“I’ve already made 12k in 2 years on my house, in 20 years time I’m going to be rich”

happenstance

Now thats not a quote from me but someone i know. I was looking at buying a property but came to the conculsion that they are too overinflated and a house is only worth what someone is preparted to pay for it. You havent made a penny untill you sell a property.

Anyway on to the point. My friend pays about 10'000 a year on a mortgage of 140'000 that lasts 30 years. So after paying 300k he'll own his house that cost 140k.

Now im taking another route, I travel about with my job and so dont really need anywhere other than a room to crash in the odd weekend. So i have not so great room in a shared house that costs 280pcm (inc tax, water, elec, bills). As im no money waster im currently saving about £900 a month. The intrest i get averages out at 3.927% pa from a combination of isa and bonds. Also I don't think my 280 is that much more than my friends bills for his house.

So roughtly Im saving 10'000 a year and after 30 years i will have £575'816.88 in very liquid accets and my friend will have a house worth 253'590 (based on inflation at 2% a year) that he has to maintain. Very rough figure as im not calculating the intrest daily but yearly.

Anyway does this make sence to anyone else or have i got my figures all wrong?

Doozergirl

So, at £6k a year, your friend will have, erm, £132,000 in 20 years. I'd tell them not to give up the day job as that's not exactly my idea of rich now, nevermind in 2026!

Tiggs_2

happenstance wrote:

Anyway does this make sence to anyone else or have i got my figures all wrong?

Your assumption that house prices will inflate at just 2% is significant in your thinking, and IMO unlikley to be correct. You could just as easily find he has a house worth far more than your fund of money.

Your bigger assumption is that over the next 30 years you wont want a house of your own....no intention of getting married/family?

T

v0n

Your assumption also is that you will always live in shared accomodation and save £900 a month. Ouch.

david29dpo

i take your point, but your life style is different. thats the difference!

F_T_Buyer

It does kindof make sense, but as other have pointed out your life styles are very different.

Not buying now makes very good financial sense, as house prices are way way above their long term average, so any medium term price change is likely to be down, and renting is cheaper. Also... all the usual arguments blah blah...

poopscoop

You also forgot to calculate what happens if you lose your job and if you have kids, then their education blah blah

tomstickland

The original post is about right - last year I've lived at home with my parents in a single room, paying £300 pcm for everything and saving around £900-£1000 per month.
I did the same sums, but I factored in a 4% house price growth rate and then years of saving a large deposit offered virtually nothing over buying and paying a mortgage at 4%.
ie: save at 4% ish, houses grow at 4% ish, mortgage rate is 4% ish.

Either way, I'd recommend continuing to live on the cheap for as long as possible so you can have 10s of thousands saved.

poopscoop

yeah, best way is to live with your parents then you can save loads

Tiggs_2

poopscoop wrote:

yeah, best way is to live with your parents then you can save loads

but anyone doing that in recent years would have seen house prices rise faster than they could save....and while they may be high now, the assumption that they will not continue to grow long term beyond inflation is naive.


and most important of all......who wants to live with their folks!!! I moved out at 18 and bought the first house i could find! That was 14 years ago, i'd not be to happy today if i was still at parents house saving up my pennies!

finance is important, but so is life.

poopscoop

Tiggs wrote:

but anyone doing that in recent years would have seen house prices rise faster than they could save....and while they may be high now, the assumption that they will not continue to grow long term beyond inflation is naive.


and most important of all......who wants to live with their folks!!! I moved out at 18 and bought the first house i could find! That was 14 years ago, i'd not be to happy today if i was still at parents house saving up my pennies!

finance is important, but so is life.

I know, I was poking fun. I was making a suggestion if you were to save even more money nowadays you could do that.

I also moved out at 18 :rolleyes: