Hi MMM people, longtime UK reader, looking for some input on my house purchase plan.
Situation: looking to buy a house in the city where I currently rent in UK. I used to live in a smaller town, where I own a flat - this I currently rent out and make around £100 pm from. It is reasonably low maintenance, and tenants are nice. Flat is worth about £120k and I owe £58k on the mortgage.
I have around £40k cash for a deposit, and can borrow a max of £280k. I work as an IT contractor, take home is around £3500-4000 pm, savings rate could be better, but hovers around 50%. Nice 2 bed houses I am looking at cost around £300k and I plan on sharing with a friend to save on bills. A £260k mortgage would cost me around £1000 pm, and a lodger would bring in £500 pm.
Buying seems a good idea and workable on paper, but then I am not exactly happy about getting such a large mortgage, even if I can get a 5 year fix at 2%. House prices in the UK have just started to plateau and are bound to crash at some point - but should that stop me from buying now? I am currently paying £500 pm to rent a room in a shared house with 3 other people, and owning my own place just feels better to me with regard to repairs etc.
I am wondering if it makes more sense to sell up the old flat and get a cheaper mortgage? Or given low interest rates, go for a 90% LTV mortgage and invest in other things? I have a small amount in an index fund, but it also seems like a bad time to invest in markets...
