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Author: Subject: OT: House to buy or not to buy

posted on 31/8/16 at 03:30 PM Reply With Quote
OT: House to buy or not to buy

A long post but I am sure some of you will have been in a similar situation. I am struggling to get my head around the numbers especially as emotions get in the way.

For the last few years I have been living in a house owned by my parents, they now want to sell it. I either have to buy them out or move out and go elsewhere. I had intended to change careers but am not quite ready to move on.

I really like the house and want to stay here for at-least the next year so my current job can run its course. After that I may end up moving around a bit and renting before I settle somewhere after 5 years and sell this house to fund a permanent home.

The house is valued at £170,000
I can put down a deposit of around £50,000 (Half of which is a 'Loan' from a kind uncle on the understanding he gets it back after 5 years)
Meaning I need a mortgage of circa £120k.

Having spoken to various banks and mortgage advisors I can get a suitable 25 year mortgage on a fixed 5 year rate.

Question is, should I buy? Clearly if I rent it out the rental would cover the mortgage payments plus a tiny amount for maintenance. Could be some stress in managing property and tenants if I live the other end of the country but is it worth it to be "on the property ladder"? Conversely I may end up staying here longer term but this is less probable.

5 year fixed at 2.6%
By my calculations after 5 years the £119,000 mortgage would be around £98,000 meaning I would get back about £21,000 (Can anyone check this is right?)

Minus £3000ish for selling fees, a grand for tidying the place up pre sale and then conveyancing fees I would probably end up with around £15,000 once all is said and done (plus my half of the deposit).

Short term getting money together for the deposit is going to be a stretch, its doable but a stretch.

Are my sums right? What are peoples thoughts? Worth buying?

[Edited on 31/8/16 by tegwin]

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posted on 31/8/16 at 04:46 PM Reply With Quote
I'm guessing you have never bought a house before, after five years you will be lucky if you only owe 115k and what about the possibilty that house prices can go down. Having said that I would buy as your rent for something else will still be paying off a mortgage, only somebody else's.


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posted on 31/8/16 at 05:22 PM Reply With Quote
Yes - if you can get equity in the house then definitely worth doing.

Only concern in Plymouth would be the ability to let out if you moved away...? What's the rental market like there?

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posted on 31/8/16 at 05:22 PM Reply With Quote
Persuade your parents that selling top you will save them a lot of hassle and expense....
They may offer it to you at an advantageous price.

Then consider how much your mortgage v renting would cost, but allow for maintenance etc.
Then take a punt on what house prices will do over the 5 years.

Is the house in a renting-friendly area? if so it may well be a good buy, as long as you don't overpay for it.

Another point, when considering renting, think about how much you will be charged to move into a place. My daughter and boyfriend forked out £1k in fees just to get in. That is plus deposit and rent etc! shocking, but in some areas rental agents seem very expensive. Plus, having a mortgage is good for the soul, the earlier you start the further you get up that housing ladder.

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posted on 31/8/16 at 05:23 PM Reply With Quote
House prices may fluctuate especially considering Brexit but in the long run they never go down
But it's about the short term in your case and the 50k you owe uncle
For me buying has always been a better option than renting
You can always rent a room to a mate to ease costs.
You could buy off you parents with uncles help and when the time comes, sell, pay uncle and buy a flat.
You will have a track record, some equity and a credit score

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posted on 31/8/16 at 06:12 PM Reply With Quote
It was under different circumstances but I bought my first house this year and there was a lot to consider but as some one else said, if you rent you are just paying someone elses mortgage.

If you are going to buy I would start looking around at other houses, don't just buy the one from your parents because you already live there as you might find something better.

A final point, I'd be wary about buying from family. Obviously it depends on what your parents are like but I know a few people who've bought from family and then have problems because the family think you own them one because they did you a favour, or act like its still partly their house and think they should have a say in things.

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posted on 31/8/16 at 06:57 PM Reply With Quote
Thanks for all the comments guys. Very much appreciated. It's easy to go around in circles in your head and get nowhere with decisions like this.

Can anyone check my man maths? Assuming mortgage is for 118,000 over 25 years but fixed at 2.6pc for 5 years. How much equity would I own after 5 years if I sell? I recon it's around £20k but I'm not totally sure!?

I appreciate house prices may fall but looking at trends here and looking at the type of house it is I'm willing to gamble on it going up or at least holding firm.

Again given the type of house and its location I'm getting agents reckoning it's worth £800 a month let as a family home....

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posted on 31/8/16 at 07:59 PM Reply With Quote
Just bought my first house at 44. Get on with it while you can.

After 2 years I will have paid enough off to re mortgage at the next to level down. Unless it's a fantastic deal get a 2 year fixed rate , pay enough off and remortgage again . Don't forget fees either . Lots of interest is usually paid off in the first years and you will only know by going to see an adviser who can work this out
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posted on 1/9/16 at 06:35 AM Reply With Quote
Simple's if buying is cheaper than renting it's a no brainier... If not you need to think carefully as your investing in the house (assuming your doing capital repayment mortgage), you might be better off with a smaller cheaper house.

Check if renting and saving is a better option for your, 5 years may not be long enough to make it economic (once legal fees and stamp duty are paid).

Check the "true" value of your house by looking at similar houses in your street that sold and the actual sold price (zoopla is great for this) estate agents estimates are not always that accurate...


