• This topic has 48 replies, 35 voices, and was last updated 14 years ago by Kuco.
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  • To Buy Or Rent?
  • Wansley
    Free Member

    Me and my girlfriend are looking to get our own place in the near future (Hopefully!)

    As a first time buyer trying to get onto the property ladder what would you guys do? Buy or rent?

    I spoke to an estate agent about a house a few weeks back and he said at that time there needed to be a 5% deposit on any house. The one we saw was just under 100k (so approx 5k deposit). This would take us so long to save up for so i can see the pro's of renting. This would enable us to get a house, test the waters and see if we can live together, see if we can maintain a home etc.

    But then i look at the negatives of renting and it just seems to be dead money as you dont actually get anything at the end of it like you do when you pay off a mortgage.

    So what would you great people at STW advise a first time buyer/renter looking to get his own place…

    All advice will be greatly appriciated!!

    PeterPoddy
    Free Member

    the negatives of renting and it just seems to be dead money

    You've hit the nail on the head there mate.

    I think if you think you're going to be together more than a year, buy.

    I reckon house prices are as low as they'll go now, and 'cheap' 😉 starter homes will always sell easily.

    stugus
    Free Member

    I think if you havn't lived together before then rent for 6 months and see if it'll work. Then buy in 6 months time.

    atlaz
    Free Member

    For relationship purposes, the rental is best
    For money purposes, the buying is best

    gonefishin
    Free Member

    I'm not sure where you live but a 5% deposit doesn't seem like much to me. When I got a mortgage 6 months ago I looked at one with a 10% deposit and that was fixed for 5 years at 7%. The only way to get anything approaching reasonable interest rate was with a deposti of at least 20% although 25% was considerably better.

    convert
    Full Member

    I'd check out that 5% if I was you – that seems unrealistically small in these current times. A colleague of mine in a professional job was asked to provide a 25% deposit by her mortgage providers back in October as a first time buyer. Things might have got better again since then. I'd also want to be pretty certain you are going to stay together – by the time you factor in arrangement fees for the mortgage, stamp duty to buy, solicitors fees to buy and sell and agents fees to sell it, you will have to be in there for a few years before you will break even unless house prices increase rapidly and with what the government (of whatever colour) has in store for us after the general election I can't see that happening.

    mrmo
    Free Member

    just to put another twist on this the house i am renting is £650, this is the normal rate for what i am renting, there is a house on the market two doors up, same style two up two down early victorian terrace, for £205,000… I haven't got a clue how they can justify the price but houses are still massively over valued.

    I don't see house prices going anywhere for a while, if you haven't lived together i would suggest renting for a bit, seeing if you can live together and then buy later, timescales depend on how long it takes you to get the deposit, stamp duty, solicitor fees etc etc sorted. I am assuming that you don't have fridge, freezer, cooker, bed, etc. renting also gives you some time to get this stuff together, whether you buy, beg or borrow.

    Wansley
    Free Member

    We've been together 2 years now and i dont see us breaking up any time soon (i Hope) so i said why not rent for 6 – 12 months to get a feel of living together and what its like owning a house etc…

    Just thought id ask for some advice as ive never done this before lol

    Roscoemck
    Free Member

    I'm a Sales Manager at a Mortgage Brokers. If you can find a 95% deal, snap their hand off. Very few lenders looking to lend above 90%, 85% at apush, below 80% the norm. Even at 80% you are looking at rates in excess of 5.5%.

    Big deposits are what's required now and even then, the lending criteria is really tight. Trackers are offering the best rates and the base rate isn't going to go up by much in the next 1-2 years.

    uplink
    Free Member

    I'm sure I've seen part ownership deals with deposit paid by the developer recently
    Could be imagining it though – worth checking out all the same as a half way house [see what I did there?] sort of deal

    Roscoemck
    Free Member

    Same again uplink, looking for deposits between 10 and 15%. Don't know many developers willing to pay that.

    toys19
    Free Member

    mrmo – Member

    just to put another twist on this the house i am renting is £650, this is the normal rate for what i am renting, there is a house on the market two doors up, same style two up two down early victorian terrace, for £205,000… I haven't got a clue how they can justify the price but houses are still massively over valued.

