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

mummytofour

wibble68 wrote:

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.

Guess it depends whats the most important thing to you in life.

I guess to me owning my own home, as that way I have somewhere for myself and family to live without being asked to leave when the landlord decides to sell the house, I always believe that peace of mind is priceless!

Also so often rents ( round here anyway) are more than morgage.


I guess in ansewer to the OP, to increase ones income and spend less would be the two ways one normally goes about saveing for a deposit.

Jo_R_2

Thankyou all for yr great advice.

A few thoughts...

I am 28 and have always rented. We live in Derby City. Realistically I have never been in a position to save much or to buy, neither has it been something I have thought much about until now, with having a family and wanting the security that comes with owning yr own property. I would love to get a mortgage now - however I know that based on what I and boyfy earn currently, we would end up somewhere not very desirable and believe me, that's not what I want, much as I would love to get on the ladder.

I am happy to save for a few years should that be the best option. The PGCE can be put off, that's not urgent. I do realise that there is a need to balance which happens first, boyfy's business or buying a house. In this equation, my current belief is that buying before boyfy sets up on his own would avoid the problems mentioned, ie trying to find a commercial let for a house whilst still renting, and establishing his income for mortgage purposes.

Realistically, we know as well that boyfy will need capital to start on his own. He will be working from home but may need to rent studio space and will definitely need more equipment. We have roughly planned that when he has finished in a year and a half, as well as continuing to take on paid assignments which he is doing alongside studying, he will be working full-time in whatever capacity to allow us to save prior to establishing his own business. I am wondering about one option being maybe just prior to him setting up the business that we could look at taking on a mortgage.

The rent we pay currently is extremely reasonable for where we are, having been here 2.5 years our landlady hasn't raised the rent and I know that equivalent properties in the area are at least £60 more per month to rent. This house is worth around 90k, but I will not lie, it is tiny, it only has a single second bedroom and we are running out of space already. With another little one on the way, we know that the longest we can stay here is probably until June 2007 which coincides with when boyfy wil finish his final year. Up til then we can have baby 2 in our room with us but after that we have to find somewhere bigger anyway, which is what makes me wonder when is the best time - for somewhere bigger, eg just a double second bedroom, as well as FGCH, double glazing and shower, none of which we have now, we would be paying another £100 at very minimum in rent extra per month.

There is also the option to move to another area, we do have our hearts set on staying here but I know if we rented the equivalent right in the city centre or any of the suburbs the rent wouldn't be much different either way. So another option might be to wait til boyfy starts work rather than when he has been working a while - however the obvious disadvantage is that we won't have had time to save much.

Aaaaaarrrggggghh I just don't know! Sorry again for rambling!

flea72

perhaps you need to look at what value of mortgage you are able to get now, and how that compares to house prices in your chosen area.

obviously if you cant get a big enough mortgage, then you know that renting is your only option now. however, it will also give you an idea of how much you realistically need to save over the next couple of years to bridge the difference between what you need to buy a house, and how big a mortgage you can get

Its probably obvious, but by paying rent every month, you are really just throwing money down the drain that could be put to good use. i know in my area, where rents are higher than the mortgage repayments would be, i just wouldnt be able to pay rent, and be able to save a decent amount of money as well. but at least with owning your own home, you dont have to find that extra money for 'savings' each month

Also the longer you leave it to start a mortgage, means you could still be paying off your mortgage well into retirement. i know this is becoming more the norm nowadays due to people having to increase the years they hold the mortgage over, so they can bring repayments down, but i would actually like to have some money in my pocket at the end of the month, whilst im still young enough to enjoy spending it. based on my current salary, there is no way i would be able to meet my mortgage repayments, once i retire, so the younger i am when i clear it, the better

Flea

van_persie

flea72 wrote:

...

Its probably obvious, but by paying rent every month, you are really just throwing money down the drain that could be put to good use. i know in my area, where rents are higher than the mortgage repayments would be, i just wouldnt be able to pay rent, and be able to save a decent amount of money as well. but at least with owning your own home, you dont have to find that extra money for 'savings' each month

Also the longer you leave it to start a mortgage, means you could still be paying off your mortgage well into retirement. i know this is becoming more the norm nowadays due to people having to increase the years they hold the mortgage over, so they can bring repayments down, but i would actually like to have some money in my pocket at the end of the month, whilst im still young enough to enjoy spending it. based on my current salary, there is no way i would be able to meet my mortgage repayments, once i retire, so the younger i am when i clear it, the better

Flea

Rent is only dead money in a rising market. Please don't be brainwashed into thinking renting is in some way a waste of money. The market is at best static right now and in areas where prices are falling, renting makes perfect sense. Who could have foretold such outrageous House Price Inflation since 1997? And yet people are reluctant to accept that there will at some point be a price correction; the power of paper money and the illusion of wealth. We're at the market peak, IMHO, and today's bargain buys are tomorrow's market prices. Proceed with caution..!

ftbworried

van_persie wrote:

The market is at best static right now and in areas where prices are falling, renting makes perfect sense.

