Mortgages talk to me! I'm ignorant so literally know nothing...

[Deleted member 77746]

I would look into trying to save up for that extra 5% deposit. The reason I say this I was going to put a 10% down but then put 15% down because this reduced my monthly repayments by about £100. This also means I reduced my repayment term by 5 years.

Also, yes the interest will be a lot to start with but over time that decreases.

Don't forget to try and buy a house that you think you could easy sell then if you do require to move anywhere else or move back home then you shouldn't have a problem selling it.

Win / Win situation.

 

[Strife212]

You might think rent is a complete waste, but the interest part of the mortgage + maintenance + loss off interest on £10k savings + moving fees + house price depreciation are likely to be an even bigger waste of money overall. You pay your money and you make your choice but it is NOT black and white.

And after renting you have literally nothing to show for it!

 

[Deleted member 77746]

And after renting you have literally nothing to show for it!

Correct, all I had was my belongings.

 

[D.P.]

. I refuse to move out and pay rent because the money is just completely wasted.

as an aside, I just don't understand this kind of opinion whatsoever. It seems to be strangely common in the UK, that it is some kind of right to buy a house and you are deranged if you would even consider for a second the notion of paying rent. Meanwhile the rest of the world pays rents and don't even consider buying a house until they are in a much more financial secure environment.

Firstly, money spent on rent is probably the most important place to spend money after food and water - it is putting a roof over your head, giving yourself a home to protect you from the elements. A fixed address is also a requirement for many things like phone contracts, credit cards, having a job.


Secondly, you have no grantee that buying a house is not completing wasting your money, what if there is a crash in house prices - suddenly you have lost tens of thousands, or more.

thirdly: you must now realize that getting a mortgage just means you are wasting money on interest.

EDIT: to add some obvious advice, save up for more of a deposit so you can get lower rates and require a smaller mortgage (large deposits are really a double win here). Try to get a shorter term mortgage so you will pay less total mortgage but will be paying in much more each month. lastly, get a mortgage that allows large over payments and pay in as much as you can to drop the capital that you owe. If your monthly mortgage on interest is 450 quid and you drop don 1500 a month you will pay much less interest in total. If you cannot afford to do that you can join the rest of the world in simply renting accommodation.


As a more serious answer, have a look to see what rates you would get is you had a 20% deposit. It might be worth saving up for an extra year.

 

[Deleted member 77746]

The way you have to look at it is that if you rent you throw away money regardless of the situation, however if you mortgage at least you take a chance and fingers crossed everything is for the positive and not for the negative.

 

[MBennett]

House prices have never depreciated long term. It is very black and white. A mortgage over 25 years with an unencumbered property at the end will work out a hell of a lot cheaper than 25 years of rent, where you end up with nothing.

I am not talking about doing long term renting. The housing market like any market is cyclic, there are good times to jump in and out (although as you rightly say the long term trend in this country has been up). As houses become cheaper over the next few years my advice is not to just look as renting as dead money, it is waste but not really any more wasteful than getting a mortgage* to buy when you factor in all the 'waste' when buying i.e. interest repayments, maintenance, loss of interest on saving/other investments, depreciation (in a falling market).

No, he could rent and 'waste' significantly less cash by renting cheaply and then jumping in (with a bigger deposit and better rates) on a house that is cheaper in 3 years time. Then he could ride the market back up for the following 10 years and sell it at the market peak, repeating this would allowing to climb the 'ladder' much faster than just jumping in now and slogging through it. He may want to do that but its up to him. I just wanted to respond to the phrase "Renting is dead money" which irritates me intensely and makes me want to punch Kirsty Allsop into next week.


*clearly it is dependent on individual circumstances as to which works out cheapest because it all depends on things like location, deposit size, interest rates, timing etc.

 

[D.P.]

The way you have to look at it is that if you rent you throw away money regardless of the situation, however if you mortgage at least you take a chance and fingers crossed everything is for the positive and not for the negative.

But you dont throw away money if you rent, you pay to have a roof over you heard.

by your logic you are throwing away money if you eat food because once you've eaten it you have nothing to show for your investment- except it kept you alive!

