[Closed] how can/will i ever buy a house..advise

I too lived in Cambridge and I still work in Cambridge. If you can commute in I would say look at Ely or beyond. We live near Downham Market, 35 minutes on the train and flats available from about £70k Houses from £85k. So about a third of what you pay in Cambridge. I know a very good indepoendant mortgage adviser as well if you need any more advise.
Drop me a mail if you want tmiddleton AT cambridge DOT org

what sort of deposit do people want these days anyway?

about 25-30% 😯

Even with a highish income and sizeable deposit, it's still crazy.

On £23k and kids to support you'll never buy a house (on your own) - you need to find a long-term rent that suits.

flats available from about £70k Houses from £85k

i feel for you Odannyboy, the same question has been playing on my mind for about 3 years, the onyl way i console myself is that renting isnt that bad when you call someone to get something fixed instead of burning your savings each time... also we're quite different to many other countries where its the norm to rent.

i make a concious effort to avoid threads on here where people talk about their second properties as i like to blame people with more than one house for the lack of ANYthing affordable within a 90mile distance of my work

You need to find yourself a single mum to hook up with, ideally she will work in healthcare or education and will have "key worker" status, use this to get in a council house you can then buy, or one of those home buy schemes.

23k is your problem

What do you do?

Can you earn more?

Council list and right to buy are my initial thoughts on what your strategy should be. You have kids so you get pushed a little way up the list. You can be pushed right to the top if you're willing to make yourself technically homeless, but this will entail staying in some form of temporary accommodation.

Council rents are below market rate in my opinion, and when you right to buy you get a discount on the basis of how long you've been renting it, so the rent isn't "dead money" as such. If you improve the house and can evidence that, it can also further reduce the purchase price to you (ie, if you move into a slightly scuzzy place and do it up).

As the price is fairly low on right to buy, you can save for a deposit, and with a low price may also be able to aim for a short mortgage, which saves you a lot of money in interest.

The other option is to find a way of earning more, but it's shite out there at the moment. I'm looking at the potential to be earning less after doing a pretty sought after Master's degree than I was before it!

Good luck and take the advice of a good mortgage advisor as recommended above.

I've just done a search for a mortgage for 2 1/2 times my salary with a 20% deposit and returned the grand total of [b] not a single offer ! [/b]. What happened to lending based on risk and ability to pay?

It absolutely boils my piss that bankers will no doubt be coining it in over this and charging even higher interest rates despite the incredibly low base rate. It's a disgusting situation where ordinary people are now paying for the greed of a few.

get yourself onto the local council housing list asap
once you finally get a council house (5 years or so) wait 5 years and exersize your right-to buy

the shared equity things can be a good idea (essentially cost you rent to eventually aquire equity) but they're only available on new-build flats & houses - which are often priced a little higher as a result.

how old are you? assuming your wage will, in the long term, keep track with house prices..

aim to borrow 4x your income, if you can afford it. on 23k that is 92k borrowed, and should cost around £500/month on a 25 year mortgage. you'll also need 10k as a deposit (90% mortgages will come back, and probably by the time you've saved that much). a good option to save money is move back in with the olds. its not nice, but a lot of folk do it.

so you've now got 102k - so that'll buy a 100k house\flat. Not much in cambridge, I'd wager. So you get a 1/2 bed flat, and pay the mortgage for 15 years. Over this time, you'll get about 50k in equity. Repeat the exersize and you've now got £150k to spend on a house. 25 years to pay off the mortgage.

Its not good, high house prices suck. But buying a house on a below average wage (for the area) has never been easy. I earn approx double what you do, and could only afford the *cheapest* house that came up for sale here (Brighton).

t'other option is to move somewhere cheaper. For instance, lochelly in fife has average house prices of £81k. that's a third of what they are in cambridge. Even if you can't move now, you could always be living in a flat in cambridge for now, then move up to a house in a cheaper area when the kids have left home etc..

its also loads cheaper if there's 2 of you, at some point in the future.

i know.what with kids and all i will be in this town for at least twenty years.i was quite smug for a while when i used to walk home from works piss up etc while all the others ran for trains, lifts etc.
oh how it all has changed now.
best thing was i never got a pension together as she always said the house would be our pension when wer down sized at retirement. now thats gone to... well not for her tho 🙁
repeat, must cheer up, must cheer up.....

We are doing our bit to avoid ever paying any bank a single pound in interest by saving up to buy a house outright.