    The "dead money" thing can be a bit misleading – For example in mrmo's quote above he says that the house he rents for 650 is approx worth 205k.

    205k @ 4% interest (interest only) = 8200 pa – £683 per month

    And that is just the interest which if you are on interest only then this is essentially dead money too.

    If you rent mrmo's house for 650 you don't have to pay any maintenance costs, building insurance new boilers etc etc. I can see the case for renting..

    OK bias alert – I am a landlord, but I let exclusively to students so I am not here to convince you that renting is best I'm just opening your eyes to a myth.

    Ok if you go onto repayments too then you will be paying another 390 odd a month but importantly as the sum owed reduces then the interest (and "dead money" ) reduces I'm just working out how long it will take before the interest payments go below mrmo's rental figure of 650.

    Wansley
    Free Member

    Right well looks like if i want to leave home and get my own place with my girlfriend its going to be renting for a year or more.

    Suppose this will give us time to save up and get furniture and what not.

    Just didnt really want to paying money not to get anything in return but i suppose its not too bad for the short term while we sort things out.

    rOcKeTdOg
    Full Member

    if you've not lived together before, rent for 6 months, you don't know anyone properly untill you have lived with them 24/7 and a fortnights holiday together doesn't count, buying a house is easy, splitting a house after a break up is tedious to say the least!

    aracer
    Free Member

    If you've not got a deposit to buy then I don't think you've got much choice. Rent and start saving hard (ie curtail going out, stop buying bikes etc.), as the size of your deposit will make a huge difference to how much you pay for your mortgage.

    jonb
    Free Member

    Try speaking to an independent financial advisor. If you want to be told to rent visit housepricecrash.co.uk and read the should I buy or should I rent thread in the rental section.

    From the limited information you've given I think you should be renting.

    Remember that interest rates are currently as low as they have ever been. Work out what would happen if (when) they rise to 15%, can you still afford to pay back the capital on the loan?

    If you rent within your means and make a concerted effort to save by the time you've been together for a while you should have a deposit. It shouldn't take that long to save £5k between two people, especially if you are living together and sharing bills.

    Renting isn't dead money, you have security and flexibility that you don't have with a house.

    Wansley
    Free Member

    Thanks for all the info guys.

    jonb – Thanks, ill have a look on that website.

    Ill have a word with the missus tonight and see whats going to happen.

    Baldysquirt
    Full Member

    On the whole "dead money" thing, I guess it does depend on the what the rental market is like near you. You're lucky if you can rent a house similar to ours in Sheffield for less than £500 a month. We're paying just under £450 on a capital repayment mortgage, so renting makes much less financial sense, unless flexibility is a priority. We did need 25% deposit for that deal, though.

    Having said that, renting was definitely the right thing for us when we first moved back here a few years back, so we could get a bit more of a deposit and spend a bit of time choosing the right area.

    lunge
    Full Member

    As i understand it you will struggle to buy without a deposit. I'm looking at buying my first house this year and the only way i can do it is to get a pretty big deposit together.

    HoratioHufnagel
    Free Member

    i'm looking to buy my first house and even with a massive deposit, which i have saved up, i still can't afford anything less than 1 hours commute by car away.

    Shared ownership isn't without its downsides. My girlfriend has taken it up to buy a TINY 1 bed flat and we're looking into moving in together, however she's tied into a very specific contract. The house has lost value so she can't afford to sell, but can't rent it out either (my preference as its a 1 bed place near a station) because the contract does not allow it. Even if you sell it you have to offer it to as shared-ownership first.

    i reckon she should just rent it out anyway though.

    cinnamon_girl
    Full Member

    No offence intended but you are young and should enjoy yourself before you get tied down with all this stuff. Go see the world, have a million and one g/f's, do lots of things. You have plenty of time for mortgages/settling down etc.