 

[Deleted member 77746]

But you dont throw away money if you rent, you pay to have a roof over you heard.

by your logic you are throwing away money if you eat food because once you've eaten it you have nothing to show for your investment- except it kept you alive!

I didn't quite mean it like that. You are paying someone else's mortgage or giving the owner money instead of making the home yours.

 

[D.P.]

I didn't quite mean it like that. You are paying someone else's mortgage or giving the owner money instead of making the home yours.

But the upshot is you are paying to have somewhere to live which is one fo the most important things you can spend your money on. It is nice to own a house but there is absolutely nothing wrong with renting.

 

[Crafty]

No, he could rent and 'waste' significantly less cash by renting cheaply and then jumping in (with a bigger deposit and better rates) on a house that is cheaper in 3 years time. Then he could ride the market back up for the following 10 years and sell it at the market peak, repeating this would allowing to climb the 'ladder' much faster than just jumping in now and slogging through it. He may want to do that but its up to him. I just wanted to respond to the phrase "Renting is dead money" which irritates me intensely and makes me want to punch Kirsty Allsop into next week.

Nice theory, but:

Market is on its arse right now - I doubt if rates will get much (if any) cheaper.
You are gambling on house prices being cheaper in 3 years.
Worse than that, you're gambling that prices will drop far enough to outweigh 3 years repayments..
e.g. £100k house, 3.99% - in 36 payments you will have paid off about £5k capital. Thats an even bigger gamble that the prices drop that much - especially at the low end of the market.

In addition you are 3 years further away from paying the mortgage off.. if rates did go down and if prices did drop faster than your capital repayments it'd have to be quite a dramatic drop (on both fronts) to account for three years worth of payments - even if they were at higher rates.

Besides, if you wait for 3 years, you then start to procrastinate and wait another couple of years, because you think it might get cheaper then.. then you wait a bit more.. suddenly you are years down the line and its even harder to get into the market.

You have to take the plunge at some point, you can't wait forever.

The only thing I agree with is amassing a deposit as big as you can before you do take the plunge. Doing this whilst renting is difficult, OP is in the best position by living at home and minimising his outgoings

 

[BennyC]

You're right, bookmarked

There's a brilliant over payment calculator here:

http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator

Even just £50 a month overpayment can shave years and thousands off your interest.

 

[MBennett]

Nice theory, but:

Market is on its arse right now - I doubt if rates will get much (if any) cheaper.
You are gambling on house prices being cheaper in 3 years.
Worse than that, you're gambling that prices will drop far enough to outweigh 3 years repayments..
e.g. £100k house, 3.99% - in 36 payments you will have paid off about £5k capital. Thats an even bigger gamble that the prices drop that much - especially at the low end of the market.

In addition you are 3 years further away from paying the mortgage off.. if rates did go down and if prices did drop faster than your capital repayments it'd have to be quite a dramatic drop (on both fronts) to account for three years worth of payments - even if they were at higher rates.

Besides, if you wait for 3 years, you then start to procrastinate and wait another couple of years, because you think it might get cheaper then.. then you wait a bit more.. suddenly you are years down the line and its even harder to get into the market.

You have to take the plunge at some point, you can't wait forever.

The only thing I agree with is amassing a deposit as big as you can before you do take the plunge. Doing this whilst renting is difficult, OP is in the best position by living at home and minimising his outgoings

Rates are at historic lows to prop up a market that is dead on its feet. Its a risky move by the BoE that promotes inflation and is a sign of a sick economy that is in a coma. Eventually rates will rise, particularly if the BoE loses control in the bond market and has its hand forced which has happened before and then that will hurt on the interest repayment side! (After the fixed period obviously).

But even ignoring that, I had a look at the September Land Registry Values for the North East and they are -3.2% YOY, so he is already up £3306 in the year by waiting for the flat to fall to £100k.

Personally I can only see downward forces on house prices (epic debate worthy in itself) and very little on the upside, you are free to disagree if you want and it could be considered gambling, but I like to think it is more of an educated guess which is all anyone can do.

