWP tenants. Also a stronger position from which to "hold out" for a reasonable job to replace the one lost - rather than grabbing for the first one you can get your hands on.0 -
Is the starter home better or worse (smaller/bigger/better condition) than where you are currently renting?
If it is better, then it is a no-brainer as you would be enjoying living in a nice home that was your own whilst putting your money into repayments of the mortgage instead of rent.
If, however, the starter home is not as nice as where you are currently renting then you may need to get your calculator out and consider all the variables.0 -
Round where I live you could buy a 3 bed for around £325k around 5 years ago. Now these properties sell for £500k+ and some 1 bed flats cost more than £325k now.
So basically if its going to take 5 years to be in a position to buy somewhere for that price, you may find you can still only afford a starter home anyway.0 -
Is the starter home better or worse (smaller/bigger/better condition) than where you are currently renting?
If it is better, then it is a no-brainer as you would be enjoying living in a nice home that was your own whilst putting your money into repayments of the mortgage instead of rent.
If, however, the starter home is not as nice as where you are currently renting then you may need to get your calculator out and consider all the variables.
The starter home would be worse than where I am currently living and about £150 more per month on the mortgage. That's why I've been avoiding this idea so far - although I'm paying more than 30% of my net salary on rent (and another 7% on bills), my current home is perfect except that it's small. It's also worth about £200 more in rent per month than I'm paying because I got lucky. A starter home would be about 4x further from work time-wise (cycling instead of walking), in a less nice neighbourhood, and would probably require some work which would eat into any overpayments I'd want to make on the mortgage.
So back to the calculator it is! I've called upon a friend who studied maths at university to help me on this one...0
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