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The goal in this house is now: BUY a HOUSE!!!(28 Posts)
In possibly the scariest decision we have ever made, me and DH have decided to buy a house. Round here, a two or three bed in need of work curently costs between £70,000 and £10,000, so we think we need to save in the region of £15,000 as our credit isn't excellent.
We are going to start off putting aside £200 a month, then gradually up it as our income increases (we have good prospects for promotion in both our jobs, DD1 will be starting school soon, then DD2 will start getting some free nursery when she gets old enough)
We're aiming for less than three years of saving, and we think our mortgage payments will be less than our rent is now (£525 pcm)
Are we living in cloud cuckoo land? £200 a month is pretty much all our "spare" cash after bills and food, but we will be able to know we won't be chucked out on the landlords whim and that is worth any amount of scrimping.
Not that bothered about ever owning the house, tbh, but to have that security would be wonderful.
Definitely worth doing. Lots of benefits of home-ownership besides lack of landlord-related stress. Main one being that you're not just throwing £500+/month down the drain... you get an asset to keep, se1l or pass on to the kids at the end of it. Apparently, home-owners live on average a year longer than those who rent as well.
If you've put a 3-year estimate on saving up for the money, spend a little time now working out the best place to put it. Check out comparison sites for a tax-free Cash ISA, for example (£5,100/year). Or, if you have a lump sum now, there are some good rates for 3-year bonds.
Good luck. There's nothing like getting the keys to your first house. Be it ever so humble, there's no place like home
Yea buy a house and then see the value drop and negative equity.
Paying interest on a mortgage is also money down the drain, as is building insurance, building maintenance costs etc etc
Very few people are predicting a dramatic drop in house prices. Even the most pessimistic pundits are saying that prices are only likely to drop a small amount. I very much doubt they're going to rise either but if you are buying a home rather than an investment that doesn't matter.
Save as much as you can and invest your savings sensibly. Some regular savings accounts give very good returns so they might be worth looking at.
Workingnomad's prognosis is unnecessarily pessimistic. If you're planning to buy a home and live there for 10+ years you'll ride out any temporary dips in the housing market. Building insurance is pretty cheap in the grand scheme of things. As for maintenance, if you're prepared to take on a house that needs doing up it can be very rewarding indeed, whereas there is little satisfaction in maintaining a house that doesn't belong to you.
To be scrupulously fair, the only downside I've found of home-ownership is that it is more difficult & more expensive to relocate than if you are renting. If you have to move in a hurry and the market is down then you can end up selling at a loss and still having to pay solicitors, estate agents and all the rest. But if you think you'll be reasonably settled for some time and if you choose a good location, that's an unlikely scenario.
If OP is planning to save for 3 years then buy, she'll be in a good position to take advantage of any fall in the next few years. I am assuming from the price she gives of houses in her area that she is not in London or the SE where there probably won't be much of a fall if any.
Given she's not planning to buy immediately I can't see much risk of negative equity.
Like I said mortgage interest payments, which will rise significantly when interest rates rise, is money down the drain.
Why do people overlook this? Is it because they have been brainwashed in this country? Most other Euro nations have no such housing obsession and probably live in less debt and are happier overall.
You would be much better off saving for 10 years and buying for cash when house prices and earnings are back on par instead of paying the bank for an additional 15 years.
What's worse? Paying a landlord £500/month rent for 10 years while you save up or moving in and paying a bank a diminishing amount of interest for 25 years?
Your suggestion also assumes that house prices will stay where they are for the next 10 years. That's not been the case for any 10 year period in the recent past. So the mortgage interest vs rent equation has to be offset against the increasing capital value of the property.
Many commentators expect house prices to be sluggish for years (see Japan).
The last 13 years of house price inflation is unprecedented and has been funded by cheap toxic credit and low interest rates.
Wages have barely risen in that time and the gap between house prices and wages are historically high.
Interest rates are going to rise soon and put a lot of people in negative equity.
RICS have just announced that prices are falling faster than ever according to BBC today.
Buying anytime soon and being chained to a mortgage for 25 years in these economic times is foolish.
www.telegraph.co.uk/finance/economics/houseprices/ 8121034/House-prices-to-rise-by-16-per-cent-in-thr ee-years.html
I own, and rent from the MoD. I know which I prefer and it's having my own bricks and mortar around me, not someone else's.
You really believe the Telegraph? That's only one opinion. Many non media bodies would say the opposite.
See the person who wrote that probably has a vested interest to keep prices inflated to sustain their own BTL portfolio.
Go ahead, stretch yourself and buy at an inflated price, that's what the greedy banks want you to do!
No doubt you are the same person who whinges at headlines such as 'Barclays give out record bonuses'. Ask yourself how they can afford to do this.
Make sure you are buying it for the right reasons. There is lots of emotion about house-owning which can cloud people's perception of what it means to be a house owner.
For example everyone gets very depressed when house prices fall. Why? There are good reaosns for a govt to get concerned, but as an average joe, if you own a house, then are your ambitions to (1) eventually trade up to a bigger house, (2) sell it when you retire and live off the earnings, or (3) hope it goes up in value so you can borrow some money against it to spend on other stuff.