That'll teach the bu66ers.

At the moment we could buy a small 2/3 bed terraced house in Truro - not really the plan. Some way to go yet...

I've just twigged who you are. Get a decent lawyer and get some money off her. You might not think it's right at the moment, but you need to do the best for yourself, and by extension, your kids.

Don't dispair. 5 years ago I honestly considered buying a house impossible. Granted I have less baggage, but I'm now a homeowner ... don't give in if its what you want, but you can't be impatient.

odannyboy - how have you not got any savings? I suppose you paid rent to your ex?

Surf-Mat - so you're saving up for a cheap house but run an expensive car? You really love cars! BTW, not sure it's sensible saving up to buy a house outright as you're paying rent which could be paying mortgage interest - same thing really. Unless you're convinced prices will fall significantly.

IMO forget council - so many council houses have been sold that in most areas there is a huge shortage of council accommodation especially decent stuff. You will be a low priority and may never get to teh top of the list.

Look at housing association stuff instead - decent rents, security of tenure, shared ownership possible.

Remember that renting is not all downsides. NO negative equity, no reliance on the vagaries of interest rates, no large repair bills. In much of Europe far more people rent.

Find somebody else in the same boat and band together? It'd be a start, at least.

Tiger - nope, saving up to buy a "proper" house. About halfway there.

Currently rent a nice pad for silly (low) money and claim a quarter of all bills from our business. Cheap for us, cheap for the business.

Car wasn't actually all that expensive and was bought outright, such is our allergy to debt - and yes, mortgages are a debt - a massive one.

To the OP - any affordable housing options? Housing Assocs will often "buy" half the property and so your monthly outgoings could be really low.

There are some being built in our village to compy with section 106 for some bigger houses. In a village where there are many £1m++ houses, these will be £140k for a 3 bed pad with direct river views. Well under £100k for 2 bed places. A bargain but too small for us. If you can find an HA doing a split ownership scheme, you might be okay?

I think as well, that if the op ever got to the top of the list then council tenancies may not be what they are now. I've heard talk of scrapping life long tenancies.

Surf-Mat - oh I see but that must take ages? Unless you earn a lot I suppose. I have no problems with debt if the rates are right, the payments affordable and the benefit worth the cost. Anyway, when it comes down to it your cash is getting a return - though not much now if in a low-risk place - so if that outweighs house price growth after tax then you've done well; maybe there will be a crash! I was lucky to be ready to buy a house in the mid-90s so have surfed a decent wave since then; now in a house that I would never have been able to afford if I hadn't taken that approach.

We are doing our bit to avoid ever paying any bank a single pound in interest by saving up to buy a house outright.

That'll teach the bu66ers.

No it won't - coz while you're saving thousands they're using your money to speculate on the markets!! Unless you have it all in a suitcase under the bed.

I used to live in Cambridge & despaired at the house prices. 6 or 7 years ago when I was thinking of getting a place, it was about £120k for a bedsit, £140k for the smallest flat.

As suggested above, could you move & commute?? As Tommid suggested, somewhere like Downham Market. A friend of her indoors lives there & it's really nice.
March would be another option - commutable and pretty reasonable, but you will need a large deposit.

I used to commute from north of Peterborough to Cambridge Science Park, but I wouldn't recommend that as you'll spend way too much on fuel to make it viable!

What ties do you have to Cambridge?
Could you/would you consider moving to somewhere with lower house prices. Cambridge is particularly bad for high house prices.

Would you be able to take on a 2nd evening job, perhaps and put that money into a savings account for a deposit. I'm guessing if you have kids it's not practical to be working in the daytime and into the evening at a second job.

The housing market is tough for everyone at the moment. We've had our house on the market for almost a year and have had no joy. I don't think the people who are looking at our house (mainly first time buyers) can afford the deposit requite to get a mortgage.

Wait to inherit?

Or recieve an offer from a family memeber with health problems to invest all their capital from downsizing into a 66% share in a property for you and your kids. Pay the remaining 34% as a short, hard mortgage. This should be finished by the time the relative has ended their suffering, and bingo, 4 beds, 3 floors, 2 bathrooms, a games room in the converted basement, and a shed. All on a single, lowly bike shop manager's wage, by the age of 26.

Worked for me anyway.

We are doing our bit to avoid ever paying any bank a single pound in interest by saving up to buy a house outright.

That'll teach the bu66ers.

And where do you think rent money goes?

