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Is buying a house a good idea? watch

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    I appreciate this is a really stupid question but i'll ask it. I opened a help to buy ISA and i have about £4k saved up. I wanna transfer to the lifetime ISA cos i'll be able to get the £1k bonus every year assuming i save up £4k every year.

    What are the benefits of owning rather than renting? I reckon once i save up about £20k for a deposit in about 4 or 5 years i can get my own place.

    Does anyone have any advice on how to proceed? Thanks.
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    (Original post by Silver Arrow)
    I appreciate this is a really stupid question but i'll ask it. I opened a help to buy ISA and i have about £4k saved up. I wanna transfer to the lifetime ISA cos i'll be able to get the £1k bonus every year assuming i save up £4k every year.

    What are the benefits of owning rather than renting? I reckon once i save up about £20k for a deposit in about 4 or 5 years i can get my own place.

    Does anyone have any advice on how to proceed? Thanks.
    Biggest benefit? Actually having an asset at the end rather than chucking money at something you'll never own.

    (There are differences between Freehold and Leasehold, but heck )
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    (Original post by Blue_Cow)
    Biggest benefit? Actually having an asset at the end rather than chucking money at something you'll never own.

    (There are differences between Freehold and Leasehold, but heck )
    A lot of people would claim that a house is not an asset though, it's a liability. Assets tend to make money, not suck it out of you in the form of a mortgage or bills.
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    (Original post by Acsel)
    A lot of people would claim that a house is not an asset though, it's a liability. Assets tend to make money, not suck it out of you in the form of a mortgage or bills.
    That's true actually...
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    (Original post by Silver Arrow)
    I appreciate this is a really stupid question but i'll ask it. I opened a help to buy ISA and i have about £4k saved up. I wanna transfer to the lifetime ISA cos i'll be able to get the £1k bonus every year assuming i save up £4k every year.

    What are the benefits of owning rather than renting? I reckon once i save up about £20k for a deposit in about 4 or 5 years i can get my own place.

    Does anyone have any advice on how to proceed? Thanks.
    owning a house is a great idea if you can financially support yourself long term. only buy a house that doesn't need much work on it if you don't want to pay out. but you will pay more for it in the market. if you want cheaper buy a do a upper, but sometimes they can b money pits! when looking at houses you want to make sure it's free hold, that means you own the land your house sits on. is there any shared access? look at the roof if it looks like newer cement and looks solid, chimney no gaps in mortar around bricks. any flood risk? inside need to look at the boiler, is it a combi boiler (doesn't need hot water tank, heats water from the mains, more efficient) how old is it? has it been recently serviced and is there record of regular services 1 each year. look at fuse box, does wiring look modern, does box look modern. can you smell damp, musty smell? look how old windows are and doors. is the layout of the house work for you? how many bedrooms? do you want down stairs loo. just to name a few big things. but first time buyers mortgages are at least 10% deposit atm so keep an eye on that. do research on mortgages, any chance banks have to screw you over they will.
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    (Original post by Acsel)
    A lot of people would claim that a house is not an asset though, it's a liability. Assets tend to make money, not suck it out of you in the form of a mortgage or bills.
    meh i'd still rather own than rent
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    (Original post by Acsel)
    A lot of people would claim that a house is not an asset though, it's a liability. Assets tend to make money, not suck it out of you in the form of a mortgage or bills.
    So do you prefer renting instead then?
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    (Original post by Acsel)
    A lot of people would claim that a house is not an asset though, it's a liability. Assets tend to make money, not suck it out of you in the form of a mortgage or bills.
    But if you weren't paying those bills, presumably you'd be renting instead. So it's not really a choice between "paying nothing" and "paying a mortgage".
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    (Original post by Silver Arrow)
    So do you prefer renting instead then?
    That's a complicated question that depends on the context as there are pros and cons to each. For example if you rent you might not have the security or owning a home. You could get evicted and even with notice you'd need to find somewhere new to live which is a pain. If your landlord is expected to deal with maintenance then it can be a pain to get anything done. I'm very much familiar with this as it took far too long for a lot of major things such as a door lock and an oven to be fixed in the house I'm currently renting at uni.

    I don't think there is a correct answer to which is better. However if I had to pick between renting and owning a home, I'd probably take owning a home. There's a level of control and security with owning my own place that would make me more comfortable. But more importantly, truly owning my own home would mean I have the income to support it. I'm not simply talking about getting enough for a mortgage and then paying it off for X years, I'm talking about having the money to outright own a home with no strings attached.

    If I were in a position where I had enough money to put a deposit down and get a mortgage, I'd seriously consider continuing to rent. I'd put down a deposit on a house, get a mortgage and then renting that house out to someone else, while I lived elsewhere in rented accommodation. Rather than be tied down to a house and a mortgage I'd turn that into an actual asset that generates income for me. But it's not something I'm in a position to do and haven't put a large amount of thought into.

