rent or buy

[jellytot]

Hi All

Just looking for some advice. I will be moving to Australia in abut 2 or 3 years time. We are currently renting a house whch we couldn't afford to buy but its in a lovely area, nice neighbours, close to my sons school etc etc. Anyway my first question is would we be better off buying a house given that we would definitely be selling in 2 or 3 years time. And if the advice is to buy should we buy new or secondhand, we are not ftb so would have to pay stamp Duty.
Any opinions appreciated

Ann

 

[hmmm]

I know I'll be shouted down by the property can only go up fans, but have you considered what your situation would be if the price of the property you bought fell over the three years?

 

[RainyDay]

If you're planning on moving to Oz for good, I'd stick with renting. If you reckon you'll be coming back here to settle down, I'd buy here.

 

[dam099]

If you're planning on moving to Oz for good, I'd stick with renting. If you reckon you'll be coming back here to settle down, I'd buy here.

I would agree with this and add that obviously if you do intend moving back and decide to buy it should be with the intention of keeping it while you are away. Therefore it would either need to be self financing (bearing in mind likely interest rate rises unless you fix the rate) or require during the time you are away that you will have the funds to cover any shortfall in financing.

 

[LDFerguson]

Here's some maths to help the decision...

You get a €250,000 mortgage over 30 years at 3.1%, to buy a house for €272,000. So you've spent €13,600 Stamp Duty and invested a €22,000 deposit, plus €2,000 legal and valuation costs. Total outlay from you ~€37,000.

At the end of three years, assuming no increase in interest rates you'd still owe €234,000 on the mortgage.

Scenario (1) - house prices increase at 3% per annum for the three years. You sell the house for around €289,000 after auctioneer and solicitor fees, pay back the lender their €234,000 leaving you €55,000. Not bad for an outlay of €37,000 after 3 years.

Scenario (2) - house prices stagnate for the next three years. You sell the house for €272,000 but the auctioneer and solicitor take €8,000 between them leaving you €264,000. You pay back €234,000 to the lender and have €30,000 left over. You spent €37,000 so you're losing money.

You need house prices to increase in the period before you emigrate for this to work, assuming you don't plan to rent the house out when you're gone. If they don't increase or drop even a small bit, you're losing money. You also would be affected by any increase in interest rates in the interim.

 

[jhegarty]

Here's some maths to help the decision...

You get a €250,000 mortgage over 30 years at 3.1%, to buy a house for €272,000. So you've spent €13,600 Stamp Duty and invested a €22,000 deposit, plus €2,000 legal and valuation costs. Total outlay from you ~€37,000.

At the end of three years, assuming no increase in interest rates you'd still owe €234,000 on the mortgage.

Scenario (1) - house prices increase at 3% per annum for the three years. You sell the house for around €289,000 after auctioneer and solicitor fees, pay back the lender their €234,000 leaving you €55,000. Not bad for an outlay of €37,000 after 3 years.

Scenario (2) - house prices stagnate for the next three years. You sell the house for €272,000 but the auctioneer and solicitor take €8,000 between them leaving you €264,000. You pay back €234,000 to the lender and have €30,000 left over. You spent €37,000 so you're losing money.

You need house prices to increase in the period before you emigrate for this to work, assuming you don't plan to rent the house out when you're gone. If they don't increase or drop even a small bit, you're losing money. You also would be affected by any increase in interest rates in the interim.

don't forget to figure 3 years rent into it...

 

[Eurofan]

don't forget to figure 3 years rent into it...

But also home/life insurance, furniture and fittings, maintanence and upkeep etc. etc.

Owning a home costs a lot more than just the mortgage.

I'm increasingly conservative financially particularely where big numbers are involved. I'd be very uncomfortable relying on even a small compound growth in the market over three years.

I'm actually in exactly the same position myself. It's very likely I'll be moving abroad in 2008 and the numbers just don't add up for buying right now. I've just sold my own home and am renting now (very happily).