    Haze
    Full Member

    Rent for a while if it's not going to interfere too much with you saving for a deposit.

    It'll get you used to the outgoings too.

    sweepy
    Free Member

    Rentings underrated IMO, I live in houses I could never even think about buying, I do **** all DIY, if I want to move I can just do it- no getting trapped by terrible neighbours or new bypasses etc, and as for security i was in my last place for 14 years and left of my own volition. I really dont understand why people are so desperate to own.

    simon_g
    Full Member

    Similar situation and I rent with my gf.

    Pros of renting at the moment:

    – lots of properties to choose from is keeping rents low. Even more so now, as people who own houses but don't want to live in them (relocation, moving in with partner, etc) are renting them out instead of selling.
    – as property is still overvalued for the most part, rents (mine at least for the last 4+ years) are usually below the cost of the interest on the mortgage if you bought the place.
    – no unexpected bills. A boiler replacement can be £2k+, even an appliance failing can be hundreds to fix or replace – if you rent it's your landlord's problem.
    – you get flexibility. Find a dream job elsewhere? Want to drop everything and see the world for a year? Neighbours from hell move in? Just give your notice and leave. If you own it you're either stuck until you sell it or you'll be forced to be a landlord yourself with all the liabilities that involves.
    – houses are not much of an investment right now. Pretty much the best case scenario is that they stay pretty flat for the next few years. Unemployment and defaulting are only going in one direction right now, lending criteria are strict, wage rises very small if they happen at all, while the cost of everything goes up. Interest rates will have to rise eventually too making it worse. Last time round in the 90s the big fall was early in the decade but it took until 1996 before the gentle decline after the crash reversed and prices started rising again. You've got plenty of time to rent, accumulate a big deposit and buy when the time is right.
    – let's say your life continues on the same trajectory, you stay together, get married, have kids. You're not going to stay in the little flat that you can afford right now – you'll need more space. You'll have to move. If you own a place, that's a load of estate agents fees, stamp duty, mortgage arrangement fees, etc on top of the cost of moving.

    And more specific to your situation:

    – you've never lived together before. The kind of financial commitment involved in buying a place together needs firmer foundations than that IMO – ideally marriage.
    – you don't have enough of a deposit to get a decent mortgage deal. 100% mortgages are history, 95% is tricky to get and at high rates. Step back for a while and SAVE. If you can't afford your rent and putting a substantial amount away each month, you really need to consider whether you could afford a repayment mortage at all.

    Pros of buying:

    – you can paint the walls whatever colour you like.
    – you don't have to deal with rental agencies.
    – you don't have to think about risking your deposit when you change brake fluid over the dining room carpet.
    – you can stay there as long as you like (well, assuming you can pay the mortgage).
    – an investment – but ONLY in market conditions where prices are rising.

    Personally, I want to buy when I am fully settled, both in my relationship and my job/career, and we are able to afford a place that we can live in (with space for kids and all that) for at least 10+ years. Buying a pokey flat now just to "get on the ladder" makes no sense at all to me.

    mefty
    Free Member

    I would rent. Toys19 analysis is spot on. The dead money is only true if house prices are rising inexorably which I don't think they will be in the near future. The government has pumped a huge amount of money into the system to stop asset price crashes which would have forced us into a depression. The effect of this should be that house prices don't rise above inflation until equililibium is met again as this money is taken out of the system over the next year or two. Interest rates will need to rise during this period as well. Also take house price inflation figures with a pinch of salt – people spend a huge amount of money doing up their houses but this does figure in many of the statistics thus true inflation is overstated as the housing stock has been improved.

    Anyway, if you don't have a deposit then you probably don't have a choice. But if my analysis is right, you don't need to worry about that!

    Ti29er
    Free Member

    Since you're only planning on living together for the first time, I'd rent.
    If you are struggling with "approx 5k deposit. This would take us so long to save up for" suggests to me that you have little clue, if any, as to how much it costs to run a home for a year.

    ourmaninthenorth
    Full Member

    Just didnt really want to paying money not to get anything in return

    Unless you're very luck, you're going to have to pay to put a roof over your head. That's what you get in return, whether you rent or buy.

