[irresseni]

As some of you may have noticed with one of my threads late last year, I was looking for a job and I have now got one in Southern London that I am very happy with [thumbup]

So I am hoping to move out into Southern London but I am in a pickle with what avenue to take in regards to housing! I don't know much about the renting/mortgage scene, so I need some "external" advice!

I will finally be earning a half-decent amount, so I can afford London rent prices of around £300-£600 pm. However, my Dad is keen for me to get a mortgage - I think it is out of the question in my current situation, but then I see 30% mortgage offers about and it makes me wonder. I am only 22, single and don't have an awful lot for a deposit though.

I do not mind housesharing, which with my current train of thought is probably the best route for a year or two.

So what advice can you give? Are these 30% ownership mortgages worth it? Is house sharing and renting just throwing money down the drain though? What alternatives do I have?

Any advice, even smallest amounts, will be greatly appreciated! [thumbup]

[Donadoni1809]

dude whatever you do dont get a mortgage in this current economic climate or you'll end up in negative equity
rent rent rent....its the best way at the moment, let the housing market find the natural bottom which wont be for another year or so and then pick something up cheap and in the meantime save....seriously dont get a mortgage

[Donadoni1809]

this is from today....seriously wait before you buy
http://www.guardian.co.uk/money/2009...g-house-prices
and this from last month
http://www.timesonline.co.uk/tol/mon...cle3059977.ece

[irresseni]

So you would say definitely rent for the time being?

[Donadoni1809]

i definitely would say rent and just so you know i followed my own advice 2 years ago,
my house had doubled in value over 4 years and i knew the housing bubble was going to burst sometime soon so i sold it and paid off my debts and now i rent, but seriously i would read up on this dont just take my opinion,

[irresseni]

i definitely would say rent and just so you know i followed my own advice 2 years ago,
my house had doubled in value over 4 years and i knew the housing bubble was going to burst sometime soon so i sold it and paid off my debts and now i rent, but seriously i would read up on this dont just take my opinion,

To be honest I know a little bit on the current finanacial crisis (not tonnes mind you), but with prices coming down my Dad keeps saying 'buy now', whcih I cannot understand fully but there you go - hence why i wanted an unbiased opinion and came here

I have looked around at moneysupermarket.com, looked at all the different types of mortgages etc. and I really think renting is the way forward for me until at least it appears the prices have bottomed out, which could be a few years down the line.

Anyone else with input, anything at all would be greatly appreciated!!!

[Soolfelpecelf]

Anyone else with input, anything at all would be greatly appreciated!!!

Yeah i have some advice, stay the **** away from Balham. It's bad enough just working round there.

[gMUVgw71]

I think it depends a lot on how long you are planning to stay in the place as well. Negative equity is only a problem when you try to sell a place. What you should focus on more is the mortgage repayments and what can happen to them. With interest rates falling from 5% to 1.5% in the last few months the price of a mortgage has fallen through the floor. My parents’ mortgage repayments have fallen by over £300 in the last few months for example.

But with that in mind it’s quite possible that the rates will go up in the future as the economy recovers so what may look like an affordable mortgage now might suddenly rise by quite a bit in the future.

House values will ALWAYS go up if given enough time. If you buy a place and its worth £10k less 6 months later, that’s only going to be a problem if you try and sell there and then. If you can afford to buy a place and can afford realistic changes in payments due to interest rates than try and buy.

[Jon Woodgate]

Getting a mortgage in the current climate is a stupid bit of advice tbh

[texbrease]

Rent for the time being until the market bottoms out, then get a mortage at a fixed (low) rate for the first 5 years. That would be my advice.

[Xewksghy]

house sharing is a bad idea to me. bit messy to get out of.

[Arkadiyas]

Rather than try and disuade you with arguments of negative equity and market trends, I'll try work through what you could realistically afford.

I'm going to make a few assumptions here. Your top level is £600pcm for rent only. Taking in to account bills, living and travelling costs, assuming you don't have a student loan and no other debt that you are servicing, then £600pcm is realistic on a basic salary of above £23,000. If you're not making this, the top end figure is unrealistic. Mortgage lenders usually base rates and offers on cashflow rather than the old school "4x salary" due to historically soaring prices, what people need to borrow and higher levels of default. In reality, you're unlikely to get a mortgage having just got a new job as you probably have a probation period during which you don't have a permanent contract anyway. Once this has run it's term, it's more probable that lenders would listen to your requests. Let's assume you're happy to rent until this time.

Using this £600 figure, let's look at fixed rate mortgages that you could afford, which would probably be suggested to a first time buyer so that you know what your term mortgage payments are, even if they are slightly more expensive than variable rates. The best rate on the market at the minute for 5-year fixed is 4.75%. £600pcm on a 25-year term will net you a mortgage around £105,000. If we move to a more typical 6.99% currently on offer to first time buyers, the mortgage you can afford would be around £85,000.

You say that you haven't got any sort of deposit together, but in order to get either of these rates, you would have to deliver a minimum deposit of 10%, so let's assume that Dad sells the speedboat and throws some cash your way so that the mortgages would represent 90% LTV for the property, meaning that at the typical rate you would have about £94,500 to purchase a property and at the best rate around £117,000. Neither of these figures is going to buy a property offering any sort of comfort south of the river. You'd also need to pay arrangement costs of ~£1,000 for the mortgages and lets say ~£2,000 in solicitors fees as a low estimate.

