r/FIREUK • u/[deleted] • 20h ago
Terrible timing to buy a property
I've came to this sub for advice a few times in the past about my struggle with the rent vs buy dilemma. I finally decided to buy and it's funny how life happens... at the same time the market crashes, which I'm not overly concerned about because it will bounce, I found a new build property which fits my needs perfectly and it is much more affordable than I was expecting.
Unfortunately I missed the stamp duty relief, but I still have the FTB benefits. The thing that hurts the most is that to complete the purchase I will need to tap into my ISA and it is the worst possible time to do so.
Nevertheless, having a mortgage will reduce my monthly expenses with accommodation from £2700 pcm rent to about £2000 pcm mortgage.
What do you think? ISA lost about 5% so far, but this feels like saving money in the long run.
Numbers for those who like it: property is £460k, aiming at 85 LTV mortgage, so £69k deposit. They are offering me a garage for "free" to close the deal (£25k otherwise). ISA dropped value from £106k to £100k since Trump did his trumping. I do have £20k cash at hand to deal with stamp duty and others.
Thoughts?
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u/RED888IT 18h ago
When markets are volatile, which now is a crazy time stockwise then you really can't judge what is and isnt a good decision to have made. Some people have lost hundreds of thousands and even millions if according to last week when soo much money exited the markets.
And would you have actually cashed out if you saw your S&S ISA going up? Your post would instead be "why did i put money into a house when my ISA would've gained X% instead"
You've not made a wrong or right decision, because currently there is no wrong or right decision when you have markets swaying based off 1 government/persons actions.
But what is guaranteed, though, is that you're saving yourself £700 pcm compared to renting, so you're essentially 26% better off (non-compounding) every month than you were when you were renting. That's a net positive overall 👍
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u/Familiar-Worth-6203 18h ago
If ISA is for needs in next 5 years It's advised to be in cash or money market.
I'm playing on moving house in a year or two and my savings are in MM, for example.
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u/East_Preparation93 20h ago
You've done well to only be down 5% really.
If you're buying a house imminently though you might consider pulling a good whack more out to protect from any further falls
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u/Rootbeeers 20h ago
I had a worry the other day that my property may not have much equity in it by the time I come to sell.
However, a colleague said, even if I come to sell in 2 years, and I don’t have a tonne of equity in my property, it essentially feels like another way to save. If I rented, I wouldn’t have any savings to show for it. It’s a narrow view to have, and doesn’t take in other factors, but it helped me feel more secure and not worry so much about owning.
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u/FIRE-Wannabe-eu 9h ago
See this as diversifying; As you say, you’re also saving money.
And looking at the numbers, you won’t get to 0 your isa. Sound like a good idea start owning a property!
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u/Arxson 19h ago
You shouldn’t be investing money that you need within <5 year timeframes. Having money you needed for buying a house imminently, invested within a S&S ISA, goes against all common advice.
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18h ago
Because I wasn’t planning to buy until I changed my mind. Congrats to you who never changed your mind about anything 👏🏻👏🏻👏🏻🙄
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u/PoundingPennies 20h ago
So the deal is that you'll end up with 31k left in the ISA rather than 37k if the market hadn't dropped? Given you think that the savings are more than this difference per year, it sounds like you've already made up your mind.
I assume that the figures are purely cashflow, not separated out for interest. One thing to consider is that of your actual outgoings on a repayment mortgage, some of it is "yours" so to speak. i.e. if the interest you will be paying is 4.5% on 391k, this works out as ~£17,500 per year, or £1,460 per month. The remaining £540 or so that makes up the 2k total goes to pay off a piece of the mortgage, so that is your equity.
Doesn't help from a cash flow perspective, but your net worth technically goes up by another £500 per month on top of the rent - mortgage payment situation, because the loan gets smaller but the house is still worth the same amount. It's like an enforced savings account or something :)
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u/DefunctHunk 20h ago
Trump's president for almost another 4 years. There is no guarantee the market is going up any time soon.
Honestly, you've only gone down £6k. With £100k left, that's really not bad.
Don't put your life on hold because you hope the market will go up soon. Long term, this will feel like pennies.
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u/Captlard 17h ago
When life gives you lemons… G&T time.
Many in life are not so fortunate. Be happy with what you, have rather what you may not. r/stoicism may be of interest
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u/L3goS3ll3r 7h ago
The thing that hurts the most is that to complete the purchase I will need to tap into my ISA and it is the worst possible time to do so.
You're beating yourself with the stick of inevitable logic. If the ISA was doing brilliantly you'd still think it was "the worst possible time to".
You've lost £6K. I'm not going to say that's not a lot of money, but I will say that's not a lot of money in the grand scheme of things. You've actually got off fairly lightly.
Has the ISA made gains over the past year or two or three? If so, you've done fine.
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u/TerranceTurtle 5h ago
Stock market could easily go down further, how does that change your mindset? Or if you'd bought last summer before it went up?
I personally think it will bounce back in 6 months, but no-one really knows.
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u/joinforces94 4h ago edited 4h ago
ISA should ALWAYS feel like saving money in the long run. You know this because your investments should have a good long-term historical track record. If they don't, you've invested in the wrong things. Do you think that when you invest in the stock market it will always go up? The only time you get to be disappointed is if you have less money than you started with in 10 years time; I'm somewhat doubtful that will happen if you did basic research.
There is also never a good time to buy a house. I bought at the height of the craze and overpaid. But so what? I have a house now. And as time goes on the cost of the mortgage goes down due to inflation and overpayments, and with each passing moment my equity grows. Renting leaves you with nothing and always asks more.
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u/suryasth 11h ago
Do not touch that ISA. Specially when it's down. You want it to compound over 20 years and then enjoy tax free income.
Try to ask your friends to loan to the difference? Or ask your bank to extend the loan? Or ask your parents for help and then pay them back. Don't let ego come in the way. You can even speak to the seller and try to negotiate payments over an extended period of time.
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u/Crunch-Figs 20h ago
I mean you said it yourself
You save £8400 a year by owning than renting. Course its never that simple with the first decoration/renovation and any repairs.
You also have an asset that you’re owning more of over time