Impatient first time buyer

[Marshmallowpops]

Anyone else?

Been saving for a deposit ever since university (2 1/2 years ago) and now have £15000, mortgage would be based on DP's income as I'm self employed so I expect we could borrow around £112000, and we're in the North East so house prices are lower than other parts.. but DP is saying he thinks we should wait and save more deposit and then get a better interest rate on our mortgage.. I'm just really impatient and want to own a house, we've been renting our 2 bed flat for £600 pcm for these past 2 1/2 years which I know is not bad at all compared to other parts of the country but still I would prefer that money to be paying off mortgage. Also one of the two bedrooms is completely occupied with my working from home and partner has no space to himself which causes many arguments and I feel we'd be so much happier with more space! (Currently have no children). Also I keep seeing properties on Rightmove (I trawl through multiple times a day!) that look like good value (looking to get a doer upper) and I worry that house prices will start to rise again following these uncertain pre-brexit months.. so basically wondering if it's worth saving higher % deposit as it may save us money, in terms of interest, in the long run?

If you bought, you could remortgage in a few years time when you have more equity in the house, and get your better interest rate then, as you'll have been putting the mortgage payments into your house rather than rent. So you pay your mortgage of, say £600 per month, some of which is interest, but some goes into paying off the mortgage. Then after, say 2 years of paying E.g. £450 per month off the actual mortgage owed, you have over £10000 less to pay off than when you started and so borrow less on a remortgage, effectively lowering your loan to value ratio. Plus if the house has increased in value at all, that counts as the current house value and lowers your loan to value ratio further, getting you better deals.
Did that make any sense at all?!

I guess what I'm trying to say (very badly!) is that you could save up for 2 years then get a better interest rate, or you could buy and put that money into the house for the same period of time, then get the better interest rate. It might not always work out better I guess, and I may be oversimplifying things, but I'd think it's sensible to buy if you can. Good luck!

Oh thanks SadSongs I will definitely do some research into remortgaging as that sounds interesting - I’ve never really heard of that before!!

Whilst the interest rate is so low I would say buying now is a good option

Whether you'd get better interest rates in a couple of years' time is debatable, in my opinion. The current low rates won't be around forever, and there are many people who think they'll be going up soon, particularly once Brexit gets under way. So that'd be a pretty strong argument for getting a mortgage now to take advantage of the low rates you can get and fix for as long as you can. If interest rates rise, you'll have gained; if they stay low, you can refix and benefit that way.

I'm in the north-east too, and it's a great place to get on the property ladder. Good luck.

Work out what the monthly interest portion of the mortgage would be versus your rent. If the interest on the current mortgage payment would be lower than the 600 a month you are paying, move now, as you will then effectively be saving money, even if the total monthly payment is higher.

If the interest portion is higher than your current rent, calculate when that will stop being the case and see how long it will take you to save up more of a deposit to bridge the gap.

Like a PP said you'd have no guarantee of better rates in 2 years so that alone wouldn't be a good enough reason for me to wait.

In the meantime you'd have paid 2 years of mortgage payments rather than it being stuck on a cash deposit account.

I would buy now while rates are low and put the £600 into mortgage repayments and even overpay if you can. That way you would build up equity in your property and be better off in 2 years time. The review it all.

It is better to actually do something, enjoy a new home and save any friction due to lack of space and the very frustrating wait before you feel like you are achieving something you have saved for, waited for and not doing it will drag down your enthusiasm. morale and affect your relationship.

I'm sorry but your DP is thinking unemotionally/financially when life is not always about money/saving a few quid, it's about living, living in the now and homemaking and money always sorts itself out in the end. Nothing to say you will gain anything at all by waiting, the market/interest rates are too changeable to predict with certainty.

I don't think you are being impatient, I think you are in a good position to make good use of the savings you have and the market as it is now, especially in the area you live in. And you have identified a good opportunity.