On to another point, the 30% shared ownership schemes. I'll just come straight out and say that in a falling market, they are a bad idea. They play to the desperation of people who follow the mantra "I must get on the property ladder". In a booming market, they appear to offer growth on 30% equity for the buyer, but factoring in interest payments on the mortgage, fees, solicitors costs and 30% liability on the property, you may as well rent and save on the side as in 5 years time you'll barely have any equity to transfer to a new property anyway. Housing companies that propose these offers are in business to make money, not to find you somewhere to live; always remember that.

My suggestion, as you can probably guess, would be to rent for 12-18 months at least, then you can find out what you can comfortably afford each month, whether you enjoy the job and like living in the area; London is not for everyone. For £600pcm, you should be able to get a room in a shared house in a place like Earlsfield, including bills. Renting isn't throwing money down the drain if you can't afford a house, plus any expensive problems like plumbing and heating repairs don't need to come out of your pocket!

[Caunnysup]

An old Wall Street saying states: "You have to buy when there's blood on the street"

Would all you guys crying wolf out there rather have bought 2 years ago when prices were about to top? I'm sure you would...

TBH I'm seriously starting to look at buying a place in London whithin the next 6 months.
Rates are low, prices have come down (not a lot, in the "good" areas, and that's because of strong underlying demand for good quality stuff... which this city does NOT have a lot of, sorry Londoners )...

But bear in mind we're talking a niche market here. In the OP's case I would go with Cazzam's recommendation. With £600pcm you're better off renting for the time being until 1) you get more capital and 2) the areas you were looking to buy a property actually stabilize (which is gonna take longer than the high-end market).

[irresseni]

Big post

You, sir, are an absolute legend for that post. Not only did you explain everything in understandable language, but you also worked out my wages (just £2,000 off ) and I cannot thank you enough for the advice. I have a little deposit, but not £10,000 or so -> more like £2000.

In all honesty, I was thinking about this last night and the more I did I really think my Dad really didn't have the right idea, but all of your responses here have made that perfectly clear too.

Thank you so much, all of you. [thumbup] [thumbup] [thumbup]

[Arkadiyas]

Not a problem, I went through something similar a few months back with my girlfriend's younger sister so that we could bring her head back out of the clouds that her and her boyfriend (combined salary of £40,000) were going to buy a £200,000 flat with a £180,000 mortgage they had been offered. Their expected salary growth is about inflation + 1%, so it was a ridiculous proposition. As an actuary, I'm quite risk averse (with the advice I give to other people at least), and things must make future financial sense. We live very much in a "have it now" society.

I also think that our parents' generation (my Mum is 47, I'm 28) don't fully comprehend relative market positions between their purchasing point and ours. They have experienced the excessively high mortgage and inflation rates of the 80s that we don't understand (yet) but, for example, my Mum paid £11,000 (1x salary) for a house now valued at around £100,000. She wants to move but also work part time and retire at 55 when she'll move to Mallorca where she has a flat. She's fully paid up on the house and flat, so I told her to just sit it out or come and live with me in our little annexe!

[heennaRaf]

If you can afford the deposit and think you have job security, or somebody else to help in case you are laid off, I would consider buying your own place.

Why pay £500 for rent, when you can pay £600 having bought your own place. Prices have dropped recently so its a good time to buy. Who knows if they will drop more - and if they do, by how much?

Say they drop another 3% by a years time (extremely unlikely), thats a £4500 reduction on a £150k flat/house. In that much time, you will have paid >£5k in rent anyway?

By far against popular opinion, I say nows the time to get your own place!

[Arkadiyas]

I also say buy if you can afford and are settled, but he can't and isn't. I think my post was sufficiently detailed to show what is out there at what price. Who's going to pay a £600 mortage for you when jobs aren't exactly ten-a-penny?

[irresseni]

Thanks for the extra opinions again. I agree Sumbernix, renting is not the most ideal situation, but considering these factors:

1. What I can afford right now
2. My lack of knowledge of the housing market (although compared to two days ago I have learnt a crapload!!)
3. The current market climate probably not looking favourably upon me to lend money (been in FT work for 15 months since university, but still young and immature without a partner for support)
4. Lack of a decent deposit sum
5. A student loan to finish paying off

However, one thing I do have is job security - my line of work is IT, but in educational environments, and right now this sector is pretty unaffected by the world around it - kids still need education! I have been told that job security will be a non-issue, hence why I have gone for this and not another in a private firm offering an extra £1500 per annum.

My sister also lives in London (Archway) so I do get a rough idea of what life will be like, so that's not too much of a problem I hope!

I am going to London Saturday to look at regions to live in with her, but realistically getting a mortgage would probably be something I can realistically do in 8-12 months - to build up a deposit, gain more experience and hopefully cheaper house prices as I can't see this market recovering any time soon.

[gMUVgw71]

Sounds like you've got everything under control... as long as you don't rush into anything you should be fine.

My sister also lives in London (Archway) so I do get a rough idea of what life will be like, so that's not too much of a problem I hope!

I live just round the corner from Archway as well.... about 5 mins walk north from Archway station up Highgate Hill, its a really nice area around there... a little dodgy south east of Archway station but nearly everything North is lovely [thumbup]

[irresseni]

Sounds like you've got everything under control... as long as you don't rush into anything you should be fine.

I live just round the corner from Archway as well.... about 5 mins walk north from Archway station up Highgate Hill, its a really nice area around there... a little dodgy south east of Archway station but nearly everything North is lovely [thumbup]

Yeah, every time I see her I always quite like the surrounding area - ideally I would have preferred a job north of the river, but beggars can't be choosers!