Tiger - should be there in about 5-10 years time. Got to where we are savings wise in under 5 years.

Muffin - maybe but it's all guaranteed and not "costing" us anything. Add up the interest paid on the life of a mortgage and you have spent an extra house buying a place.

Aidy - to our landlord who well get on rather well with. No problem with that. It's a great place to live and work for a very small outlay.

IMO forget council - so many council houses have been sold that in most areas there is a huge shortage of council accommodation especially decent stuff. You will be a low priority and may never get to teh top of the list.

TJ, that's a load of horseshit. The guy's got kids and an income below the national average (and almost certainly way below Cambridge's average). It costs nothing to have a go.

op - as mentioned above, you should really be getting some legal advice about any monetary entitlement you may have.

Good luck

I used to live in Cambridge and moved due to the daft prices. Now in Bristol and got my house for £104k. There are new builds going up and the adverts all say you can move in for £800 inclusive all other bills paid, they are pert equity share so you only pay around £60k mortgage. So as long as you have £800 in your pocket its a very cheap way to buy, im sure there are other schemes over the uk, just do a bit of research. Best looking at the developers web sites

you are looking at the long term goal (house) with despair but you need to focus on short term goal (without forgetting the long term one) which is to save some money.

A deposit is a huge amount of money and it'll probably take 3-5 years to save. but you need to start now.

sit down and sort out your finances. work out what comes in. what goes out currently.

Some expenses you can't change. some you can stop. some you can cut back on.

Try budgeting money.

For example put £50 aside for bike stuff each month. if you don't spend it leave it there, next month you might need to spend more than £50.

lots of bank accounts can help with this.

i am in no way an expert but i do like budgeting (i am weird) if you want more advice you can email me. 😀

Muffin - maybe but it's all guaranteed and not "costing" us anything. Add up the interest paid on the life of a mortgage and you have spent an extra house buying a place.

Depends on the lifetime of the mortgage. And if the interest paid on your mortgage is less than the rent you'd pay otherwise, you aren't effectively losing money.

Add up the interest paid on the life of a mortgage and you have spent an extra house buying a place.

Sort of - you have to consider the NPV of all the payments. Over the longer term mortgage rates are very reasonable - and that's one reason people have gone for interest only mortgages in the past; they invested the extra in the stock market assuming that their return will be better than the cost of the mortgage. I'm talking about ISA or even endowment mortgages but of course the latter are really a bit of a rip-off due to the costs associated with them.

Average of 5 years to get to the front of the queue

and

[url= http://www.guardian.co.uk/politics/2010/sep/16/right-to-buy-rethink ]Right to buy council house policy reviewed to appease Lib Dems[/url]

Also buying a house isn't a birth given right, despite the government's efforts to make it appear so.

Overseas people just rent long term and are fine.

Houses aren't the investments they once were - I reckon prices will drop massively over the next two years. Nothing is selling.

Stop no 1 - CAB.

Get their advice on how to make a claim for compensation from your ex. and especially on spousal maintenance, who gets custody of the children etc. You also need to find out what your entitlements are. You need professional advice! Some law firms do free advice sessions via the CAB. Worth a punt.

Aside from this, i'm pretty sure if you make yourself intentionally homeless you'll not get help, so be very careful if you are considering this.

Getting a council house is your best bet, then buy it when you are able to.

I wouldn't bank on the right to buy as there is tremendous demand for local authority funded housing. The rules are likely to change and it's morally wrong to deprive other needy people of a cheap place to live. The whole area of entitlement to council housing is under question right now. For example, should a family who find themselves with a good income be forced to move out of subsidised housing? There are a lot of immigrants who arrived here homeless and have legitimately jumped the queue because of their needy circumstances. The average waiting list for a council house for someone currently homed is five years! If only the system was a bit more fair and we hadn't let anyone rock up here without means to support themselves. It should be people like odannyboy getting help, not some eastern european! (expecting the usual loony left backlash - bring it on!)

We [i]do[/i] need more council housing because of the ridiculous property price bubble which has grown way beyond the official rate of inflation. People can't live in carboard boxes!

Second choice is a housing association property.

It will take a long time to get a deposit to buy a property and with two kids to take care of, £23k is not enough. If you get a settlement from your ex, this might help and especially if you get spousal maintenance.

My best mate's ex gets £2k a month from him, for herself and the three kids, but her circumstances are different. She works for herself, but doesn't draw a salary. Doesn't make sense to me how she fiddles that.

