Down Payment Dilemma

Purchasing a Home Without Parental Help, How Easy is it? And How Does it Help Your Business Life?

For most of us, or a sizable portion at least, the prospect of buying a home without parental or grandparental help is a distant one. With many mortgagees now requiring a 10-20% deposit, saving up the money in between paying rent can be near impossible. The obvious solution is to live with your parents, but for many that is a fate worse than homelessness itself. And what if you don’t have parents?

Well, there are many who advocate cashing in investments, stocks and savings to purchase a house. Of course, many people are reluctant to cash-in such assets because of the inherent fear of misspending their well-saved money. In terms of house buying however, it’s often a good idea, because you retain the value of the mortgage in the house. Even with house prices falling, it’s still better than paying extortionate rent only to get nothing out of it when you move, surely?

Even taking out a small interest loan can sometimes save you money in the long-term. This is because the money used to buy the loan and pay the interest is, in fact, cheaper than paying rent and saving up for the down payment, even if you have to pay a higher amount initially. E.g. if your loan repayment is £/$300 a month and your mortgage is £/$600 a month, then the total you pay is $/£900 a month. However, if you choose to rent a place and save money for a down payment instead, you may only save 300 and spend 500 a month on rent. Ostensibly this option seems 100 cheaper, but in-fact it’s not because you fail to account for the fact that money paid on the mortgage is recycled into the value of the house, which you will most likely redeem at a later date. You’ll either get it when you sell your house, or when you pay off your mortgage and get to live rent-free with the option of selling your house.  Of course, that’s lovely if you can afford to pay extra each month, even if you have to cut-back on a few luxuries, but what if you can’t?

Some governments or construction firms offer a rent-to-buy option, where you can use a portion of the rent paid to fund, or part-fund, a down payment.

But if all this seems like too much hassle, why should you do it?

Well, if you own a small or medium business and rely on capital credit to secure investment for future funding a mortgage can go a considerable way to demonstrating that your credit rating is impeccable (so long as you can keep up with repayments). This will inevitable make it easier for you to secure your much sought after credit.