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He's right, you know.
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I went variable as well but I also bought a place that was well within my means so if rates did increase (it's totally possible) then I could still be comfortable about repayments.
I've been overpaying flat out too, so if trouble strikes I have a buffer before the bank gets my flat.
My contingency plan for that is to move into the shed and rent out the house. But they would have to go well past 3% for that to happen. I'm hoping that doesn't happen for at least 5 years by which time I should be ok :)
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I believe the broad point in the long term. But equally it is perfectly possible to do the following (real life example, figures approximate, not me thank the lord!) -
Pay £140k for a flat in 2005
Spend £10k doing up flat in 2006-2011
Need £10k to finish doing up the flat in 2012
Need £12k to extend the unmortgagably short lease in 2012
Own a flat currently worth £120k, worth £140k in good condition with a good lease.Whichever way you look at the owner has lost £30k, or approx £5k per year.
They have also been paying a mortgage of which the vast majority of the money out is interest, which is throwing money away as much as renting is. (You have a decision - who do you hate more, landlords or banks - tough call).
£5k per year would go a long way to paying the rent - or could pay for a room in a nice house in a nicer area.
Summary - buying a house / flat can be the single most important thing you do, massively beneficial from a financial and lifestyle point of view. But it is not a one-way bet, and bear in mind a long term view of house prices and where we are in the cycle, and take proper advice when you buy!
Lecture over!
If you buy a place that needs £20k worth of work that loses £20k in value, and which needs a £12k lease extension within 7 years, then you probably make all sorts of bad financial decisions and shouldn't be allowed to manage your own money.
Also, even in that example, losing £5k a year, you'd be up on me renting.
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I remember an arguement a few years back which stated the reverse, ie renting was financially better than buying. It took into account raising a similar sum of money as would be needed for a deposit for a purchase but investing it into shares in FTSE 100 companies.
One good reason for buying rather than renting is revealed by the number of posts elsewhere on the forum of renter / landlord problems.
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If you buy a place that needs £20k worth of work that loses £20k in value, and which needs a £12k lease extension within 7 years, then you probably make all sorts of bad financial decisions and shouldn't be allowed to manage your own money.
Also, even in that example, losing £5k a year, you'd be up on me renting.
One important point in jeez's example is the purchase date of 2005 which was in the middle of theproperty boom period. 2 years later was when the nosedive started.
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...if the agent lies about the lease length and you've spunked a grand on fees before you find oput the truth (and you don't take advice so you do not realise the full financial implications of the short lease).
You didn't mention that.
Do it, but look at the cons not just the pros. And don't expect house price rises - they might happen but prices are still very high by historical standards and arguably the best case scenario is 1 or 2% growth per year for the next 10 years whilst we dig ourselves out of this hole, (worst case scenario involves the rise of the east, decline of the west and us all being fucked so don't worry about that!)
I'm fairly up on the state of the economy, as I work in that area. I've done all my research, am not going into this blind, and am sick of debating potential rises/falls. No offence to anyone on here, but there is nothing more futile. Most of my reasons are non-financial.
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The agent lying was hypothetical - not sure if that is the truth but the chances are when you buy that you will offer based on certain assumptions, spend money, then find out that things are not quite what you had hoped and were lead to believe. You clearly are very much anti-wasting money on advice (I don't blame you) but this will put you in a very difficult position where you are forced to try to renegotiate, or pull out or overpay.
I'm not against spending money on advice if I can't provide it myself. I can arrange a mortgage myself, so I'm reluctant to spend £600 for someone to do it for me.
As for the agent saying one thing and later revealing it to not be true, I will be asking for details in writing. If some deal later turns out to be untrue I will investigate options.
These are very odd scenarios you're throwing out there: buying can be risky if the agent lies to you, then you find out and yet buy the place anyway without taking further advice. Well, yes, it can. I won't be doing that.