Good luck!

[i]Overseas people just rent long term and are fine.[/i]

Agreed, but their rental systems work different to ours, espcially for long-term rent - and tbh we lived in germany and there it was more of an age thing, needing to be in your 40's to be settled in work and have the deposit - before you could buy.

Well why not use that "system" here too? Long term rents can be negotiated and buying over 40 years of age isn't exactly a daft thing to do.

Just see too many overstretch themselves because they feel they [i]must[/i] buy a house - then they lose the house and a lot of cash.

I'd have no problem with renting and not buying if there was any security in renting in this country. As it is I've had to move twice in 3 years due to landlords selling up. Two months isn't an awful lot of time to find somewhere new, then there's the general expense of moving, paying for references, putting down a deposit before the old one is released.

That'll teach the bu66ers.

What, exactly?

Personally I wanted to buy a house because I wanted to be able to do stuff do it. Like secure the garage, paint the walls, insulate the loft, sort the kitchen out etc etc. Fed up with getting crap from landlords whilst at the same time.

We pay less interest to the bank than we would to a landlord, and at the end of it all we get to keep the house. If you rent you are just giving your money away and getting nothing back from it at the end.

25 years x £750/mo rent gets you accomodation
25 years x £750/mo mortgage gets you accomodation and probably half a million quid at the end of it all.

I don't give a crap what people think I 'ought' to do 🙂

Mat - serious suggestion - seems to me it'd work out much more economical to buy a house with a flexible mortgage and overpay it with the money you'd be putting into the savings. You'd own the house in the same amount of time and save by not paying into someone else's pension the whole time. And be able to do what you wanted with the house, should that be necessary.

uluru - well you know who to blame for that don't you? Used to have security of tenure up until the mid eighties.

spngebob - you were doing so well until you said this 🙂

There are a lot of immigrants who arrived here homeless and have legitimately jumped the queue because of their needy circumstances.

This simply does not happen. The reason for th eshortge of council houses is the selling off of council houses cheaply and then refusing to allow councils to build more.

Apparently you can grab a repossession in Mepal from about £75k for a 2 bed, so there are options but you will probably have to commute further?

It does seem pretty bleak I guess, but as the guys have said above, budgeting really helps, it has helped me get onto the property ladder - whether or not it's the right thing to do I don't know. All I know is my parents rented for a long time, then bought a house late on and it didn't work out so well for them, so I've opted to buy given that I have exactly nothing to inherit.

I had to move out of Cambridge a bit too - all the way to sunny Longstanton!

Apparently you can grab a repossession in Mepal from about £75k for a 2 bed, so there are options but you will probably have to commute further?

Chatteris (shudder) was also recommended to me as a cheap place to live too...

I did it especially for you TJ. I knew you'd rise to it! 😈

Oh, and btw, I agree with you about the sale of council houses causing a shortage. However, it is not this alone that has caused the pressure on local authorities to provide cheap dwellings.

I thought someone had hacked your login the sense that the rest of the post made! Then I read that bit!

aaah, overseas, here (Basque country) the only people who rent are students and me. Everyone else stays at home until they get married at 35, having saved a deposit for their mortgage which costs them 50% of their income.

25 years x £750/mo rent gets you accomodation
25 years x £750/mo mortgage gets you accomodation and probably half a million quid at the end of it all.

its actually more skewed than that.

in most locations the rent is less than the mortgage, particularly if you include house 'running' costs (ie repairs, wear and tear, etc etc). However rent goes up with inflation as time goes on, whereas a mortgage is fixed. Inflation roughly doubles ever 20 years (ballpark) - so by the end of the 25 year mortgage you'd be paying (on average) £1500 in rent, but still only £750 mortgage.

every country is different when it comes to rental vs buying. In germany, for example, rent is fixed when you sign the deal, and can't be increased. They also can't chuck you out - so if you move in somewhere, and live there for 20 years, you're paying rent at 20 year old rates by the end. On the flipside, a lot of places don't come with kitchens, and you're expected to decorate yourself. In addition, there is high capital gains tax on anywhere you live less than x years (might be 5?) - which reduces the appeal to people wanting to do a place up and flog it on. A lot of people only buy when they are a deal older, but it kinda works due to the culture & law.

There is an opportunity cost with buying - the capital can be used for other investments. Oh I already said that really.

Find me a 25 year fixed rate mortgage!

