Buying a house (and renting)

Lex-Man wrote:I'm not sure that I agree with your assessment that houses are that safe. If I paid 500k for a house and the market crashes it's possible that I will lose a huge percentage of the value of the home so the value goes down to 125k. If I've got a substantial mortgage on the property it would make it harder to renew as I've trying to borrow say 300k on 125k worth of value and I may get the house repressed through negative equity. Interest could also spike making my repayments double and again I'm probably going to lose the house. Also the area where I have my house could become undesirable, I know in the past when house prices did drop it became almost impossible to sell houses in places like Croydon so although I own the house that has some theoretical value it's impossible to realise. Then houses have fixed costs you've got to pay to keep them habitable to retain their value.

With shares it's unlikely that you'll lose 100% of your investment as even if the company goes under, share holders are the first group to be paid back from the sale of any assets that the company holds.

That said I think there is a level of just belief in the value of houses that keeps the prices high, which is why I think it'll take a year or so of tiny 0.3 percent declines in price to get to the point where people accept that house prices can fall to get to the point where a large drop is possible. Also the government are seemingly going to do everything they can to keep house prices high.

Sorry, this isn't correct.

This is not a good comparison. It would be extremely unlikely that house prices would ever drop by 75% (in the 2008 crash average house value dropped by 25%) It then went on to increase greatly over the coming years.

If a company goes bankrupt Shareholders are the last ones to be paid. Debtors will get paid first.

What Bankruptcy Means for Shareholders
Shareholders are the last ones to be paid out if a company goes out of business. In many cases, those owning stock won’t get anything back at all.
If a company goes through a reorganization in bankruptcy, the stock is likely to go way down in value. It could get so bad that the stock is delisted from major stock exchanges.
The stock could very well become completely worthless. But there’s always a chance that the company could emerge from bankruptcy stronger and stock prices may rise. In the short-term, however, the stock price is likely to stay very low during bankruptcy and immediately after.

https://www.thebalance.com/what-happens-to-stock-when-company-files-bankruptcy-3141358

Albear wrote:

Lex-Man wrote:I'm not sure that I agree with your assessment that houses are that safe. If I paid 500k for a house and the market crashes it's possible that I will lose a huge percentage of the value of the home so the value goes down to 125k. If I've got a substantial mortgage on the property it would make it harder to renew as I've trying to borrow say 300k on 125k worth of value and I may get the house repressed through negative equity. Interest could also spike making my repayments double and again I'm probably going to lose the house. Also the area where I have my house could become undesirable, I know in the past when house prices did drop it became almost impossible to sell houses in places like Croydon so although I own the house that has some theoretical value it's impossible to realise. Then houses have fixed costs you've got to pay to keep them habitable to retain their value.

With shares it's unlikely that you'll lose 100% of your investment as even if the company goes under, share holders are the first group to be paid back from the sale of any assets that the company holds.

That said I think there is a level of just belief in the value of houses that keeps the prices high, which is why I think it'll take a year or so of tiny 0.3 percent declines in price to get to the point where people accept that house prices can fall to get to the point where a large drop is possible. Also the government are seemingly going to do everything they can to keep house prices high.

Sorry, this isn't correct.

This is not a good comparison. It would be extremely unlikely that house prices would ever drop by 75% (in the 2008 crash average house value dropped by 25%) It then went on to increase greatly over the coming years.

If a company goes bankrupt Shareholders are the last ones to be paid. Debtors will get paid first.

What Bankruptcy Means for Shareholders
Shareholders are the last ones to be paid out if a company goes out of business. In many cases, those owning stock won’t get anything back at all.
If a company goes through a reorganization in bankruptcy, the stock is likely to go way down in value. It could get so bad that the stock is delisted from major stock exchanges.
The stock could very well become completely worthless. But there’s always a chance that the company could emerge from bankruptcy stronger and stock prices may rise. In the short-term, however, the stock price is likely to stay very low during bankruptcy and immediately after.

https://www.thebalance.com/what-happens-to-stock-when-company-files-bankruptcy-3141358

Ok, I accept that I made some errors in my argument, but I still think the general thrust of my argument is correct. It is possible to lose money on houses and share investing is not as risky as a lot of people maintain.

