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Doctor Dick

Buy Or Rent

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Hey guys,

Need some advice on whether to buy or rent while at Durham uni (stockton campus).

I see plenty of houses for sale in and around the 50-60K bracket - I would be going for an interest only mortgage and the payments would work out close to that of renting. Is this a good idea or bad idea?

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Well let's compare the two options. We'll say you're at Uni for 3 years...

Rent: Pay rent for 3 years and at the end of the 3 years have nothing to show for all the money spent.

Interest Only Morgage: (I'm assuming you have some sort of income to get a morgage in the first place) Pay morgage interest for 3 years and at the end of the 3 years still have nothing to show as you've not paid off any of the house. You're also exposing yourself to alot of risk ( what do you do if the roof falls in, boiler breaks etc)

Then you've got the issue with house prices, what are they gonna look like in 3 years? If you rent and prices go up then you've 'missed the boat'. If you buy and prices go down then you're in negative equity.

I'm in a pretty similar situation, although not looking for an interest only morgage but similar price brackets.

Where I am in Gateshead/Newcastle the majority of flats at this range are masonette type flats, and there is loads of them on the market. While I don't mind renting these and the flexiability renting gives me, do I really want to own this sort of property? I think they're massivly overpriced, have nothing going for them amd there's the stong possibility there not going to hold their value.

An alternative for you is to get a multi-bedroomed property and rent the spare rooms to other students (you'll need permission from the bank) to help clear the morgage.

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Do you want to live in Stockton and develop a career when you graduate? If so then OK but if not you'll have to get rid of the house. House prices are modulated by demand and the house prices in Stockton are low because demand is low.

When you gradate and take up your new job it's likely to somewhere with economic activity and just when you want to be flexible you not only have a student loan but also an asset/liability in Stockton. Even if you can sell at the end think about the transaction costs as well as the interest.

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Guitar - I'm hoping to buy as close to the uni as possible - my only issue being how far from campus is too far to expect your average student to walk? Otherwise I'll never get people to rent. And yea there are properties for 50-60K with 2/3 bedrooms.

Refugee - my predicament is somewhat different from that of most students. I'll be in and about stockton for roughly 7 years but where I'll be precisely isn't set in stone. I should be stockton for the first 3 years but I'll be in Newcastle for the next 2 (I'll be renting it out) with the option to move back to stockton in the last 2 years. A huge risk will be a wildly increasing interest rate as the years go by? Or is this as big a problem as I've been lead to believe? Although the interest rate is 0.5% - mortgage lenders haven't really passed it on...surely whenever the base rate "normalises" again the rate shouldn't jump up too much??

Edited by Doctor Dick

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I assume from what you're saying that you'll be a medical student and that the two return years will be your FYs?

A lot of things can change between now and then, and it's by no means set in stone that you'll get your first choice of rotation. Even if you do, the class of housing you'll be looking at will be much higher, as your income will be enhanced.

My advice would be 100% not to do it, but if you decide to you should do this on the basis of it being beneficial over the three years you'll be in Stockton. After this it will just be a liability.

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Guitar - I'm hoping to buy as close to the uni as possible - my only issue being how far from campus is too far to expect your average student to walk? Otherwise I'll never get people to rent. And yea there are properties for 50-60K with 2/3 bedrooms.

Refugee - my predicament is somewhat different from that of most students. I'll be in and about stockton for roughly 7 years but where I'll be precisely isn't set in stone. I should be stockton for the first 3 years but I'll be in Newcastle for the next 2 (I'll be renting it out) with the option to move back to stockton in the last 2 years. A huge risk will be a wildly increasing interest rate as the years go by? Or is this as big a problem as I've been lead to believe? Although the interest rate is 0.5% - mortgage lenders haven't really passed it on...surely whenever the base rate "normalises" again the rate shouldn't jump up too much??

OK, 7 years is along time, it may work out for you and I hope it does. You're a smart guy, and I think the debate may be balanced on the less tangible benefits of stability during you stay in Stockton. If you own your place you won't have the landlord and leting agent to deal with. You will be able to choose a place away from other students and be able to study in peace. If the place is big enough you can take in a lodger tax free - to a point. On the flip side you'll have some maintenance costs over the period, but at least you know you can get things done.

Who knows where the market will be in 7 years. If you buy choose your spot well, think about who is likely to buy it from you. Remember, you can improve your house but you can't improve the neighbours. Stockton isn't great but it's not all bad.

Best wishes.

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