Let's not forget all the "hidden" costs of owning - of course there's the interest, the agent's massive fees, stamp duty, etc, etc.

We're in a rare situation though paying £1k pcm for a place worth about £600k (ish) and a quarter of that is claimed back from our business. So our business is paying 250pcm for a lovely office with river views and we pay 750 for a 5 bed secluded house with five acres. A bit unusual I know.

it depends entirely on the location. In a lot of places the higher end of the market has higher costs to buy, compared to the cost to rent (I guess there are less people who can afford a £600k house who would prefer to rent). on my street houses rent for £1200-1500 (area is popular with students). I paid £214k, the mortgage interest on which is £900ish a month - a significant saving. You can't get 25 year mortgages, but interest rates generally rise with inflation, so if you're paying 10% pa on a mortgage your rent will probably be sky high too.

swings and roundabouts really. Rental agencies here in Brighton are charging over £300 per person + 8 weeks rent as deposit every time you move. gets pricey pretty quick

Find me a 25 year fixed rate mortgage!

Let's not forget all the "hidden" costs of owning - of course there's the interest, the agent's massive fees, stamp duty, etc, etc.

Why d'you need a fixed rate?

And even with all those hidden costs, you'd still be ahead I reckon. Easily.

a lot of places don't come with kitchens

excuse my ignorance but do they expect you to eat out all the time?
genuinely interested.

If we bought in this area our mortgage would be cheaper than our rent. Even taking into account extra costs associated with owning a property I think it would still work out slightly cheaper overall.

Our mortgage will be more than rent - but the figures are skew, as we're buying a 3bed house (if you've got the money, why not?) .... yet would only need to rent a 1 bed flat.

Round here mortgages are vastly higher than rent.

My flat worth well over £200 000 is what around £1200 pcm on a mortgage would be around £700 - 800 pcm to rent.

If you are on a repayment mortgage then think of part of the money as like rent, and part of it like a high yield long term savings account.

Similar problem that I had when I separated from my ex. Had to sell up to pay her off now can't afford the prices round here.

Made enquiries about a mortgage and was told I would need around a £30k deposit and may still not get a mortgage, dispite the fact I'm paying more in rent than I would a mortgage!

As for council housing, forget it, unless you are the parent in care, which is usually the mother a LA is only responsible for the parent in care.

On the plus side at least my son can stay with me whenever I like, at least my ex didn't withhold those rights to me, stay with the positives, it's only money.

And even with all those hidden costs, you'd still be ahead I reckon. Easily.

Very sweeping statement. What about a depreciating house (which all currently are) on a big mortgaged house? Nope.

And we put spare cash into savings accounts - which are currently doing "better" than money in property. Plus our business benefits from very low overheads so we make more money. Handy.

One size does not fit all and IMO the pressure to buy and following frenzy to be on "the ladder" is as responsible for the recession as bankers doing dodgy trading.

OP, you have to move. Go North young man

I think before you do anything you will need to save at least 20k first for a deposit. If I was you I would not pressure myself you have far more options with renting and less responsibility.

OP, you have to move. Go North young man

I live in Cambridge and this is what we've been pretty much looking at doing, 3 bed houses for the same rent as a 1 bed flat round here.
Better riding up north too!

Obviously not going to suit the OP though with his kids.

Surf-Mat

Know exactly where you are coming from as doing exactly the same myself. I love living rented. We rent a brand new flat for a fraction of the price it would cost us to pay a mortgage each month. Have an office set up in the spare room for the business and the landlord sorts out anything that goes wrong, pays the ground rent, does the decorating and insures the place etc, etc.

Now that property prices seem to be falling again the landlord is also taking the big hit - the cost of the property devaluing, which lets face it, on the purchase cost of 200k, even if it only drops 5% that's still 10k - a lot more than we pay in rent each year. If it drops by more than 5% then we're laughing.

Half way there now in 5 years, some of the deposit invested in a savings account (which is just about keeping up with inflation) and the other half invested in gold (which is way outperforming anything else at the moment).

Hopefully in 3-4 years, a combination of more savings and a dropping property market will mean the two will meet in the middle and we will be able to buy with cash - and live mortgage free 😀

I hate renting - I hate not being able to have pets, or being able to decorate or even put up pictures (not allowed to put nails in the wall), and most of all I hate the letting agency coming around every 6 months when we're at work to inspect our house.

