Buy now or rent

[Iammetoday]

We rent at the moment. Our landlord is selling up. Shall we use savings & get a 5% deposit? Or keep renting? We are early 40s, 2 dc. Been renting with same landlord for 10 years so we have cheaper rent than market and landlord is giving us first offer on the house to buy (private) but it would be a struggle to get the money needed especially in today's mortgage climate. Also I don't think we could raise more than 5% deposit and not getting any younger- can you get mortgage with 5% in 40s?

I think it’s worthwhile buying because of you buy at the right time it’s an investment, once your mortgage is cleared you own something rather than paying a landlord. Of course you do become responsible for the maintenance of the property that would have otherwise been your landlord’s responsibility. So first step is weighing up what you would prefer.

Second step is to go to an independent mortgage broker to see what mortgage you would be able to afford and what minimum deposit you would need. Deals are being pulled all the time due to concerns re: affordability, so you might struggle with just a 5% deposit. Is the landlord offering a good price? If you might struggle with the mortgage payments you want to consider how much the house is worth you don’t want to be in negative equity and trapped in a house you can’t afford. I predict that prices will continue to fall.

I think if I was I your position unless I absolutely loved the house and could afford the mortgage, I would rent for another year and save hard. Although there are no guarantees I anticipate repossessions and people struggling over the next 12-24 months so I think there will be bargains to be had. Of course sad for those who find themselves in that position.

Also I don't think we could raise more than 5% deposit and not getting any younger- can you get mortgage with 5% in 40s?

Yes you can. We were going to buy a pretty expensive house this year with a 5% deposit; if based on just his age and income they would offer us a 33 year mortgage (he's 41) but if based on both of us (I cannot/do not work) they would only offer us a 28 year mortgage term (I'm 47). I'm classed as a dependent, fyi.

Bear in mind with these longer than 25 year terms that you have to pass affordability checks, I'd had 25 years of working and paying into a state pension and he has a very good private pension, so they're obviously banking on taking money from private pensions well past retirement age, which is very far from ideal, and I'm glad we didn't do it.

Be mindful that just because you've lived in a house for 10 years doesn't necessarily mean that should be the house to buy. With a bit of patience and perseverance, there will be bargains to be had out there in the forthcoming months/few years.

In terms of deposit amounts, there's very, very little difference in mortgage rates between a 5 and 10% deposit these days, so don't let that worry you. But the less equity you put in a house, the more at risk of negative equity you might be in the future. The sensible thing to do is to buy under your means and overpay your mortgage a bit if you can; if you can't afford to do that, buy somewhere you know you wouldn't want/need to move away from within the next 10 or so years.

Thanks @Purpleboat so landlord doesn't need to sell until next year- around April, so we could rent & hold on until then. We do love the house and it has lots of potential. It's not been valued yet but landlord is very reasonable and if private sale he will knock £8000/10000 off as not paying estate agent fees.....

Thanks @KievLoverTwo that's good to know- we will go to mortgage broker this week but interesting to know about the %deposit and are factor.

Don't let him hoodwink you into thinking he's doing you a favour by knocking 10k off because he doesn't have to pay EA fees. It's likely he'd still get more by doing that if he invites the average joe off the street to buy it.

In a falling market, it's really, really important not to overpay, so I wouldn't recommend just giving him what he's asking for it, unless you can't afford to go elsewhere.

Most folks buying now (in stagnant and falling areas) are doing through pricing exercises and going in at 10% under asking price or 10% under what they perceive it to be worth.

I wouldn't count on him knocking off a lot for you. Also offering you first choice doesn't mean he won't decide to go with an EA. If you're not sure what the house is actually worth then how do you know you will be able to afford a 5% deposit?

Is it worth your while asking a couple of local estate agents to come in and give you an idea of what they would market the house for? Then knock off the amount of their fee and that gives you a way to assess how good an offer your landlord is making you.

I don't think it's worth trying to time things if it's a home to live in. Interest rates seem set to go up. If there are price drops or a "crash" mortgages jsut get harder to obtain.

Hi the house across road very similar sold last month so gives us an idea of price so we can work out 5%.@Whinge

We would definitely get it valued- @Britinme

He's only told us today so mind is over thinking!

As you are settled and paying below market rent, I would hold on until next Spring when prices will have fallen more. He can get it valued then and see. At present, a lot of estate agents/ sellers are over valuing but things may be different by Spring 24.

We did 43 and 41 , we got the keys in December. We only had a 5% deposit. We are with Nationwide and we had a very good broker .

Also start cleaning up your finances, pay off as much debt as possible if you can , cancel all subscriptions and try to not let your bank account get to zero before every payday . Do not take out anything out on finance esp cars . make yourselves look as reliable as possible. All extra income you can generate also helps .

@pavillion1 thank you- will do that

Don't even do PayPal 3 in 1. If you have credit cards, try to overpay them slightly. Try not to use your overdraft. If you like to gamble, get a revolut card to do it on, no gambling on your current account (I won't even let the OH buy National Lottery tickets on ours at the moment!). Don't switch bank accounts. They'll be looking at all your spending habits so try to keep it down, expensive purchases after the house purchase, etc.

Make sure you are on the electoral roll.

@KievLoverTwo thankyou will pay off PayPal ASAP and credit cards thanks.

This is not generally good advice. Don't manipulate your spending temporarily in order to maximise credit (mortgage).

I'm losing track of the number of news reports about people who cannot afford their mortgages even though they were stress-tested (based on manipulated spending) at the time they took them out.

If you can't afford a mortgage (and potential increases) on your normal spending regime then you are paying too much.

Oh, thanks a bunch!

It's not bad advice if you want to pass their credit checks.

Thankfully, the banks are now far less harsh when it comes to repossessions so if OP really reigns in the spending, she might be okay, because there is now more of a safety net then ever before.

Also, she's been given good advice to make sure she pays as little as possible which could make it more affordable.

Thanks all,we have a loose plan now-
We will get property valued first.
We're paying off credit card/ PayPal as a priority
See a mortgage broker to get an idea( obviously used online calculator but would like to know more deals)
We're going to save until next spring and continue renting Until then.
We will then look to buy- either house we're in or another.
If house were in which is preferable we will do so privately, get valuation, conveyancer and negotiate hard!

Thanks for all the advice I think it's doable and we are expecting (unfortunately) some inherited money in next few years so this will go towards house too.

If you are doing that to pass credit checks then you are stretching yourself too far. It's not realistic to maintain that constrained spending in the long term, hence many of the stories of heart-ache in the press.

The best advice given was to wait until next year and hope that prices have fallen to the point where the home becomes affordable within their normal budget. Meanwhile save like billy-ho to increase that deposit percentage(which will naturally increase as prices slide).

All sounds sensible. Good for you!

@rainingsnoring thank you!

Which banks are giving out mortgages with 5% deposit? 😳

loads are and some are now doing 100%

Spoken to natwest recently and they’re not giving out new mortgages to ftb’s unless you have 15% deposit an up. So really not sure about loads.

Not worth having an argument about. On Moneysupermarket if you enter FTB with 5% deposit on a 300K home then there are 15 pages of results.

Of course, how much is available in funds for these deals is unknown as is their willingness to lend to the hoi-polloi.