An interesting question came into property expert Virginia Wallis at the guardian online last week, a question that many people of a certain generation across the UK must be asking.
“My girlfriend and I are debating buying our first home in Manchester, but are unsure when to take the plunge. At the moment we are renting a flat for £810 a month. My girlfriend is a recruitment consultant and I am a PhD student; we are both 23.”
“We have a fairly small deposit of £15,000 – the obvious response here is to wait until we have a larger deposit and can borrow less and get a better mortgage deal. However, property prices are going up quickly in the city centre, where we are looking to buy, and we are worried that any extra savings we put away (we should be able to save £6,000 to £7,000 a year) will be negated by the rising prices. We wondered whether it might be better to buy a property sooner rather than later – even with our small deposit (most of the properties we like are around £150,000) – and then to overpay on the mortgage, rather than wait to save for a bigger deposit and continue paying rent?”
This is a common question that we here at Belvoir! Sheffield here at a great deal, supported by the demand that we see in both our property in Sheffield available to rent, and the property across Sheffield for sale.
Virginia answers in this particular case (remember this is Manchester), “Purely on the basis of monthly cost, I would say buy now rather than carry on renting. Even with the 90% mortgage that you would need to buy a property costing £150,000 with a deposit of £15,000, your monthly mortgage repayments would be around £120 less than the monthly rent of £810 that you are currently paying. That’s assuming that you were able to secure a 90% repayment mortgage at a variable interest rate of 3.65% over 25 years with monthly payments of just under £687 – as currently available from the Coventry Building Society.”
“But you are correct in saying that you could get a better deal with a bigger deposit. If you were able to cut the size of your mortgage to £127,500 (which is 85% of the flat’s value) and so increase your deposit to £22,500 (assuming no change in its price), Coventry BS would charge only 2.65% in interest and so bring your monthly mortgage payment down to £582. With the 85% mortgage and a bigger deposit, after four years, you would owe about £108,000 whereas you still owe around £116,000 after four years with a 90% loan. However the difference in the amount of capital repaid is only about £1,000.”
It’s a minefield, and that why you should talk to a property expert here at Belvoir! Sheffield if you are in a similar position and are thinking about buying a property in Sheffield. We have years of property experience, specific to Sheffield, and as we have beenSheffield’s leading letting agency since 2006, we are in a unique position to advise you on both rental versus buying.
Belvoir! Sheffield is the one stop specialist for Sales and Residential Lettings and Property Management, Investment and Wealth Management Advice, Fit-outs and Renovations, Property Insurances and Mortgages. Belvoir! Sheffield was the winner of the Belvoir Franchise of the Year Award for 2013 and is a multi award winning agency.
For more information, please visit Belvoir! Sheffield or call 0114 331 0033. Alternatively, please email rick@belvoirsheffield.co.uk
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