I have to disagree, even after the house price boom is meant to be 'over' the guy who just sold us our house made over 30k in 2 years on it. Every single house we went to view in December/January has now been sold in the area we were looking. Hardly the stagnant over supply that I hear about on these boards. A good decent sized property will always be in demand, however the over supply of 2 bedroom 'apartments' (i.e flats) is stagnating THAT part of the market.

Renting IS dead money. You rent for 25 years at £600pcm plus inflation at 3% you will spend a whopping £262k. Now even if you buy a £150k house and there is a MASSIVE price crash and you house is worth only £75k then you have lost 75k- So what's better a GUARENTEED loss of £262k or a SPECTULATIVE loss of a maximum of £150k (your house would very unlikely ever be worth NOTHING though!).

wibble68_2

ftbworried wrote:

Renting IS dead money. You rent for 25 years at £600pcm plus inflation at 3% you will spend a whopping £262k. Now even if you buy a £150k house and there is a MASSIVE price crash and you house is worth only £75k then you have lost 75k.

You may want to include the interest on a 150k mortgage over 25 years to make a better comparison.

The main advantage of buying would be that eventually you don't have to pay the bank or a landlord.

ftbworried wrote:

So what's better a GUARENTEED loss of £262k or a SPECTULATIVE loss of a maximum of £150k (your house would very unlikely ever be worth NOTHING though!).

I still don't understand how the price of a house can be placed in this equation.

van_persie

ftbworried wrote:

...

Renting IS dead money. You rent for 25 years at £600pcm plus inflation at 3% you will spend a whopping £262k. Now even if you buy a £150k house and there is a MASSIVE price crash and you house is worth only £75k then you have lost 75k- So what's better a GUARENTEED loss of £262k or a SPECTULATIVE loss of a maximum of £150k (your house would very unlikely ever be worth NOTHING though!).

Please read my post carefully.
"Rent is only dead money in a rising market."

Please think about this and explain why this cannot be true.

Your example speculates on a long-term investment.
My statement relates to someone who wisely chooses to rent during HP deflation and enter the market at the trough. Bit of a no-brainer...

meanmachine_2

To all the intelligent poeple on here, save your breath.

The OP is coming from the position where they would "love to have a mortgage" (yes, because taking on long term secured debt is such fun), and is supported by people who think past performance is a guarantee of future performance.

Just like those who operated the Titanic said that, because they hadn't hit an iceberg yet, they never will.

And mummytofour's 8K debt was whittled away by massive wage inflation WHICH NO LONGER EXISTS.

As for "it's better to take out debts when interest rates are low", this has to be the dumbest piece of advice I've ever heard. Interest rates are temporarily low, because wage inflation is low. And the moment wage inflation starts rising, where do you think interest rates will go?

Sheesh. As I say, waste of time.

ftbworried

There seems to be a lot od scaremongering on this board. I read with interest a post about predictions in house market movements, and the subsequence results. A lot of people were predicting 'massive crashes', in 2005- did it happen? Nope.

I don't quite know why they are trying to scare people out of buying houses, because surely a reduction in FTBs CAUSES stagnation (and hence demise) in the property market? but then of course they'd LIKE a nice little crash in property prices because it will justify all the scaremongering that they've been doing.

I might pop back in 2007 and see whether you are all still predicting the end of the world!

van_persie

meanmachine wrote:

To all the intelligent poeple on here, save your breath.

The OP is coming from the position where they would "love to have a mortgage" (yes, because taking on long term secured debt is such fun), and is supported by people who think past performance is a guarantee of future performance.

Just like those who operated the Titanic said that, because they hadn't hit an iceberg yet, they never will.

And mummytofour's 8K debt was whittled away by massive wage inflation WHICH NO LONGER EXISTS.

As for "it's better to take out debts when interest rates are low", this has to be the dumbest piece of advice I've ever heard. Interest rates are temporarily low, because wage inflation is low. And the moment wage inflation starts rising, where do you think interest rates will go?

Sheesh. As I say, waste of time.

Couldn't have put it better myself. A great post...