The average return from the S&P 500 in about 10%.

https://www.nerdwallet.com/article/inve ... ket-return

Also looking at the below graph is you bought a house in 1988/89 you would have probably lost money on your home (adjusted for inflation) if you sold your home anytime before 2001. Again house prices (adjusted for inflation) still aren't above the level they were at in 2007 and we're likely to see house prices fall over the short term.

https://www.allagents.co.uk/house-prices-adjusted/

The other thing is that I don't think that looking at historical house prices guarantee future returns, we could see population decline in the UK as birth rates fall reducing the desire for housing.

Does anyone have experience or advice regarding buying the freehold of the building in which your leasehold flat is? Our landlord has sent a letter with an offer to purchase and I would prefer to be a freeholder but have no idea about the process, costs and risks/liabilities.

Super Dragon 64 wrote:Does anyone have experience or advice regarding buying the freehold of the building in which your leasehold flat is? Our landlord has sent a letter with an offer to purchase and I would prefer to be a freeholder but have no idea about the process, costs and risks/liabilities.

I've not done it, but wish I had! We were offered it years ago, decided we didn't want the responsibility and it was then sold to a bunch of banana splits.

This seems a good guide to what you can expect: https://www.moneysavingexpert.com/mortg ... to-manage/

My parents bought the freehold on two flats that they owned. In the first flat the tenants agreed to pay a company to deal with the maintenance of the building. In the second it was decided that the tenants would deal with the maintenance stuff themselves and it turned into petty bickering as people argued about how much they should spend and basic maintenance just didn't get done. I would recommend doing it though otherwise you'd probably end up in a situation with some private maintenance company who will push prices up to turn a large as possible profit.

The Times are reporting that the Stamp Duty Holiday will be extended till June (apparently 1 in 5 sales agreed in the summer still have not completed!).

The early signs were house prices were dropping in January and February as demand faded due to people giving up on the ability to complete before the deadline.

Very concerned a stamp duty holiday extension will give the top of our chain reason to delay as we still haven't exchanged contracts but have given our end of tenancy notice :S

Really need to exchange contracts this week then before the budget and anything being confirmed

Grumpy David wrote:(apparently 1 in 5 sales agreed in the summer still have not completed!).

Been going since mid-september here when we had our offer accepted

Grumpy David wrote:The Times are reporting that the Stamp Duty Holiday will be extended till June (apparently 1 in 5 sales agreed in the summer still have not completed!).

The early signs were house prices were dropping in January and February as demand faded due to people giving up on the ability to complete before the deadline.

My wife and I had an offer pn a flat accepted today and then I saw this news. Hopefully we can make the new deadline

It'll be good for my parents too as they're trying to move. I don't think they've found a buyer yet though and it might make people delay and look around more so who knows.

Completing on our house today! Offer was accepted in mid August so it's taken a while! The stamp duty holiday along with covid/working from home seemed to be the main reason for it being so slow, as well as the solicitors who seemed to really struggle to contact each other.

We started looking before the stamp duty holiday was set but have obviously benefitted from it, although as first time buyers not as much as others may do. Glad they've extended if they have (although left a bit late) as the delays mean lots of people risk missing out.

Will be interesting to see what they do with stamp duty moving forwards.

Remortgaging struggles are real

Phoned up my lender yesterday to see if there was any additional lending available so we could get our bathrooms redone as well as some other home improvements. House has been valued at £90k more than we paid for it, loan-to-value is at 53% so we'd be on their lowest rates and best prices. Mortgage advisor says "yeah based on your earnings and all the rest of it we'd be able to lend you another £30k at an additional £125 a month. Not bad, I think, we were paying that much in total for the mortgage before our rate switch last year. Spent the evening excitedly looking at all the kitchen/bathroom sites out there, drawing up our dream list of the work we now think we can actually have done, and all for less than doing it on all on finance with the various companies we'd need to use.

Call the lenders up again today to get a proper offer in principle sorted so we can actually start the ball rolling. Speak to someone else, go through the same process and "oh I'm really sorry, the advisor yesterday used the wrong form and there's actually zero borrowing available to you based on affordability - ZERO. What?! How does that strawberry floating work? How can there be a £30k swing, it's all the same information, nothing had changed from yesterday.