If the answer is (1) then you should want prices to fall. If the answer is (3) you are a fool and living on the never-never even if it doesn't feel like it. If the answer is (2) then yes you do want prices to rise. FWIW I haven't yet met anyone who wants to do this. Leaving something to your kids is fine but reality is they may just flog it and pay off student loans or their own debts and you could probably have used the money you would otherwise have had spare to help them out during your lifetime rather than when dead. And you also risk losing the lot anyway by having to fund carehome costs in your old age....
If you want to buy a house because you want to decorate it to your tastes, and not always worry about being given notice, or for reasons like that then fine. But there are lots of good reasons to not buy too.
Good post StillSquiffy.
This forum particularly has a lot of emotional people on so your advice is spot on.
Just a shame most people are brainwashed into the home ownership obsession in this country.
renting in this country is crap, was talking to a woman who had to pack up and move rental accomodation pretty much teh week she came home with her new baby. if you are in a position to buy then it makes sense in terms of stability
i own my house (but am close to losing it now, thanks to ex-dh) but all i have ever been able to afford is the interest-only payments. So basically, i am throwing £700 odd down the drain every month.
However, if i were to rent a similar sized 3 bed in the great location we are in now, this would cost around £950-1100 pcm.
So its cheaper for me to stay in my mortgage-owned house even if i am only paying the interest at present.
i guess i am lucky that a quarter of the house's value is all my own cash.
i agree about the house ownership obsession in this country. My sister lives abroad and is in her 40s, and she has no wish and no pressure to ever own her own place. But i guess she has spent time with people who are living on the borderline of survival so her priorities are a little different!
I would quite happily rent forever, if we had any decent rights as tenants. I would give my right arm to get a housing association house- security, upkeep and we could decorate and maybe even get a cat!
However, we are in a house with a boiler that technically works but costs £150 a month (along with the oven- although that is currently broken again) to heat a small 2 bedroomed house to the point where we still all wear two jumpers.
We are not allowed to decorate, have a veg patch, have a pet, hang pictures, install doors on the impractical open plan arrangement, put catches on the cupboards, put up a fireguard or saftey gates, basically we are made to feel like disliked guests.
Our entire gas supply was cut off for being dangerous a few weeks ago, and we had to wait until the landlord got up and rang his mate before we even knew when it would be mended. It broke at teatime one day, it was teatime the next day before the landlord got round to contacting anyone about it. We have two preschool children and live in the north east, where it is very cold.
The letting agent rang me up when I was heavily pregnant (literally about to drop) and started yelling at me, saying I hadn't paid the rent for months and calling me all the names under the sun. When we rang back later that day with our bank statement in our hands (showing all the payments, on time) we didn't get so much as an apology.
The landlord could give us two months notice for no reason and we would have to move out.
That is why I want to buy. I couldn't care less about investments. If we were in a country where we had decent rights, we would rent for our entire lives.
All I want is to be able to plan my next few years without having to leave a big blank as to where we will actually be living at the time.
If we find a good landlord, we may even forget this plan and stay with them.
Plus, interest only mortgage on this place would only be about £395 pcm! We pay £525 now and it doesn't work (well, it works in that it has a roof and walls)
Well said. Hardly anyone buys a house as an investment. Most of us buy a house so that we have a roof over our head and a bit of security. Mortgages are hardly 'safe'.. but at least as long as you keep up the payments you don't get any hassle. A friend who bought her council house said that the best moment was repainting her front door ... no-one to tell her what colour it should be. Good luck
OP sounds very reasonable to me. It's all very well to talk about how sensible people are in other countries where they don't have such an obsession with home ownership, they generally have renting laws which give the tenant far better rights than here.
We're in the North East, in a former mining town- unless they suddenly extend the metro out here, in which case we would get a small hike in house prices from commuters who work in Newcastle, we're pretty safe in the knowledge that house prices in this town will go steadily downward under this government (then hopefully upward if we get a more sympathetic government afterwards, but, like I say, we're not looking for an investment property, and I can't see things ever "booming" round here tbh)
Other countries have laws that you have to let your tenant get on with it while they are renting off you and they choose when they leave (unless of course they break a major rule or don't pay rent). Here we basically can't even withold any rent when we have no cooking facilities, or the landlord will evict us.
There was a programme on TV a couple of weeks ago about renting and there were people on there who were living with rising damp, which was damaging their health and a lady who had no hot water and had to heat pans on her stove to bath her baby. And at any time, the landlord could serve you notice.
In this country, tennants seem to have minimal protection in comparison to other European countries.Also, renting is often the same as having a mortgage.
If I could get a guaranteed long term lease with a certain amount of freedom to make hte place my 'own' and my rent was half the price of my mortgage, I would have thought twice about getting my mortgage.....
A final point is that our house is probably in negative equity. But first and foremost, its our home.
Renting is often a lot more expensive than a mortgage. The landlord just charges what their mortage and insurance cost, plus a bit more. I suppose you don't have the worry of the boiler breaking or such, but renting means I am lining the letting agents, landlords AND the banks pockets.
Good luck with your savings, you are lucky that prices are not rising whilst you are saving.
When DH and I first started saving for our own home the prices were rising by 1k a month and we were getting further and further behind.
I think the best reason for buying your own home is that it will eventually be paid for and in retirement you will not need to pay rent or mortgage.
As the years go by it is likely that your mortgage will be a lot less than the rental prices.
You quote prices for an interest only mortgage now sure if you are aware you would need an endowment policy, or similar, with interest only.
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