    There is, as sweepy points out, a peculiar mentality in this country that insists on property ownership, even when it does us no good.

    You sound young (you may not be), so rather than get yourself into something that might, for whatever reason, turn into an expensive mistake, do what most people do when they leave home and move in with their GF – rent.

    Enjoy living together, have fun. Do as CG advises – see the world!

    cookeaa
    Full Member

    Me and My partner are probably where you’ll wind up in a couple of years I reckon, We’ve rented together for about 3 and a half years and now have a 6 month old daughter together, We’ve agreed a purchase price with the owner of the house we are currently renting and are lining up he Mortgage/Soliciters/etc….

    Rent together first, I know it’s tempting to hop on the property ladder ASAP especially with all the talk of house values rebounding but we ain’t out of the shit (economically speaking) just yet, I’ve know couples buy together without really having lived together for long and it can be messy when they do split up (not that you will of course)…

    As for a 5% deposit, you’ll be lucky… I’m sure they’re about, I’m also sure the interest on them probably takes the piss something chronic…
    There are some better Mortgage deals about than there were 12 months ago so shop about and read up, We can only swing a 10% jobbie ourselves which is the bottom of the market still but the property we’re getting is in the south and costs almost double what you’re paying, the really good deals at the minute seem to kick in when you can rustle up 25% or more for the deposit.

    The other big thing is don’t forget the other costs of buying; Solicitors fees, Survey, arrangement fees, Removals? They all stack up, £5k Will not be anything like enough for a £100K house…
    That said you’d be mad to offer the asking price for any house at the minute, the worst they can do is refuse…

    And whatever you pay in rent the odds are that a mortgage will cost you more each month at the minute, (unless you wind up with some shady interest only deal), so see how you manage your rent and once you’ve been living together for a while try to realistically calculate what an affordable monthly mortgage/insurance outgoing figure would be, don’t guesstimate it…

    If you want to buy together rent first, and both keep an eye on local property prices and available mortgage deals, buying our place has come at the end of about 18months of looking about and watching mortgage market, and we haven’t closed the deal yet…

    ooOOoo
    Free Member

    Renting is money down the drain, but then so are interest payments.

    cookeaa
    Full Member

    Renting is money down the drain, but then so are interest payments.

    Following that logic then you're recommending he becomes homeless?

    Renting has many advantages, just because you don't own another fraction of your house at the end of each month doesn't mean your being robbed, you actually get a house/flat to live in, that's what you pay for… ownership has higher cost's, more liability and is really only a "sensible investment" over the long term…

    ebygomm
    Free Member

    and as for security i was in my last place for 14 years and left of my own volition.

    But that's just down to luck rather than any sort of security.

    Our landlord has just put the house we've rented for the past 18 months up for sale, two months notice is not really security.

    Incidentally, the house is going on the market for only 5 grand more than it's purchase price 5 years ago (and the owners have added a large conservatory and refitted the kitchen and bathroom since then).

    I'm sure I've seen part ownership deals with deposit paid by the developer recently

    I've looked into some of these and the more I look, the more I think they're a con, preying on people who can only afford a house this way. The 75% (or other percentage) they quote is the full asking price of a new house, but people don't pay full asking price.

    toys19
    Free Member

    ebygomm – Member
    Our landlord has just put the house we've rented for the past 18 months up for sale, two months notice is not really security.

    Your landlords is a fool to give you notice, probably been badly advised by the dumb estate agent.

    Round here a rental property is much more easy to sell with tenants in it. Imagine buying a rental prop empty and then having to wait for x weeks to rent it, most people are looking to move but need to give a months notice – you could lose maybe 6-8 weeks rent. Yawn, estate agents are thick and useless liars. Of course he might think that people would want to live there as a residential prop but still average sales take more than 2 months to I would not give you notice (if buyer wants vacant possesion) until I had a firm solid looking offer.