I'd say that numbers are strongly in favour of getting on the property ladder. Currently, you pay £600 in rent so that's £7,200 a year down he drain. A mortgage or £112,000 can be had at 2-3% interest so that's only 2.2-3.3k in interest and any amount above that would be paying down the mortgage. So you'd be better off buying and save 4-5k a year and after a year, you'd only own 107-108k if you paid £600 pcm on your repayments.

In addition to this basic calculation, there is a bit of a gamble, e.g. Prices might fall or rise (so you could be better or worse off) but interest rates are probably only going to go up so you'll likely get a much better deal now than in the future.

Oh, and make sure you have a good contract in place if you aren't married (sth to sort out with your solicitor during the buying process).

Thank you everyone very much for taking the time to give rational advice- I feel more informed now. I hadn’t really thought about interest rates going up as stupid as that sounds, even though that’s what makes a massive difference isn’t it. I’ve been more concerned with house prices, thinking maybe they’re at their lowest now so it’s a good time to buy but then part of me is also wondering about the possibility of them falling again with Brexit- then what if we’re plunged into negative equity and then dislike the area but are unable to move (currently in a very nice area that I love but that we can’t afford to buy in so we’re having to look in much less affluent places about 15 mins drive away - I know we’ll have to do a lot of research before committing but there are things you don’t know until you’re there like neighbours etc. Also my income is likely to take a big hit as I have students who come to me and I’m not sure what portion will travel to a new area as many walk, and I probably won’t be as lucky with attracting new students in a less affluent area, but I suppose I can always rethink my work and how I deliver it.. but definitely at first I will lose income - if I lose 10 students which is quite likely, I will lose £600 a month!, so is it worth saving more deposit so we can eventually buy in a nicer area I am now wondering?)

I also really worry about making bad financial decisions that will get us into trouble (having grew up with a single mother on benefits due to caring ft for sister with MH problems.. she constantly worried about having house repossessed (massive 4 bed terrace bought for 60k in early 90s but on interest only mortgage that I’ve had much rather traded for a small council house growing up as my poor mother really couldn’t afford to maintain it so it was always in a horrible state not helped by the fact she is a very big hoarder! Not even sure how much it is worth now as it’s terribly run down). She still has this problem as she hasn’t been able to keep up at all with mortgage repayments but she keeps writing convincing letters to the bank which have managed to persuade them not to take it yet, and I was at one point considering putting the money I’d saved into her mortgage to help her keep the house, but I’d worry it would get taken anyway and my money would be gone, and I know also that she will not be made homeless as she currently cares ft for my grandma, and my grandma’s house is paid off so I’m sure she’ll inherit that- just so no one thinks I’m leaving my mother homeless!!))
Sorry that was a massive massive derail but just to give an idea of how scary these decisions are for me!

And my partner is very very negative (he calls himself a ‘realist’) and he plays out the worst possible scenario for everything in his head. Yes I think he thinks quite unemotionally as beach said. I am kind of like an overenotional yo-yo as perhaps you can tell from this post. Excited and impatient about a new home but also terrified of bad decisions.

But I think pp JoJo is right, buying a house is always going to be a gamble but if interest rates are low now then that’ll save a lot of money!

Thank you again to you all for sharing your wisdom and knowledge and sorry for such a ramble!

I would say that's it's a bit of added complication if you teach music/do tuition etc. Establishing yourself in a new area might take time and as you pointed out - the take up might not quite be the same as it is in a well-off area.

If you were to stay where you are, would you be able to afford a 2-bed flat? Or do you feel like you really, really need a bigger property? You could always move up the ladder in, say, 3 years once you've saved up a bit more but in the meantime you'd be paying down a mortgage and living in the sort of property that you're in while renting anyway.

In terms of ever being in negative equity, you mentioned being keen on doer-upper. The advantage of those is that as you do them up, they go up in value so prices would need to plummet drastically for you to actually end up out of pocket.
But there's also the consideration of trying to do a place up while you've got children coming in for lessons... Refurb works are noisy and messy and dust gets everywhere so it'd be very difficult to keep even one presentable, clean room.