But it does have its plus points - you're not tied down to a particular area, you don't have to wait for a buyer to move, and the letting agency has to sort anything that goes wrong.

N Star - I like your style!

Mrs Toast - depends on where you rent. We are allowed pets, can nail pics to the wall, paint rooms, etc. We look after the place well so they are happy for us to do almost what we want with it. But yes, many rented places are quite limited in what you can do.

i got divorced 7 years ago, gave her the house, accepted that it would be a long road back to financial awesomeness. I'm perfectly happy to rent. one day i'll buy some land and build a place. my advice is to completely get the idea of house ownership out of your mind and focus on getting a life back, getting a better paid job, getting laid, and in a few years re-assess the house issue.

I haven't read any of the previous threads but...
I was in the same situation (but on a LOT less income) 7 years ago. I got a council house (in an area I'd grown up in) I think the rent was about £200 a month then. After I'd been in it for 2 years, I bought it for 34K (valued at 50K less the discount of 16K for being in it for 2 years) Managed to get a 100% mortgage which made the monthly payments about £210 a month IIRC. I was 47 yrs old at this point.
My personal circumstances have changed dramatically but I've still got my little ex-council house now worth about 90K.
I dunno whats changed as far as buying council houses go but If it's similar then I'd swallow any pride you might have & go for that option if you can.

Yes, owning a house isn't the be all and end all in life for us. We'd rather have an easy time renting and have much more time for stuff we like doing (biking and snowboarding) - rather than gardening, decorating and waiting in for the plumber to turn up.

For some people I know it's different though. I guess they feel the need for the security of a more permanent place, which I guess is why prices have gone through the roof recently, egged on by easy credit and the media whipping up frightened first time buyers into overstretching themselves by spinning that old chestnut "quick, if you don't get on the ladder now, you'll never be able to afford it".

Just remember chaps, life is for living - not for mortgaging yourselves to the hilt.

And for anyone who still thinks that owning a house is an 'asset' well you're wrong - unless you're lucky enough not to have to live in it. Read the book 'Rich Dad - Poor Dad' for the full explanation.

Friends of mine on a low income for Cambridge (which is anything under about £50k) bought a part equity with a housing association in Cambourne and commute by bus into Cambridge to work everyday.

Price here are obscene, but then there are a lot of very well paid people and a shortage of houses, it's also almost recession proof, so never really dips much.

As for mortgage rates and deposits, these things are cyclical, so it will all be different in a few years.

It is interesting how these kind of discussions about houses, house prices, and home ownership really polarise people.

Surf-Mat, I like your approach, for what it is worth I think you are going about things the right way. Certainly in the early years of a mortgage, most of the payments is spent on mortgage interest, so if the opportunity arises to save lots of cash whilst having low costs, then that is a no brainer. If you can outstrip the effects of house price inflation whilst saving, then you are certainly onto a winner - if only for a few years until rent vs mortgage and house maintenance costs start to go against renting. I also think that house prices are likely to drop significantly over the next few years; we have had the mother of all house price bubbles, and it is due to pop. I know where I think the graph in the link below is going to head over the next few years......

[url= http://www.housepricecrash.co.uk/graphs-average-house-price.php ]Historical House Prices[/url]
Imagine what the equivalent 1996 price will be?

Whilst demand is so constrained, the population keeps rising and the average number of people per household keeps falling, house prices will only keep rising as demand keeps outstripping supply.

Its interesting. If I had taken surf matts appraoch when I last bought I would never have bought.

My flat cost me £48 000 on a mortgage - much lower than the rental at the time. It has appreciated in value massively - more than £10 000 a year since I bought it. so even if I had been able to save £10 000 pa I would never have been able to buy. Mortgage payment are under £4000 a year

Surf matts approach only works while house prices are in bust - if you have not bought by the time of the next boom you never will be able to

If you make the assumption that house prices will level off and only increase at the rate of inflation - c3%, then a house worth £300K today will be worth £628K in 25 years time, so if you save up over that period thats what you'll need. You will need to put £1500 a month away for that @ 2.5% savings rate

Over that period a mortgage would cost you £531K @ 5%, thats £1771 so its is cheaper to buy the house in the future, so long as you know the market is flat, however If you add your rent to that you are looking at paying £928K in total to own the same house in 25 years time. a cost of £2500 a month.

Buying the house now with a large deposit if you have one is the best way forward, and then using savings to continuously offset if you have that opportunity,,,

If I had taken Surf Mats strategy I would not be able to be living in the house I am now.

