Rent vs. Buy

[PhillyChic]

We are wondering whether our best route when moving to England from US is to rent or buy a flat or house. We will have approximately £100K in savings. My hub is a Londoner so has better sense of the locations he'd prefer to live, however he's lived in the US for 20+ years, so I understand there are some complications to (re)establishing credit over there and I was wondering if that extends to real estate purchases as well. I have a job offer in UK but we could also purchase the house while in the US, where our combined income is much higher. We would be willing to live slightly outside of London since £100K down probably won't get us much in London. Any advice on how others have dealt with this would be greatly appreciated.

[Jrge]

Originally Posted by PhillyChic

We are wondering whether our best route when moving to England from US is to rent or buy a flat or house. We will have approximately £100K in savings. My hub is a Londoner so has better sense of the locations he'd prefer to live, however he's lived in the US for 20+ years, so I understand there are some complications to (re)establishing credit over there and I was wondering if that extends to real estate purchases as well. I have a job offer in UK but we could also purchase the house while in the US, where our combined income is much higher. We would be willing to live slightly outside of London since £100K down probably won't get us much in London. Any advice on how others have dealt with this would be greatly appreciated.

Hi,
If you guys can buy the house while in the US, then do it. Once you get there -regardless of your income- you will have to adjust your budget to a new lower income with a higher cost of living. In a few words, less disposable income. And, if what you have available is £100K, I strongly suggest you keep in the bank at least £30K and invest the rest on your property, should you decide to purchase it.

Since you husband had established a credit history in the past, it will be helpful if he checks his score on Experian, and book a consultation with a mortgage specialist. They should be able to guide him in the right direction to re-establish his credit.

Obviously, you will start new. But, if you are disciplined and use your initial credit chances wisely (car lease, contract mobile, council tax, utilities, rent/mortgage, Insurance, etc), in a matter of 6 - 12 month you should have established a modest credit score.

Animo
(Cheers)

[jojo]

I'd suggest renting first. Then you can find an area that you feel is right and get a feel for life, costs etc. IMO, house prices arent going anywhere in the foreseeable future, so there's no rush to buy.

jo xxx

[nyclon]

No credit is no credit no matter how you slice it so yes it extends to real estate. Since it's been 20+ years since your husband has been in the UK I would expect you'd be starting from zero.

I would also suggest renting to give yourselves some time to get a feel for areas. Again, 20 years is a long time. Places change and visiting over 20 years is different from living there.

You probably won't qualify for a mortgage at all since you will have no credit and if you did you'd would need a hefty downpayment of 40%+. Of course it depends on where you want to live but sadly £100,000 isn't likely to be enough of a downpayment in London or neighboring areas.

[PhillyChic]

Thanks for the replies. It seems for lack of credit, we'd be required to put down 6 mo+ on a rental. I hadn't heard anything about 40% down to purchase, is that if we'd buy right away upon arriving? I'd like to look into buying from the States, has anyone had experience with this? Our credit scores are very good and with the downpayment we could make, I'd think we'd be great candidates for a mortgage, other than the fact that I'm an expat.

[nyclon]

Originally Posted by PhillyChic

Thanks for the replies. It seems for lack of credit, we'd be required to put down 6 mo+ on a rental. I hadn't heard anything about 40% down to purchase, is that if we'd buy right away upon arriving? I'd like to look into buying from the States, has anyone had experience with this? Our credit scores are very good and with the downpayment we could make, I'd think we'd be great candidates for a mortgage, other than the fact that I'm an expat.

Yes, without any UK credit you are likely to have to pay 6 months rent in advance on top of a 6 week or so security deposit.

Since you have no UK credit history, 40% may not be adequate to secure a mortgage right away. Additionally, with the current economic situation, lenders are extremely cautious and even those with established financial relationships and great credit history are having to come up with substantial down payments. You'll likely need a good year but more likely longer to establish credit and then you will still probably need 40% down. Also, you may not even qualify for a mortgage at all until you, the non-UK spouse, have ILR.

I am highly skeptical that you would be able to buy a property in the UK while still in the US. I don't understand what the other poster is getting at. I suspect that he mistyped and meant to say "if you can buy while in the UK", not US.

[modzy78]

Originally Posted by PhillyChic

Thanks for the replies. It seems for lack of credit, we'd be required to put down 6 mo+ on a rental. I hadn't heard anything about 40% down to purchase, is that if we'd buy right away upon arriving? I'd like to look into buying from the States, has anyone had experience with this? Our credit scores are very good and with the downpayment we could make, I'd think we'd be great candidates for a mortgage, other than the fact that I'm an expat.

Your credit scores in the States are absolutely worthless in the UK. I was quite annoyed by that because I have a great credit score and haven't been able to use it at all to help us. It's a shame because I easily qualified for a mortgage in the States before the financial crisis. I also couldn't use any of my perfect driving history to help lower our car insurance rates when we got a car over here. And you might find it difficult to get a job because you don't have UK qualifications and/or current UK work experience. If you're prepared for those frustrations before arrival, it will help you adjust.

I haven't heard about needing 40% down, but I don't know if you'd be able to buy from over there. It seems to me that the people who buy from overseas tend to be very wealthy people who are buying expensive central London homes outright for investment properties. I can't see an American bank giving you a mortgage when you'll be leaving the country because there would be too much of a risk of default in their eyes. And British banks will be leery because you don't have a credit history in the UK. Also, be aware that in some of the nicer parts of London (including suburbs), you're looking at probably spending at least £200,000 for a one-bedroom flat in a complex. If you want to spend less, you'll have to go pretty far out of London, probably somewhere in Kent. But then you have to balance the cost of commuting to London for work or activities. Travel costs can be pretty steep, and they're set to go up in January.

Those who recommend renting are giving the best advice. You really want to make sure you're in an area you'll be happy with before making a large investment. Also, I can't remember if you have work lined up, but that would also affect where you'd want to live. And while a property might look nice online, there might be factors that make it less than ideal once you arrive.

Do you have any family members or friends you could stay with when you first arrive? If you really want to try to buy soon after arrival, that could be a good option that would save all the rental deposits. Even if you ended up renting to save up a larger home deposit, it would give you a chance to visit some rental properties and get a feel for the area. Best of luck with whatever you decide!