Young family saving for deposit on house... Advice!

Jo_R_2

Hi all

I am working, boyfy working part-time and student full-time towards end of second year of three. We currently rent in a great area, have been here 2.5 years, want to stay in the area as great school (have a 2-year-old and another on the way) and are thinking about buying in the future - not practical currently due to above but also boyfy wants to set up his own business after uni so we need to save for a deposit and also towards him starting up on his own, so am thinking quite a few years in the future.

Obviously this is quite a general question but can anyone offer any advice for where we are at now as regards saving for a deposit. As I said we need to deal with boyfy setting up on his own, also I am hoping to do a PGCE which will mean me finishing work at some point. I'm really not sure what order to do these in but did think that it might be a good idea to get our own place prior to boyfy setting up his own business, due to the problems involved in getting a commercial let as he will be working from home so will make things a lot easier in that department.

We are on quite a tight budget at the moment and am in process of sorting out our finances. We don't have much at the mo in savings and what does worry me is the prospect of saving each month but house prices being so much higher in, say, 10 years when we're ready to start looking for somewhere and what might now be a nice deposit not being much at all really!

Sorry for rambling, hope this makes sense and someone can give out some pointers - I don't know much about the whole house buying process either.

Thanks!

mummytofour

I am not sure where in the Uk you live and how much houses prices are, I would say however IMHO the sooner you get on the housing ladder the better, as far as I can seen house prices in the long term only ever go up.

I live in the south east where house prices are really high and so are rents, if I was in your situation and you could raise a morgage of some kind now, then I would do that, even a 2 bed flat now will IMHO put on money over time, for now you could manage in that size while your children are little and by the time they are older you will (hopefully ) have some more money tied up and in the flat to use as a deposit to move up the ladder, all this does of course depend on what prices are like in your area and on your income.

sanfrancisco

Hi there,

You are in a great position. With property prices at an all time high, now is not the time to buy! If you bought now you would be comitting financial suicide. So...finish all your education, do your PGCE, remain frugal, work out how to set up boyfriends business, and save, save and save some more. In 5 years time when you are ready to buy you will have a nice healthy deposit and house prices will be lower. Don't worry about houses for now just save and learn and get on with your life. This is of course just my opinion.

Good Luck.

distilled

Or you could try shared ownership. Not an ideal solution but at least it gets half a foot on the ladder. Good luck to you both

devils_advocate

mummytofour wrote:

I would say however IMHO the sooner you get on the housing ladder the better, as far as I can seen house prices in the long term only ever go up.

I apologise if I sound a dischordant note, but even if house prices have always gone up in the longer term, there is no guarantee that this will happen in the future.

Similarly, if prices have gone up in the past over several cycles, you have to time the rises correctly. For example, if you were to buy now, and prices were to go to 200% of your currnet purchase price in 15 years time, you're completely stuffed if they've fallen to 50% in 5 years time and this is the time you want to move to another property. Yes, you can then move in 15 years time when prices have had a spectacular rebound in years 13 to 15, but this may not be what you want.

And he factor that many forget about - inflation. As far as I can see inflation in the long term has only ever gone up.

JennyW_2

sanfrancisco wrote:

Hi there,

In 5 years time when you are ready to buy you will have a nice healthy deposit and house prices will be lower.

they could also be higher

zar

Hello :hello: I'm in a fairly similar situation. The "mortgage-free" board is only just developing (started last week) but hopefully you'll be able to find pointers there. Even if you are not currently in debt, the debt-free board has lots of tips on cutting back on expenditure, and from a household point of view the old-style board has tips on cutting back on your food budget.

From a buy or not to buy perspective, most people on here have quite strong and varied views on whether prices are going to go up or down in the short/medium/long term. Obviously its something to bear in mind, but try not to worry about it too much and just concentrate on saving as much as you can now. The savings and investments board may help in deciding where to put your spare cash. Use both your cash ISA allowances first (£3000 each each year - next year starts on 5th April so if you any savings now make sure they are in an ISA this year). If your bf's current part-time earnings are under the tax allowance make sure he fills in R85s on all his accounts to get interest tax-free, and put any extra cash in his name so you avoid paying tax on your savings as much as possible.

flea72

it would depend on what i lived, and how much it would cost me to buy a house of the size i needed, in the area i wanted

It would also depend on how much i could afford to spend. for eg. if you can afford rent at £500, and also manage to save £100 a month, then working on the same outgoings, you could afford to have a mortgage payment of £600 a month. Now go forward 10yrs. your £100 a month savings will now equate to £12k you could use towards a deposit, realistically would that be enough?

House prices do not drop significantly over a 10yr period. Prices drop short-term and then recover, and then normally go high again. Much like yo-yo dieting. you reach you target weight, then over the next couple of years put more back on, until you actually weigh more than you did originally

You only have to see how house prices have moved over the past 20, 30, 40 years to see that prices never keep dropping.

as long as you arent stretching yourself to your financial limits, mortgage wise, and make allowances for interest rate rises, then buying is always the most sensible option long term. Just think how much you could have paid off your mortgage over 10yrs, rather than trying to save and pay rent at the same time. I also know that some rented properties have stipulations about running a business from home, so thats another expense if your bf had to rent commerical premises too

Your situation is quite hard to plan for, no idea on what income will be in a couple of years time, whether you will even have any income at all, when your bf starts his business and you start your PGCE. Personally for you renting is prob the best option at the mo as it gives you freedom, however on the other hand, it would be easier to get a mortgage now, whilst you both have an income, than it will be in say 5yrs, when your bf is self-employed, with no accounts, etc.

Its a hard decision, one that every house buyer has to consider, and every situation is different. But for me, if i could afford to buy a house, then i would always choose that option over renting

Flea

mummytofour

JennyW wrote:

they could also be higher

Totally agree, on the whole house prices have go up, 30 yrs ago my folks house cost 8k its now on for 230k.

This house was 88k 7 yrs ago and now is 2.5 times that, as I said in the long run house prices will go up. I think anybody who believes house prices will hugley fall over the next few yrs is fooling themselves! Everything goes up in plus supply and demand.

Shared ownership is a way to go, BUT im going to try not to reccomend that option unless you have NO OTHER option as its a nightmare and in the long run, not as easy as it may first seem.

wibble68_2

mummytofour wrote:

I would say however IMHO the sooner you get on the housing ladder the better, as far as I can seen house prices in the long term only ever go up.

I'm sorry but this is not good money saving advice.

The amount a property goes up is insignificant when it comes to money saving being as a person who only owns one property will never realise their asset unless they down size or move back in to rented.

The only important thing to this couple is that they save a good deposit, which in a stagnant market is worth doing as they will have a smaller mortgage.

flea72

but when interest rates are fairly low, you are better off paying towards a mortgage than putting aside savings.

The op is not looking to buy for about 10yrs, and in the meantime, they have little spare cash to put towards savings, and if her bf does start up on his own, then his income will be minimal if at all, and all the savings will be depleted, as the business will more than likely draw upon them

if you do not have spare cash due to low income, then you will never be able to save an amount that is greater than the rate house prices rise at

Flea