In This Guide
Apply for a mortgage
Buying at auction
Buying in Scotland
Conveyancing
Find and view
Negotiate
Plan your purchase
Success and failure
Surveys and valuations
To buy or not to buy
1. It begs the question
2. The financial arguments
3. Economic factors
4. Stay where you are!
5. With your partner
6. With your friends
To buy or not to buy
The financial arguments
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When it comes to matters of money, there is invariably an argument somewhere along the way. Sometimes it can get quite nasty, with blows traded or friendships compromised, whilst on other occasions the argument can be a more placid hypothetical one. Whilst some arguments simmer and then rise into a heated frenzy, the financial argument of whether or not to buy a house often boils down to your ability to take a long-term view of the situation.
If you want to use our 'buy or rent' calculator, which will help you decide whether you will be better off financially through buying or renting over a period of time, click here to visit our calculators section.
Many people are put off by the short-term cash outlay required
in order for you to buy a house. Even if you plumb for a one
hundred percent loan, you can still be left with a bill for
several thousand pounds for all the other expenses you will incur.
Find out what these are and make sure that you plan your finances
properly by reading a breakdown of the buying
costs.
Aside from fittings, furniture and other possessions which you
may not buy if you are renting a place, there are several financial
products often associated with buying a house that are not directly
part of the buying costs. A house is a major asset and the debt
you incur in getting a mortgage to obtain the property is a pretty
huge responsibility. Therefore, buying a house often brings with
it the need to buy various other financial products to protect
all the concerned parties. Buildings
insurance protects you and the lender from damage to the asset,
life assurance helps protect your dependants from having to meet
the responsibility of your debt and protection
products give you some protection in the event that you become
unable to meet your payments. People are generally less likely
to incur these expenses until they buy a property.
When you are renting a property, most of the responsibility for
maintaining it lies with the landlord. You may have to keep to
certain restrictions, pay for any damage you cause and leave the
property in a reasonably good state, but any major work is not
usually your responsibility. When you buy a place, this all changes.
Whether it's plumbing, wiring, paintwork, damp, redecorating,
repairs or any other sort of odd job or major work not covered
by your insurance, you cannot usually look to anyone else to meet
the bill. Whilst good things usually happen in threes, there is
no restriction on how many bad things can happen all at once.
Some people seem to have a fear of a mortgage as this great expensive
shackle that will bleed you of money from now until eternity.
This perception usually results from nothing more than a fear
of the unknown. People buy property as an investment because they
know they can generate more money in rent than is needed to pay
the mortgage. It doesn't take a genius to work out that you will
almost always be paying more on a monthly basis to rent somewhere
than you would be for a mortgage on an equivalent property. A
genius would probably be able to mentally aggregate the savings
over a twenty-five year period, factor in the likely maintenance
expenditure and buying costs and discount the sum back to a present
day figure. We think that is probably going a little too far and
a are happy to say that none of us is capable of doing that without
a serious amount of time, some textbooks and a calculator.
Here is the real beauty of buying a house. This reason often outweighs
all others. Once you've stumped up a deposit, you then pay less
than you would if you were renting the same place and then at
the end of the mortgage term, you get to keep the house. Fantastic!
Given that you can now take many mortgages with you if you move
(rather than paying it off with the proceeds of the sale and taking
out a new one), there is a reasonable chance of owning the full
equity in your home after a twenty-five year term.
What's more, property can sometimes be a great investment. Over recent years, some areas of the country have seen property prices rise by a proportion that you would normally associate with high flying growth stocks and shares, with the added bonus of a lower level of risk. With the size of the figures involved, a ten percent rise in value can represent a serious amount of money for you. And if you do sell in order to cash in your windfall, as long as the property is your main residence, there is no capital gains tax to pay on any profit.
As long as you don't get caught out by financially over-stretching yourself or getting caught without the appropriate cover in the event of one disaster or another, then the long-term financial rewards of buying a house usually outweigh the short-term expenses.
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