I could afford the extra payment myself, let alone my wife chipping in as well, I just don't understand it. We have friends that have more debt than us (like £10k on credit cards, compared to our £500), more lending commitments, earning comparable salaries in a house with much less equity than us that have been approved a £50k remortgage to get a new kitchen and central heating. It just seems so unfair, we can easily afford to pay more, yet they only want to lend to people that from the outside look like they don't have 2 pennies to rub together. The computer says no, so that's that. No ability to appeal or get a strawberry floating human being to actually look at the numbers, it's just a flat refusal.

Very frustrating and depressing

Wouldn't it be easier to get a cheap cash loan or 0% credit card? You want your mortgage to go down not up!

Dual wrote:Wouldn't it be easier to get a cheap cash loan or 0% credit card? You want your mortgage to go down not up!

No chance we could borrow 20-30k at £125 a month, surely?

Not interested in getting another credit card, we've worked hard climbing out of a couple of grand of debt on them and loading one up with thousands in an afternoon would just be too painful.

Will have to look at loans or finance options with kitchen/bathroom companies, but I don't hold out much hope

Preezy wrote:

Dual wrote:Wouldn't it be easier to get a cheap cash loan or 0% credit card? You want your mortgage to go down not up!

No chance we could borrow 20-30k at £125 a month, surely?

Not interested in getting another credit card, we've worked hard climbing out of a couple of grand of debt on them and loading one up with thousands in an afternoon would just be too painful.

Will have to look at loans or finance options with kitchen/bathroom companies, but I don't hold out much hope

Contact a local mortgage broker or try l&c. There's other lenders.

You can borrow 25k from Nationwide as a loan but the monthly repayments would be around £450.

Edit: also if we have a recession I could easily see 30k going from a houses value.

Preezy wrote:Remortgaging struggles are real

Phoned up my lender yesterday to see if there was any additional lending available so we could get our bathrooms redone as well as some other home improvements. House has been valued at £90k more than we paid for it, loan-to-value is at 53% so we'd be on their lowest rates and best prices. Mortgage advisor says "yeah based on your earnings and all the rest of it we'd be able to lend you another £30k at an additional £125 a month. Not bad, I think, we were paying that much in total for the mortgage before our rate switch last year. Spent the evening excitedly looking at all the kitchen/bathroom sites out there, drawing up our dream list of the work we now think we can actually have done, and all for less than doing it on all on finance with the various companies we'd need to use.

Call the lenders up again today to get a proper offer in principle sorted so we can actually start the ball rolling. Speak to someone else, go through the same process and "oh I'm really sorry, the advisor yesterday used the wrong form and there's actually zero borrowing available to you based on affordability - ZERO. What?! How does that strawberry floating work? How can there be a £30k swing, it's all the same information, nothing had changed from yesterday.

I could afford the extra payment myself, let alone my wife chipping in as well, I just don't understand it. We have friends that have more debt than us (like £10k on credit cards, compared to our £500), more lending commitments, earning comparable salaries in a house with much less equity than us that have been approved a £50k remortgage to get a new kitchen and central heating. It just seems so unfair, we can easily afford to pay more, yet they only want to lend to people that from the outside look like they don't have 2 pennies to rub together. The computer says no, so that's that. No ability to appeal or get a strawberry floating human being to actually look at the numbers, it's just a flat refusal.

Very frustrating and depressing

Take your business elsewhere

Negotiated to buy a little house with a garden just outside Warsaw. I'm lucky that I can scrape together exactly enough to pay cash for the property- reliant on the zloty staying weak.

As I pull money out of stocks, etc, I'm absolutely praying the GBP exchange rate stays strong. It's at about a 5 year high now and I really need it to stay that way into next week...

Since December the shift has been over 10% - three months and I might save over 15 grand!

Is there no way to move the money now?

Lex-Man wrote:Is there no way to move the money now?

90% of my money is in S&S so I'm having to wait for Vanguard to sell them, and wait for the money to land in my bank account before I can use Wise to get the money into PLN.

Actually dreamt about currency exchange rates last night