We were contemplating for ages the pros and cons of renting versus buying and came up with the below for buying:
Pros for buying
- We own the house. The money we are paying renting is dead money that we aren’t getting any value on
- The mortgage is cheaper than rent, because depending on purchase price, say a £150,000 house over 25 years you may be paying around £500 depending on the interest, but private renting might well be around £600-700 a month with nothing to show at the end of 25 years.
- You can within reason do what you want with your own house and extend
Cons for buying
- You need a deposit of at least 5%, possibly even 10%
- You need a decent income before you are able to lend money
- You don’t have a landlord to do the repairs and everything so if anything breaks you are on your own, and you have to pay for general property upkeep.
So we decided 2 years ago that we didn’t want to rent anymore and thought about buying, but were do you start. We did our research on what the banks would lend us, so we went on the calculators online and messed around with some figures, however we found quite a few of them weren’t accurate for the situation, for example one told us we could have a set amount but when we went through the process and said we had 4 kids the amount of money we could borrow dropped by the tens of thousands.
So with an idea of an amount we could borrow we set out to make 10% deposit within a year, this meant some serious cut backs on spending, budgeting with everything. We got rid of Sky Tv, got active as a family doing bike rides in an evening and then playing board games to save money, we just had a Netflix subscription to went from spending £32 per month to £8 per month for the TV. We cut back on the food shopping so we only bought essentials and made sure food wasn’t wasted. Then the main things for saving, we looked around at the offers and interest rates available for saving and noticed some banks offered a switching bonus and then had linked savings accounts to save money. So we utilised this offer to bring in some more money.
Nationwide were offering a 5% current account and linked saver for 12 months, HSBC , First Direct and Halifax were also offering a switch bonus at the time so it is worth looking around to see what is on offer. However we didn’t want to keep switching as didn’t want to affect our credit rating. So look at all the bank websites and see the incentives and how much you can save with them. We found it was easier to save when the money wasn’t in our current account as it was like any money in the current account could be spent but in a savings account it was there to save and not be available.
Help to Buy ISA – We shopped around for this and got a great deal at 3.5% with Halifax I believe in the end. We saved £200 a month into this account and you get 25% back from the government when it is cashed in so well worth it with the money back. The only issue with this was you cannot include the bonus as part of your deposit, but it does help you add some extra money at the end to pay off your mortgage and decrease the term.
Help to Save – If you are on a low income and get tax credits you are able to save for 4 years and get 50% on top, so if you save £1 they give you 50p as a sort of bonus. I believe you save for either 2 or 4 years but the information is below and well worth doing if you can as this seems to beat many savings accounts if you don’t have much in them.
Mortgages for low income with Children – Don’t think it is impossible – You can always use a broker if you may struggle on the high street to get a mortgage – Although we found Nationwide the most helpful for families with children, as most of the others seemed to want to lend us less when we said we had 4 children.
So yes It may take a while to save a deposit but you can use the above methods to help out. You can also boost your income by:
Survey Sites – Global Test Market, Branded Surveys, Take part in Research, Crowdology, Valued Opinions, Swagbucks, Toluna, Paid Product testing, New Vista, Mingle
Apps to make money – Shoppix, Vypr, Receipt Hog, Onepulse and lifepoints
Shopping (To make vouchers) – ShopandScan
When looking for a house the App we loved was Rightmove, it seems to list all the properties and our favourite part of the process was definitely the looking around and seeing where we could live, negotiating offers and seeing how much we could get for our money.
Once we had put an offer in and it had been accepted then we had to get a solicitor so again something you have to budget for, then if your house is worth a certain amount there is stamp duty to pay so definitely worth setting a budget to include all these as well as you don’t want hidden expenses. You also have moving costs to factor in.
Don’t forget when shopping around for a mortgage look at the interest rate and how much you will be paying back each month to check if you can afford it. You may also be surprised to know if you overpay your mortgage each month you can knock off so much interest that you will save lots of money especially in the first few years.
(Disclosure: None of this information above constitutes advice, this is just our experience of buying and the offers and products that were available at the time and obviously they change so there could be new deals or these may have been removed from the market so please do your own research – We are not accountable for the accuracy of the information in the post)