    If you want to stay, I would go back to the landlord and tell him this advise, maybe look at the local rental market if its booming tell him this. Ask the dumb agent (or a dumb agent) what % of the buyers are likely to be landlords , if it's high then tell him this too (this will probably go over the agents head as did I mention that they are worse than useless).

    There is a the objection that some will say – you cant complete without vacant possesion- total b*llocks- sold and bought many props with tenants in.

    ebygomm
    Free Member

    We haven't been given notice, but I'm not sitting waiting for it if the house sells, and having to keep the place tidy and have people come and look round.

    It's more likely to be sold as a family home than a rental house. It's not your typical rental property, the only one on our street, so not likely to attract buy to let investors, and there's a huge amount of rental properties sitting empty at the moment in this area.

    Wansley
    Free Member

    Thanks for all this info guys! Really appriciated!

    Ive been on the phone to the girlfriend and had a very quick chat about things that have been said here and she's now changed her views on the whole renting idea as have i. I definately think for us the way to go is renting. As you guys have already said its the first time living together and if we do brake up easier to part and dont have to faff around selling etc.

    So renting it is.. Going to look through our finances tonight and see what we can afford etc. 😀

    nickegg
    Free Member

    My wife and i don't even consider th pro's of buying because it's quite simply an unachieveable dream!

    We earn enough to pay our £575 a month rent and £141 a month council tax and all the usual outgoings. It might be 'dead' money to some of you but we have no choice!!!!!We have paid in excess of £20k to our current landlord over the last three years!

    House prices might be low but mortgage deals are requiring such huge deposits it's ridiculous!

    ebygomm
    Free Member

    House prices might be low but mortgage deals are requiring such huge deposits it's ridiculous!

    I was reading an article the other day that suggested the average first time buyer now has a 25% deposit, how on earth?!

    gilchrist222
    Free Member

    Rent. You will have more money to do interesting stuff instead of spending it on your house. I bought my first place 3 years ago and haven't bought a new bike or anything good for my bike since.

    kimbers
    Full Member

    renting might start looking better if interest rates go up and im certain they will after the election in may

    for some they already are

    http://news.bbc.co.uk/1/hi/business/8471955.stm

    Ti29er
    Free Member

    It's not legal per se, but when I rented, each & every time, I sub-let rooms.
    Non of the landlords were in the slightest bit worried.
    This meant that my own rent on a £750pcm 2 bedroom house in Harrow worked out at about £150 for me.
    I lived in what would have otherwise have been the dining room (yes, I did remove all the furniture). I also had 2x dogs and managed to save £40k+ over 4 years of living there.
    It can be done.

    tron
    Free Member

    Renting can be seen as "dead money". But so is the interest you pay for on a mortgage.

    My view with renting is that you have a lot of advantages. You can move fairly easily. If you split up, or one of you gets the sack, then you can cut your losses and move somewhere cheaper or with your parents very easily.

    On the other hand, with a mortgage, you are tied to one location. If you need to move for work, it's a lot more stress. If you lose your job, you HAVE to make the mortgage payments or go broke. That can be a career ender in some professions. Do not view having a mortgage as owning your own home, because it isn't. The bank own your house, and you're paying them for the luxury of not turfing you out. I personally wouldn't enter into a mortgage with anyone I wasn't willing to marry and have a joint bank account with.

    For what it's worth, an unrefurbished flat where I used to live costs £120k. The mortgage on that (based on 25 years, £120k purchase price and 5% rates) is nearly 40% more than I was paying my landlord, and the place had been done up, and he had to fix everything that broke.

    My aim when I come to buy a house is to be able to put down a good deposit (around 25%), and to pay the mortgage off in 10 years. That will probably mean 10 years of not having huge disposable income, but the long term payoff is huge.

    One option that can work out well is to get on the council house list, then RTB the property at a pretty hefty discount. However, it really depends on what the council estates around you are like, and what your moral standpoint on it is.

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