    Frankly though if I had 20K in savings and were in a position to get a deposit I'd very much consider whether that's the best investment of my money. From a purely financial perspective, dropping 20K into something that will only sap more money from me sounds like a poor investment.
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    (Original post by Chief Wiggum)
    But if you weren't paying those bills, presumably you'd be renting instead. So it's not really a choice between "paying nothing" and "paying a mortgage".
    I never said it was. Paying rent is just as much a liability as paying off bills and a mortgage. I'm simply saying that owning house is not considered an asset.
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    If you wanna start a family buying a house is a great idea. Though if its just you or you and your bird I wouldn't recommend it.
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    (Original post by Acsel)
    That's a complicated question that depends on the context as there are pros and cons to each. For example if you rent you might not have the security or owning a home. You could get evicted and even with notice you'd need to find somewhere new to live which is a pain. If your landlord is expected to deal with maintenance then it can be a pain to get anything done. I'm very much familiar with this as it took far too long for a lot of major things such as a door lock and an oven to be fixed in the house I'm currently renting at uni.

    I don't think there is a correct answer to which is better. However if I had to pick between renting and owning a home, I'd probably take owning a home. There's a level of control and security with owning my own place that would make me more comfortable. But more importantly, truly owning my own home would mean I have the income to support it. I'm not simply talking about getting enough for a mortgage and then paying it off for X years, I'm talking about having the money to outright own a home with no strings attached.

    If I were in a position where I had enough money to put a deposit down and get a mortgage, I'd seriously consider continuing to rent. I'd put down a deposit on a house, get a mortgage and then renting that house out to someone else, while I lived elsewhere in rented accommodation. Rather than be tied down to a house and a mortgage I'd turn that into an actual asset that generates income for me. But it's not something I'm in a position to do and haven't put a large amount of thought into.

    Frankly though if I had 20K in savings and were in a position to get a deposit I'd very much consider whether that's the best investment of my money. From a purely financial perspective, dropping 20K into something that will only sap more money from me sounds like a poor investment.
    People who rent their homes would obviously include mortgage payments.

    I do economics, so I will tell you about the "Wealth effect"

    Lets say you bought a house worth £100K (not gonna happen anywhere near me :P) and got a mortgage for it. Because you got the mortgage, you have "locked" in the full price.

    If the house happens to increase in value (which is basically guaranteed to happen in the UK, especially South-East England) it means you've just saved money by buying now instead of buying after it has increased.

    Now you have a cushion, a very big one as well. Lets say, you need some money which you don't have (and you can't get an unsecured loan; ie, a credit card). That's fine, just go to a bank and say "I own a house that's worth £150K, and there's £75K remaining on the mortgage (I'm assuming you would have paid off the other £25K), can you give me a loan of £20K and I'll give you £20K worth of my property, that I will buy (repay) back at the same terms + interest."

    The answer will usually be "yes" (even if they thought you couldn't pay it back). Bankers have targets set by their superiors: "you must lend out this stack of money", while the banker will also be responsible for the money (the banker gives it to someone without security [ie. an unsecured loan], that someone goes bankrupt and the banker is punished for losing money (obviously, in a legal way)).

    Why? Because you're safe, if you go under, the bank (and the bank that originally gave you the mortgage) will both seize the house, sell it for £150K (or more, if the market value has increased more) take what they are owed, and give the rest to you. The house was the security on the loan.
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    (Original post by rickyrossman)
    If you wanna start a family buying a house is a great idea. Though if its just you or you and your bird I wouldn't recommend it.
    I'm currently on my own atm.
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    (Original post by Acsel)
    That's a complicated question that depends on the context as there are pros and cons to each. For example if you rent you might not have the security or owning a home. You could get evicted and even with notice you'd need to find somewhere new to live which is a pain. If your landlord is expected to deal with maintenance then it can be a pain to get anything done. I'm very much familiar with this as it took far too long for a lot of major things such as a door lock and an oven to be fixed in the house I'm currently renting at uni.

    I don't think there is a correct answer to which is better. However if I had to pick between renting and owning a home, I'd probably take owning a home. There's a level of control and security with owning my own place that would make me more comfortable. But more importantly, truly owning my own home would mean I have the income to support it. I'm not simply talking about getting enough for a mortgage and then paying it off for X years, I'm talking about having the money to outright own a home with no strings attached.

    If I were in a position where I had enough money to put a deposit down and get a mortgage, I'd seriously consider continuing to rent. I'd put down a deposit on a house, get a mortgage and then renting that house out to someone else, while I lived elsewhere in rented accommodation. Rather than be tied down to a house and a mortgage I'd turn that into an actual asset that generates income for me. But it's not something I'm in a position to do and haven't put a large amount of thought into.

    Frankly though if I had 20K in savings and were in a position to get a deposit I'd very much consider whether that's the best investment of my money. From a purely financial perspective, dropping 20K into something that will only sap more money from me sounds like a poor investment.
    So unless you could buy a house outright, are you just gonna continue renting? And how would you invest £20k if you had it?
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    Before Brexit, I would say buying a house is a good investment provided it is a area with a good economy such as the south. In some parts of the country such as Bradford, property prices are falling.