He is doing the right thing financially by living at home for as long as possible but I guess if he wants the freedom he will just have to decide who he gets raped by, the bankers or the landlords

I agree with the non procrastination point, but would like to interject with the whole flexible living/moving for work thing that renting provides and at his age I should imagine he will be a dynamic individual climbing the ladder moving from company to company and may need that! When he gets old and haggard/tied down/baby making then that will be time to settle down and plant roots - who knows, maybe the two may happily align at the same time!

 

[Crafty]

-3.2% for the entire market, yes.. but what about the low end of the market ? was that fictional 100k flat actually 103k last year ? Probably not.

A £650k property probably dropped more than 3.2% though and thus the figure evens out across the market.

 

[weringo]

Noob mortgage question:

If you default on your mortgage and are unable to continue making repayments, can the bank go after your other assets or are they only entitled to the property the loan is secured upon?

 

[MBennett]

-3.2% for the entire market, yes.. but what about the low end of the market ? was that fictional 100k flat actually 103k last year ? Probably not.

A £650k property probably dropped more than 3.2% though and thus the figure evens out across the market.

Not sure I believe that is true, I think the higher priced properties are holding up better than the lower end of the market, again I refer to the latest land registry values here:

http://www.landregistry.gov.uk/__data/assets/pdf_file/0015/26016/HPIReport-september-2012.pdf

Scroll down to page 13 where it breaks down sales volume by price category then we can see that it is the lower end of the market that is suffering the most, therefore I would expect to find that would be where the majority of discounts would be found as the market would be more cut throat there. We also hear a great deal in the press about the lack of first time buyers entering the market and I this would agree with the data and the reduction in sales.

As an anecdotal I would just add that I rent a flat in Sheffield and flats for sale in this building have seen their asking prices fall from the £120,000 - £130,000 to £100,000 - £110,000 and they still are not selling (there is still the odd one up for £130,000 but they stand no chance) over the space of 14 months. This is around 30/32 months rent for the other flats in the same building.

 

[Pants]

Are there any mortgages between 90% - 95% yet on the market?

The only ones I've found either have strings attached (usually a savings account) or are local building societies nowhere near Leicester.

Was hoping we could put around £9,000 deposit against a £130,000 mortgage.

 

[Vegeta]

The 6% was theoretical I was planning for the worst situation possible. I know I annoyed some people (who I assumed must be renting) when I said rent is a waste of money, but in my situation it would be and yes even if I bought a house for £100,000 and it lost all value to £40,000 by the time I finish paying the mortgage at-least I have a property with £40,000 rather than nothing at all. I cannot afford to rent and save so it looks like I might have to stay at home for a little bit longer.

I plan to downgrade my car and cut all spending to a minimum hopefully being able to save twice the amount I currently am. I have to be honest a lot of my money is spent on stupid purchases such as expensive clothes, gadgets and trips away with the lads so i'll have myself a boring year at the prospect of getting a much nicer manageable interest rate later on. I doubt most people get on the property ladder before their 30's these days anyways so I have to look at my situation subjectivity even though I am gasping to move out.

 

[Vegeta]

A quick question guys. Say if I was to a mortgage with a 2 year fixed interest rate of say 3.5% but after the two years the term of the mortgage would go up-to 4.5%, when is the earliest I can switch this mortgage over to another mortgage for a better rate? Can I switch as soon as the 2 year fixed rate is over basically taking advantage of it then switching to another mortgage provider with a lower rate for the term? And are their costs involved in switching mortgages.

Thank you.

 

[Stretch]

Each mortgage will have a "term" in which you can't leave without penalty. For a fixed rate mortgage the term is almost always the same as the fixed rate period. After this you can continue on the variable rate, arrange a new deal with your existing lender, switch lender, or if you're very lucky, pay back all the money.

If you enter into a new term there will be an "arrangement" fee. This can be anything from £0 - £1500+.

 

[Vegeta]

The arrangement fee will this have to be paid by me or can I get it added onto the mortgage?