Some basic assumptions:
- London real-estate market is very expensive.
- I used mortgage calculators "how much I could borrow".
- I cannot borrow enough to buy a home in an area I want to live in long term; the only places I can afford I could bear to live in for 2 years maximum.
- I'm thinking about taking a mortgage anyway to "step into property ladder"...
- ...and I borrow £250k for 25 years...
- ...and I buy the place worth £300k
The rationale being - over the 2 years I'll own the place I will repay 2 years worth of mortgage worth ~£25k, I'll also accumulate savings worth another ~£25k and increase my credit score, and borrow some cash from friends and family, and...
Eventually I might be in a position to buy a place that is at least semi-decent.
Now the question is: assuming the my £300k property is still worth in region of £300k what should I do?
- Sell it, repay existing mortgage, use the surplus to fund a new one.
- Remortgage.
- Any other shenanigans.
Asking here because it's hard to find a proper guide... Most of the first-time buyer guides don't discuss the length of time to live in a property. In my current circumstances I cannot afford a place I want to have (shared ownership might be an option) so I'm contemplating getting a "anything really" further away to make the plan real in years to come.
Alternative way of asking the question - how long should I pay the mortgage to break even / be positive when selling the property?
(assuming the real-estate prices stay still)
(can do a Google Spreadsheet to simulate different rates of depreciation / appreciation too)
another ~£25k and increase my credit score
Oh my !! Where did you get that from ? Secondly a first time buyer has certain benefits, which willn't be available if you do this. You forget about the timelines involved in buying and selling. You are assuming the house prices will keep on rising, possible in London, but you cannot guarantee that it will happen within a certain time period. Don't make assumptions while buying a house. It ain't £20 or £30 that you are talking about.