Does it make more financial sense for me to buy a house now or continue renting for a few years

[eliquinn]

Throwaway account. Hoping you financially savvy Redditors can offer some advice - I (28F) am considering buying a house with my fiancé (28M). I make £39k (due to rise to mid 40’s this year). Fiancé makes £29k & we get ~ £300 per month Disability Living Allowance for our autistic son.

We live in the North of England, so this money stretches & we’re comfortable financially.

Our rent is also incredibly low despite being a lovely semi-detached house with garden in a fab area (our landlord is an angel & hasn’t raised it since 2019). It’s £610 a month.

We’ve lived here for 4 years, so are intending to stay in the area to buy, with a budget of £250k-£290k.

Here’s our issue: we’ve looked online, and monthly mortgage repayments would be almost double our current rent (more in some cases).

Whilst we can afford this, it almost seems counterintuitive to opt to pay so much more.

I know it comes with security & equity, but I’m torn.

Should we:
a) Stop being tight and just buy a bloody house as we can afford it. Finally leaving the generation rent cycle.

b) Stay where we are currently, continuing to save the difference to bolster our deposit in the hopes of driving mortgage repayments down when we do eventually buy.

c) Something else

I’m torn because I don’t want to jump on the ladder at the wrong time!

Thanks in advance x

 

[azmaveth]

@eliquinn If rent is lower than mortgage interest , then you would be spending more indeed. The right decision is ultimately a matter of personal risk tolerance - will interest on what you're saving and/or investment revenue beat the rise in house prices, and the possible rise in mortgage interest? Or do you think that prices/interest may actually go down? Who knows.

However, if you keep renting you are exposing yourself to very sudden rent raises (if your rent is low but in the area rents are high, this could change in a matter of a month) and/or evictions.

Dually, buying a house you expose yourself to high maintenance costs/unexpected expenses (you can somewhat insure against many, but not all), your relationship breaking down and a much stronger tie to break between you guys than merely renting together, and interest rates being really high whenever your fixed deal ends.

I was in your situation, in your area, with your budget, and I bought for three reasons: 1) peace of mind, 2) I personally believe that house prices in Manchester will not drop any time soon, if anything they'll shoot up, 3) I think that this is my forever house so no "ladder" considerations apply.

 

[eliquinn]

@azmaveth Thank you! Really appreciate you taking the time to share your thoughts you’ve given me a lot to think about

 

[donddc47xxx]

@eliquinn The thing is- you will never know when is the 'wrong time to jump on the ladder'...
There are people predicting house price crash constantly since last financial crisis in 2008 ( 16 years ago...)
If they bought a property instead , they would have it paid off by now.
If I were you- I would start looking for a house if I was you, but because you are in comfortable dituation- I would be a bit 'picky' and only bought when I gound a house I fell in love with...

 

[eliquinn]

@donddc47xxx Very good point! As rubbish as the market is/rates are at the moment, they’re manageable for our situation. Whereas who knows what it’ll be like in a few years time. Buying now could be our best option for a while!

 

[donddc47xxx]

@eliquinn I like the saying ' the best time to buy a house was yesterday, the next best is today' ( or sth like that )

 

[jimbeta]

@eliquinn if you can afford it (and you say you can) then i would say buy.

of course houses can go down as well as up but the sooner you buy the better particularly as you like the area.

don't forget as you are renting you are in a very strong position, don't waste the opportunity and buy a place you really love. good luck

 

[sinead]

@eliquinn Lots of people answering emotionally here.

SirCaesar is right that you should be comparing interest payments to rent, but that's not the whole picture.

You need to model the actual costs of owning, including interest, loan fees (these are incurred every time you remortgage as well) and maintenance. A good rule of thumb is 2% of the purchase price annually, Some people will tell you 1% but I think that's fanciful. You should also factor in the cost and disruption of moving. Once you have this figure, you should also look at the likely capital growth of the property vs the likely return of the difference between the two sums invested (this is the opportunity cost of the property investment).

Once you do that, for an affordable house which will give you as much joy as your current one, then you have a true comparison.

If you do this and it doesn't stack up financially to move right now, don't feel like you are missing out by not doing so. Put money aside as aggressively as you can, and invest as well as save for the future.

In the event that you're forced to move, for work or because of a large rent rise, you can revisit the situation then.

 

[carmenjones]

@eliquinn £610 a month is cheap ?

it is to pay your landlords mortgage and you will never own this house

https://www.moneyhelper.org.uk/en/homes/buying-a-home/mortgage-affordability-calculator

this sort of thing will help

It is always the right and wrong time to jump on the ladder, personally becoming mortgage free several years ago was a relief

 

[eliquinn]

Thank you! Really appreciate you taking the time to share your thoughts you’ve given me a lot to think about

 

[roger5599]

@eliquinn Had some good responses already, particularly from @azmaveth which I agree with.

What deposit have you been considering putting down? Rates on 5% and deposits are often extremely poor compared to 15%+. Have a bigger deposit would decrease your monthly repayments and your monthly interest. So perhaps you could continue renting while continuing saving and see if that changes anything in the future. Interest rates may gone down which might balance out or outweigh and changes in house prices.

 

[libertybellz]

@eliquinn It’s always beneficial to buy over rent, mainly because then your money is being used to pay down an asset you own, but also to avoid the BS of having a landlord

 

[ann3]

@eliquinn We were in a similar position a few years ago. Paid 795pcm for a lovely house. Ended up staying there for 5 years. Problem was we were out of the market all that time. We really should have bought whilst prices were appreciating.

 

[nir]

@eliquinn Like others I put off buying for the end of recession one, wrong job role, waiting for brexit vote, waiting for the outcome of the brexit vote before buying just before Covid and got lucky on rates in hindsight.

There is never a truly good time but Iv tend to find the longer I left it the sooner another reason came along not too buy…

 

[filu63]

@eliquinn Ultimately whether it works out to be financially optimal to buy or stay where you are depends on what happens in the future, which you can't know for sure.

If you can stay in a below market rate situation and house prices stay stable, you definitely can win out by taking advantage of the low living costs to save. But neither of those things is certain.

If in three years' time you've saved this £600 per month (£14k total) but the houses that were £270k are now £290k, you've actually lost out.

If your landlord decides to raise rent you also lose out. Although of course you could start looking to buy if this happens - but it can easily take several months to find and complete on a house so wouldn't be instant.

It's also worth thinking about the differences between your current property and hoped for purchases. If you're hoping to buy somewhere larger/nicer, maybe you'd rather get to enjoy that sooner rather than later.

 

[courtneylyn]

@eliquinn Option B without a doubt. Your landlord sounds like my parents landlord and they're showing no interest in selling up any time soon.

They have to give you notice when they want the property back and Section 21 evictions are possibly likely to be scrapped in the near future.