    With Brexit, no one knows where the economy is headed, it could stay the same or get worse which means house prices will fall especially in areas worse hit by brexit such as the north and midlands.
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    Owning a house is great because:

    1. Pay off rent = money eternally spent on something you'll never own (or have any real rights over etc), Pay off mortgage = calculable amount of money spent on something that you will one day own.

    2. You will not end up homeless if you own a home.

    3. You have a considerable amount more rights/power to live as you see fit in a property that you own.

    4. Your property may go up significantly in value over time, allowing you to sell it for a profit if you decide to move in the future etc.

    Major downsides:

    1. When you buy into a house, you are making a serious commitment to the area; you might find yourself one day commuting far away from home or the neighbourhood may go downhill. These things can happen in a rental situation (but in a rental situation you can move area much more easily if circumstances call for it).

    Before you buy, you need to think seriously about the demands of your career and future career prospects. So for example owning a house is not necessarily the best option if you want to be an archaelogist (because to make a living out of archaelogy you must be willing to potentially travel all over the country on a regular basis).

    You need to think carefully about the area you are buying into (why exactly do you like it, what long term prospects and real benefits does it have?). Not all cheap housing exists in bad neighbourhoods, but many cheap area's house prices reflect a distinct lack of local economy (few major employers, no connection to the rail system etc) and many cheap new build houses are built in area's that are susceptible to flooding etc. What will you do if you end up jobless (who can employ you locally?), what if your home floods?
    These things must be considered.

    You also need to think carefully about the house itself; many new cheap homes are built to a poor quality (thin walls, cheap fittings etc) and develop problems quickly. However older homes can be listed (a legal minefield for repairing or altering the home in any way) or have their fair share of old house type problems (outdated electrical circuits, woodworm, dodgy boilers etc) in general. Getting a survey done is expensive, but it can save you a fortune in the long run.

    2. You take on the responsibility of paying off a large loan from the bank. If you meet payment demands well, you get a house to keep for good at the end of it, but if life goes badly, you could lose out on your investment. Many types of situation can cause this predicament.

    Lately in life I have seen a couple of cases amongst friends who had to sell up their homes before mortgages were paid off on them. In both cases it involved a couple who had been together for a long time (5-10+ years) and over that time they had committed to taking on a mortgage together. Pooling their financial resources together meant that they could get so much more for their money and pay off the loan quicker. However in both cases, the couples relationships eventually completely broke down (and so naturally they did not want to live together anymore).
    But who gets the house?

    Both had paid into the house very equally for years on end, but there was still a lot left to be paid off. In both couples, one wanted to keep the house more than the other. However both also did not have quite enough earning power to buy out the others half and comfortably pay off the remaining mortgage alone. So in the end, both were forced to sell everything up.

    Such situations can be devastating for people, as not only is the individual faced with the heartbreak of relationship breakdown, but of losing a home that they came so close to owning and had become so financially and emotionally invested in.

    Home ownership can be great for many reasons, but you definitely need to take a careful and wise approach towards it.
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    (Original post by Silver Arrow)
    So unless you could buy a house outright, are you just gonna continue renting? And how would you invest £20k if you had it?
    Those are both questions I would explore once I were in a position to do so. Waiting to buy outright would seem very impractical and comes with a host of it's own problems.

    For me, renting is a practical solution now. I'm not in a financially viable position to buy a house, nor is it practical for me to do so while I'm a student. Give that I don't expect to be living in one place for the foreseeable future I feel it's more likely that I'll have a money for a deposit saved before I am in a position to settle down in one place and actually buy a house. Likewise the state of the housing market, where I actually wanted to live and so on would all be factors that I'd explore nearer the time.

    As I am now, if I saved as much money as possible I could be fairly close to having a deposit when I graduate. But I would not immediately seek out a house to buy. Partly because that is not practical and partly because I'd not want to put all my savings into something that is ultimately going to continue to drain money from me. I also don't know if I'd be married or in a relationship but I don't think I'd be considering buying a house if I were in a relationship with someone unless there were a good chance I wanted to spend my life with them.

    If I had exactly 20K in savings for a deposit I'd definitely want to save some more. As a general rule, my savings should cover 6 months to a year of expenditure. That would mean if I paid 20K for a deposit, the money left over should at minimum pay my mortgage repayments, bills and any other expenditure for the year. To pull a random number out of thin air, if I had 20K for a deposit then I'd want maybe 30K saved before I took the 20K out to pay that deposit. The same would be true for any investment though, if I were to invest that 20K I'd still want that year long safety net.

    I appreciate that this doesn't really answer the question but for me it's not as simple as "I'd do it when I have X amount". There are a lot of different things that I would personally consider at the time it happened. If I thought it was an appropriate time to consider buying a house then I would do so.

    Personally I'm not a fan of paying for things I won't own but if renting were a more practical solution then I would rent. Right now and for the foreseeable future, renting is practical for me and it is likely to remain that way for some time after I've got the money saved for a deposit. But I don't have an answer to your question, solely because it's not a situation I am in and don't have the experience with. But to go back to my original point, I'd much rather own instead of renting under the assumption that owning means not being tied down by a mortgage and being completely self sufficient.
 
 
 
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