Looking back at examples of people buying a house and making an impressive profit, most of them are not down to a keen eye for run down property with potential, their bargaining skills or their own touch that has transformed a house with minimal cost. The most common reason is all about timing. Buy low, sell high. Sounds simple with hindsight, but at the here and now, it poses lots of questions for potential first time buyers and those looking to move up the housing ladder.
The big question for those living at home with parents and in the process of saving is ‘Do I buy now, or wait until I have a larger deposit ready?’. Having a larger deposit is a big help, you can pass credit checks easier, potentially borrow more money and perhaps obtain a lower rate of interest. But, if you have to wait a year or two before you can get the bigger deposit, and house prices have gone up say 5 or 10%, that equates to a missed opportunity of thousands of pounds. Additionally, with interest rates being at all time historic lows at the moment, you run the risk that in a few years time rates are much higher and you end up worse off than you would have been now.
There have been times in the past when potential buyers have decided to delay, and because house prices have increased so fast, they have found themselves chasing a moving target which becomes unreachable. There have even been stories of next time buyers selling up, moving into rented accommodation and hoping prices will drop, then finding price increases have meant they haven’t been able to get back onto the ladder.
One major problem occurs when home-owners sell their property and move into rented accommodation without first seeking financial advice. You should always find out if you are eligible for a new mortgage before doing this, because you may find that although you had a mortgage, you cannot get a new one due to any number of reasons such as, bad credit, a recent change to self-employment, a change in mortgage criteria or your age.
On the flip side, there have also been times when a delay has meant prices have come down and benefited buyers. Delaying your plans with the hope that prices will drop is a form of gambling. You should make your decision based on what is right for you at that time, because a wrong guess could seriously damage your future plans.
Kieron Bassett Financial Services has two Independent Financial Advisers who specialise in mortgages and investment advice. Contact us on (01524) 832057, via e-mail, firstname.lastname@example.org, or visit www.kieronbassett.com.
Jason Hinde DipPFS
27th May 2013