Footflaps, you seem to be using the classic supply and demand argument for housing. This is true to an extent; due to the UK being a densely populated island, there will usually be high demand, although this will dampen when people begin to realise housing isn't a one way bet. I would wager that if you asked the man on the street what his opinion of property as an investment class was in 1991, they would have given you a different answer to what they might have said in 2005.

But the crucial point about the supply and demand argument, is that the housing market works off the supply of credit, not supply of housing. As the vast majority of people need a mortgage to buy a house, the house they can afford is dictated by the supply of credit. Hence we have had huge house price inflation since 1997, as credit has been easy to come by. Now that credit is being restricted, and shows no signs of easing (despite 0.5% base rate, QE, and £300bn government assurances in the shape of the special liquity scheme), then house prices only have one way to go. Couple this with other poor fundamentals (historically high wage:price ratios, increasing unemployment, the upcoming austerity cuts, 20% VAT, higher than target inflation, etc), and the smart money is not in property at the moment. I would encourage anybody to download the property bee toolbar for Firefox, and have a look at how house prices are changing on rightmove.

djglover - are you taking into account the cost of owning, and maintaining a property in your calculations?

There does become a point where the mortgage becomes insignificant to the current rent levels, so I don't think it is easy to say that buying now is better than renting, or vice versa. The point is that people who are despairing about the cost of housing now, should throw away any preconception about renting, do some maths, and also a bit of research into the housing market. Then things might not seem so bad.

NorthernStar - anyone who still thinks that owning a house is an 'asset' well you're wrong

Well I'm not sure I agree but then I haven't read of the book. I guess the point is that it's an asset that needs maintaining - i.e. it's a cost? Well we all need to live somewhere so we all have a cost; it just might be rent or mortgage or maintenance or.... So a house doesn't give an income but does that really mean it isn't an asset? It's not a very liquid asset, especially at the moment, but it can be sold therefore it is an asset surely? Well in accountancy terms anyway. And if you've paid off the mortgage it's an asset in that it minimizes your living costs - i.e. no rent - though there is the opportunity cost of course.

Would you like to comment based on what the book says?

The recent recession has also seen a baby boom, personally I'm surrounded by people who all have young children, they also laregly have more than one. So potentially we are facing quite an increase in population who within roughly 20 to 25 years (the term of my mortgage) will all be looking for places to live. It's a gamble, it's always a gamble and you have to decide to which bets you will place and when you are going to place them. Only time will tell what works out for whom 🙂

Depends on how you define an asset.

Put very simply an 'asset' is something which puts money in your pocket. A 'liability' is something that takes money out of your pocket.

If you want to be rich then you need to spend your life buying 'assets'. 'Assets' are things where your money works for you and actually earns you more money in the process.

Owning a house which ever way you look at it is a big 'liability'. Think of what it costs to own. Mortgage payments, interest, fees, insurance, DIY, plumbing, decorating, lots of your time - and the biggest cost of all is that it takes money directly out of your pocket that you could have invested elsewhere.

Yes you can argue that houses have gone up in value - perhaps by 100% over the last 10 years. But had you invested is say Gold instead they you would be looking at a 500% return on your money without any of the great expense and hassle that goes with home ownership. That put's things into context doesn't it.

A house will only becomes an 'asset' when 1. - You no longer need to live in it, and 2. - It's going up in value. If it goes up in value but you still have to live in it then it is still just a 'liability'. And its far, far worse now that house prices are on the slide again.

The end result is that despite some of the benefits of home ownership, owning your own home will never make you rich. It's far to expensive in lieu of starting an investment portfolio and sucks too much of your spare cash and time away from buying what could be very successful 'assets'.

There's plenty more good reasons for a house being a 'liability' not an 'asset' in the book but you'll have to have a read if you want to find out more.

Toby1,

Do you intend to sell your house to these baby boomers in 25 years time? If so where will you live?

Just a thought.

Me, I'm off to live in a tent somewhere near the woods 🙂

I'm not really defending the decision, I got fed up of living in a place without a garden, or a garage or without any real storage space, and also where I had to renew a contract every 12 months at a cost and had people coming round to inspect every 6 months. So rather than rent I decided to buy, I'm still not sure myself that it's a good idea but it's too late to back out now - I got the keys on Monday ... it's my first ever adventure into the property market, so I'll let you know how it goes 🙂