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posted on 1/9/16 at 07:43 AM Reply With Quote
Having paid a mortgage for 15+ years now I'd say buy the house and have the money you pay go into your own pocket and not somebody else's. I didn't buy until I was 27 years old with some fear of being "tied down", but with hindsight I wish I'd committed earlier as I'd be closer to having it paid off by now. A purchase direct from your parents will save them time and expense and also by the sounds of it you too. I say go for it.

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posted on 1/9/16 at 08:24 AM Reply With Quote
The basic answer almost certainly has to be - buy

However there are a whole bunch of things to consider

"The house is valued at £170,000" - how & by whom, is it similar to other houses in the same area, don't just look at prices on rightmove or similar, remember they are asking prices not sale prices, the sale prices are available on rightmove from the land registry, but you need to create a rightmove a/c to access them (free)

When putting a value on the house you need to bear in mind the age & condition of a lot of stuff which living there you might just take for granted - how old is the boiler, the electrical wiring, are windows double glazed & how old & what condition, fascias & soffits may need paintwork or replacing, how modern/what condition is the bathroom/kitchen & general decoration, doors & flooring - the above could easily sway a valuation or genuine worth by around £10k, so important to note

If the value is what your parents would hope to sell through an agent for then typical agents costs would be around £3500, so you would expect that to be taken off at least

"I can put down a deposit of around £50,000 (Half of which is a 'Loan' from a kind uncle on the understanding he gets it back after 5 years)" - if you tell your mortgage company it's a loan they won't lend as much or as favourably, as they will rightly be looking at the fact that at some point it needs to be repaid - your uncle would need to "give" you the money for it not to be taken into account by the mortgage co. - also is Uncle kind enough to lend this interest free or is there interest to pay to him, something you need to look at in your calcs. Further, do you definitely have the means to pay uncle back without selling the property, if property prices happen to have taken a temporary dive then you don't want to be tied in to a pre-determined selling date!

"Meaning I need a mortgage of circa £120k" - the figures you came up with for the 5 year mortgage sound high, but fixing for 5 years is likely to be an expensive way of doing things, obviously discuss with mortgage advisor, but I would look at a 2 year term with the option of what to do at the end of it, you would expect a sub 2% interest rate on that - if you may be renting the place out that needs a different type of mortgage & you would need to change, if you're in a 5 year term it would probably cost you to get out of that - is the mortgage interest only or on a repayment basis, this will affect what you owe at the end of 5 years, but don't expect it to be loads less than it started at even if on a repayment basis as most of what you pay in the early years is interest

As regards renting the place out in future, there are many pitfalls there (believe me I do it for a living!), landlords have virtually no rights in reality over the property, everything is biased in the tenants favour & becoming more so, it is absolutely essential to get the right tenant in there in the first place, which means using the right agent that will vet people properly, make sure you do your homework on this. if you get someone in who decides not to pay it could easily take you at least 6 months to get them legitimately removed by the courts (yes, really!) & during which time you're still liable for paying the mortgage

On the positive side an interest only mortgage would probably cost you less than 1/3 of what it would cost you to rent a similar property & once on the property ladder it doesn't matter anywhere near so much to you if prices go up or down as usually if you are selling you will also be buying so it both helps & hinders. Property prices around here (Essex) have gone absolutely barmy, a house my daughter bought around 18 months ago for £156k would now go for around £220k, had she not bought when she did, all she could afford now would be a small flat!

As already said, in the long term property only ever goes up, & even on the very latest figures from government we are scheduled to not be building enough houses to meet demand for at least until 2020, & we've never met that demand in the last 30 years or so, so don't expect things to change hugely in the near future, demand is always going to outsrip supply barring a world shattering event, in which case worrying about a mortgage may be the least of any of our problems!

Whatever happens, good luck with it!

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posted on 1/9/16 at 11:46 AM Reply With Quote
Paying off 50k in 5 years sounds very optimistic and that would be my main concern, though you don't seem to mention your income which everything depends of course plus you'll still be paying the normal mortgage repayments on top of this, they won’t wait for you to finish paying off your uncle first…

Your best to put it all in a spreadsheet for the whole year plus all the other things you’ll be paying, council tax, electric, food, car, heating, insurance, tv licence etc etc etc if you haven’t done this before you’re in for a big surprise. You very well may find you have totally underestimated you’re out goings.

And mind you’ll be paying this for quite some time, you may get married, have kids (tends to happen) next thing you know everything you banked on may have changed completely in a very small amount of time.

I own my house so no mortgage, have a semi decent paying job (about 37k a year), have 2 kids and a wife and a very small loan for a car. Yet it’s a struggle to save anything for anything, you’d just be amazed how much it all mounts up.

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posted on 1/9/16 at 01:22 PM Reply With Quote
Agreed the real cost of living is almost always more than you think - worth calculating to be sure.

Keep us posted on your decision as I for one am interested to see how this works out for you.


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posted on 1/9/16 at 03:48 PM Reply With Quote
If you are renting out, a lot of local authorities (all in Wales now) will require you to train and register - we rent out a handful of properties and the cost of the training (for my wife as she's the landlord) and registration wasn't far off £500. This will need renewing every few years so you'd need to factor that in too if it applies.


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