Unlocking the Mystery of Legalese: How AI Legalese Decoder Can Guide You in Deciding Whether to Buy a House on a £60-70k Salary
- May 16, 2024
- Posted by: legaleseblogger
- Category: Related News
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### Deciding on Buying a House: Financial Analysis and Options
Running the numbers, it seems that despite being able to afford to buy a house, it doesn’t make financial sense given my current circumstances, am I missing anything?
Currently, I have very low non-discretionary expenditure. £300 per month covers food, rent, council tax, etc. This low expense is due to shared living arrangements and being outside of London. As a result, I have been able to save around £20k that I could use as a deposit for a house. There is a low probability that my expenses will increase substantially in the near future.
With this in mind, I am considering purchasing a 3-bedroom house priced at £235k in a desirable area nearby. The monthly cost for this house would be £1200. Alternatively, there are other properties available in the range of 80k-200k that vary in size, location, and quality.
After analyzing the financial implications, I am questioning whether buying a house is the best decision at this stage. Despite being able to save £20k+ annually, investing in a Stocks and Shares ISA may be a more profitable option in the long run. If I were to buy the £235k house and sell it after 5 years, most of the mortgage payments would go towards interest rather than building equity. Additionally, there is uncertainty about my future plans, such as moving to a different country or area.
Considering the value of purchasing a property, the question arises whether to buy the 235k house or a cheaper alternative. Investing in a more affordable property may reduce expenses related to stamp duty and lawyer fees. Moreover, with a clear path to salary progression, the higher-priced house may become more manageable in the future. On the other hand, paying off a smaller mortgage quickly and having a larger relative deposit could be a more financially sound decision.
In this situation, the AI Legalese Decoder can help by providing insights and assisting in understanding the legal implications and financial considerations of purchasing a property. By analyzing your specific circumstances and options, the AI technology can guide you in making an informed decision on whether to buy the preferred house, a cheaper alternative, or none at all.
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****** just grabbed a
The thing that has historically set housing equity apart from other investments open to ordinary people is leverage. You won’t get 90% leverage on anything else. If you think house prices will grow fast enough to offset the borrowing costs, then housing equity can grow quickly relative to the present value of the borrowed amount. That’s it.
It’s not a purely financial decision. From the low rent I would assume you live with your parents or in a house share. There are things like having more space / your own space which have no monetary value per se, but can be very important to people. You seem happy in your current situation, so there’s no harm staying in it.
I would say, you haven’t mentioned the lifetime isa, it would be a good idea to open one of you haven’t already. It’s solely for buying a property up to 450k or for retirement, but the government add 25% on top of your contributions and interest, up to 4k a year. Meaning 1k a year of “free” money.
Hi /u/ginawo4070, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/investing-101/
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^(These suggestions are based on keywords, if they missed the mark please report this comment.)
They way I see it is, your always going to need a home,so getting on the property ladder earlier is always a good idea imo. If you want to pay less interest, you can always shorten the mortgage or overpay it.
Well £300 pcm is near impossibly low. Didn’t even realise you could rent a room for this much these days. You can’t really compare an ultra cheap room against a 3 bedroom house.
That said lets look at the maths here
Over a 5 year period
£300 * 12 * 5 = £18,000
However the rent may go up
Mortgage
(I used an ammortization calculator with 235k house, 200k loan, 6% to get £1200 pcm )
In 5 years
£14,160 principal, £58,985 interest total £73,145 (some rounding errors with calculator but ballpark)
Significantly more expensive
But is it prudent to state no appreciation?
For buying to beat renting then the total appreciation in 5 years must be £73,145 – £18,000 = £55,145
On a 235k property this would be around 4.5% per year annualised.
Possibly optimistic you will get this but I don’t think you can compare like for like with your current place and a 3 bed.
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I’m not a financial advisor, just someone who is also keeping an eye on the housing market
But my thoughts are if you’re absolutely wanting this property, then go for it because you’re financially comfortable enough to be able to afford it. If you’re on the fence however…I would wait maybe a year or 2 and stick your savings in a high interest savings account.
This is because if your current spendings are way less than they would be with a house, it lets you save more for you down-payment; I think it’s better to buy a property in 2yrs with 20% deposit than now with 10% both because you’ll save money in interest/your monthly mortgage repayments won’t be as high but also because you’d have higher equity in the property. On top of this, the interest rates are extremely high right now, but by the end of the year, hopefully, they will have dropped a little.
You mention potentially re-locating too and with myself I’ve realised the type of property I wanted at 24 when I was just wanting to get on the ladder is very different to the type I want now (27, thinking more long-term) and so to go through all the faff of buying, use up your first time buyer benefits, and then want to sell in a years time may not be worth it.
Like I said, not financial advice but just my 2 pence
How on earth are you earning £60-70k at 23 years old are you serious
You’re 23 and earning a good wage. You have a roof over your head and seem happy. Take some of that money and go and enjoy it. You’ll never be in a position again where you have literally no responsibilities other than getting to work and performing. That being said, still make sure you pit some cash away as others have said. Go on holiday, eat at some nice restaurants, go on dates, you won’t regret living your life but you may regret locking yourself in to a place.