I think I said earlier on in this thread that I'm posting here to look for advice/conversation on certain things, not debate whether or not house prices will rise or fall. It's pointless, and this thread keeps getting bogged down with it.
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Pay £140k for a flat in 2005
Spend £10k doing up flat in 2006-2011
Need £10k to finish doing up the flat in 2012
Need £12k to extend the unmortgagably short lease in 2012
Own a flat currently worth £120k, worth £140k in good condition with a good lease.Whichever way you look at the owner has lost £30k, or approx £5k per year.
I don't understand, surely it doesn't matter if your house depreciates by x in 5 years if you're intending on living in it for the next 30 years/the rest of your life? And is the 20k spent on doing it up really 'lost' money? I'd have thought that living in the house of your dreams is worth more than paying less to live in a rented place you can't touch.
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Not so much at you, more generally....
From a 'total interest paid over the course of the mortgage' point of view this makes a lot of sense.
BUT - I would be very wary of overpaying as opposed to saving.
£1,000 pcm month mortgage. £6,000 savings set aside purely for mortgage. Job lost. You can pay the mortgage for 6 months.
£1,000 pcm month mortgage. £6,000 overpayments made. Job lost. No guarantee that the bank will give you 6 months grace to thank you for making 6 months overpayment. They might say 'overpayments are in the past. They are irrelevant. YOu have missed 3 months of payments, we're gonna start repossession procedings.'
Check the Ts and Cs.
My provider lets you choose how the overpayments work (reduce term or something else) and you can 'get them back' so to speak if you need help.
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I don't understand, surely it doesn't matter if your house depreciates by x in 5 years if you're intending on living in it for the next 30 years/the rest of your life? And is the 20k spent on doing it up really 'lost' money? I'd have thought that living in the house of your dreams is worth more than paying less to live in a rented place you can't touch.
Lose your job, have to move.. what then?
Most people can't buy their dream house as their first house.
I still think if you have the cash, then buy but that's from the point of view of someone who can't spend time watching markets and crap to make money elsewhere.
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My provider lets you choose how the overpayments work (reduce term or something else) and you can 'get them back' so to speak if you need help.
You can also get offset mortgages that do a similar thing: take the balance of a savings account off the total owed, while leaving it in place, saving you interest payments. But I imagine the account has to be with the lender, possibly a specific product, perhaps not paying much interest... Still.
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"People who don't take risks don't realise they're alive".
Where's that from?
Me - b&d 2012.
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You can also get offset mortgages that do a similar thing: take the balance of a savings account off the total owed, while leaving it in place, saving you interest payments. But I imagine the account has to be with the lender, possibly a specific product, perhaps not paying much interest... Still.
They were popular in Oz when I left. A guy I work with now has one as well.
I prefer to keep my mortgage away from my bank.
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Also, even in that example, losing £5k a year, you'd be up on me renting.
Sparky - I am still terrified by your terrible maths (no offence!).
If he took out a say £110k mortgage to cover buying the place in 2005 on interest of say 4.5% he would be paying £5k per annum in interest.
He isn't being given the house for free.
So in this example he would be £5k per annum worse off than you.
Please, please remember that it isn't a one way bet as this real life example shows. -
You can also get offset mortgages that do a similar thing: take the balance of a savings account off the total owed, while leaving it in place, saving you interest payments. But I imagine the account has to be with the lender, possibly a specific product, perhaps not paying much interest... Still.
I've got an offset mortgage and it only works with current / savings accounts with the lender. As an example, if the mortgage outstanding is 100k and you have an average of 10k in the other accounts, interest is only charged on 90k in that year. Meanwhile you would continue to make payments based on the 100k figure so the overpayment would reduce the outstanding balance resulting in paying off the mortgage quicker.
They are certainly worth considering if the initial loan interest rates are sensible.
hippy
handtightenonly
mikec
Sparky
wvm
sohi
Scoot
walm-
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Owning your own home
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"People who don't take risks don't realise they're alive".