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Currently me and my partner are renting in London, which with bills included eats up around 50% of our takehome income.

It seems that if we were able to get a mortgage on a flat, we would potentially be paying less than the rent we current pay - with the bonus of owning property at the end.

However, I'm instinctively terrified of getting a mortgage (assume for this question we would be able to get one approved). While it may not be rational, my main worries are:

  • The housing in London is in a bubble, which may burst in the foreseeable future (Brexit not-withstanding, this was a concern before that as well)

  • I've had advice before that owning a flat is a dangerous game, as it can be near impossible to sell it in the future if needed.

  • If either of us lose our jobs, a mortgage would suddenly be a giant liability.

As we currently spend so much of our income on rent. Is it better to try to get a mortgage regardless of the current market - or are my concerns valid?

Right now it feels like we're throwing money in a black hole - and while we're OK for now; we are screwed when we hit retirement age.


For numbers clarity, our finances are:

  • £35,000 and £25,000 (£60,000 total)
  • Takehome: ~£3300pcm after tax, NI and pensions
  • Rent: £1700 after council tax and utilities(£1425 before bills)
  • Savings: ~£500 pcm
  • Both of us have ~35 years of earnings before retirment age

From looking around, it looks like we could get a mortgage similar to the following:

  • ~£1100pcm
  • 25 years
  • ~10% deposit
  • ~4% APRC
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The housing in London is in a bubble, which may burst in the foreseeable future

And unless RENTS go down that is irrelevant as the mortage will cost you less than renting, as you say.

I've had advice before that owning a flat is a dangerous game,

So, you plan alternatively to move out and live on the street? RENTAP property is tricky, but paying less for a mortgage while you live in - where is the risk? You downsizing significantly?

If either of us lose our jobs, a mortgage would suddenly be a giant liability.

Contrary to paying rent? Because you can not stop paying rent easily and the rent is as per your words HIGHER than the mortgage.

Hate to tell you, there are good reasons not to buy property, and good reasons not to buy it in the UK or London, but your argumentation mostly makes zero sense because it basically assumes you can go and live on the street as alternative.

You save money by buying, and you plan living there, so - reevaluate your arguments facing "logic". Yours make no sense. I would consider buying based on cost savings alone.

  • Thanks very much for the advice and putting it in perspective. For points 2 and 3 though - rental generally means we're in a contract that can be ended at will; so losing our jobs means potentially rushing to find a new cheaper accomodation, but not bankrupcy. Similarly, for not being able to sell a flat - my understanding was that we could be trapped if things went badly (where again, we stand to lose less if we're renting?). Again, these might just be misconceptions - but that's been my thought process behind that thinking. If that makes sense? – Bilkokuya Mar 25 at 19:17
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    So, you rent a flat now. And you do not think you could possibly find someone renring this same flat? For the same price? Which means you still took home some money? LOGIC ;) – TomTom Mar 25 at 19:30
  • Gotcha :) I know how stupid this whole question looks - but genuinely, this stuff scares me, which is why it's taken till now to even ask about it. Really appreciate the advice and helping clear up the real logic behind it all. – Bilkokuya Mar 25 at 19:53
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The housing in London is in a bubble, which may burst in the foreseeable future

I think the answer to that is to be careful not to overpay at the moment. In particular, new-builds may be overpriced and may lose value in the hsort term as soon as they're no longer "new and shiny".

If you can buy cheap and scruffy, and add value, that gives you some security against short term reduction in value.

I've had advice before that owning a flat is a dangerous game, as it can be near impossible to sell it in the future if needed.

This depends on the flat. You have to look carefully at freehold and maintenance costs. Some flats (especially high-rise, mixed social and private ownership) have high or unpredictable maintenance costs. Lifts, external cladding, and flat roofs are warning signs to mortgage companies. They may be 'cash buyers only' - but in London they will still sell, at the right price.

Studio and one-bedroom flats are often more expensive per sq ft and the first to suffer in a housing depression. If you have a two-bedroom flat, or a one-bedroom with a separate lounge you can use as a bedroom, you can take a lodger, or sell to two flat-sharers, which broadens your market.

You might also consider buying a shared purchase with a second couple. This means the mortgage is split between 4 people, more of whom should be working. You'd need a proper agreement between you about what happens if one person or one couple wants out. However, over the next five years you might get a handy slice of equity in the property built up.

If either of us lose our jobs, a mortgage would suddenly be a giant liability.

True, but many mortgage companies can agree a payment holiday or interest-only payments. Also, it can take ages to repossess a property. If you can't pay your rent, a landlord will probably get you out far more quickly (and possibly less legally) than a mortgagee would. And if the rooms in the flat are suitable, you can take the lodger to help bring in income. You probably wouldn't be allowed to sublet in a rental, even if you had room.

Mortgage increases are probably more predictable, and you can get fixed-rate deals. As long as you rent you are at the mercy of landlords who increase the rent knowing you have no choice other than paying up or moving out. And you will spend the rest of your lives with the uncertainty of having maybe 2 months security of tenure on a roll-on of a standard tenancy.

On the other hand:

If you rent, your landlord has to pay the insurance, maintenance, communal repairs etc, which you would have to find on top of a mortgage.

Rental yields in London are low - as little as 2% of purchase price. This means that you can probably afford to rent a much nicer place than you could afford to buy on a mortgage.

  • Thanks very much for the answer. Especially the point about the potential of paying interest-only if things go badly with a mortgage; which I hadn't realised was an option. – Bilkokuya Mar 25 at 19:20

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