Negative attitude to becoming MF by a friend!

Primrose

LazyDaisy - I'm glad your prudence paid off for you, although sorry your accident forced you to give up work. But as you say, luck has very little to do with being mortgage free. It's about self-discipline, deciding your expenditure priorities and determinedly working towards them. There's usually a lot of resentment from those who have had the same chances as you have but have decided to waste them and then possibly struggle later when difficulties come along. It's all about personal choice but for some reason, those who have exercised their choice and spent all their surplus cash recklessly usually end up tasting a dose of very sour cream when faced with accepting the consequences of their decision.

sKiTz-0

I have had it in my head that I never actually wanted a mortgage in the first place. I begrudge paying back all that money in interest. Also, as a person buying a house on heir own, I wouldn't be able to afford repayments on mortgages thanks to massively inflated house prices.

I paid off all my debts a year ago now, and have stayed frugal (although quit the second job I took on to pay the debts off). If I really really try hard I can save 10k a year, so I did the sums a couple of weeks back. Adding 10k a year to my savings pot, and compounding a modest 3% interest rate, I took the average house price and compounded a modest 5% yearly price increase. I found that the price of the house due to the increase had eradicated almost the entire amount I'd saved up!!!

This left me somewhat deflated, and then I went into looking at mortgages. To get a decent rate with affordable repayments I'd need a 30% deposit.

I have seen a place I like, up for 120k, no garden though. But even to get a mortgage on that I'd need a 40k deposit. I could save that amount in 10 years of living as frugally as I have been doing, but where's the fun in that? I'm 27 (only just) now so I'd be nearly 40 by the time I could enjoy myself. And if house prices double in that 10 years as they have in the past then I'm still only on 50% of the price. So I'm wondering if it's worth saving the 30% deposit to get affordable repayments and begrudgingly paying the interest to the banks as it effectively locks in the low price of the house - i.e. a house worth 120k now could easily be worth 240k in 10 years.

What are people's thoughts/opinions on this?

Has anybody bought a house with 100% cash before on here? What was your experience?

Could maybe getting the 30% deposit, taking out a mortgage to lock in the price then overpaying by as much as I can to minimize the interest paid over the full term be the best way to go? Best of both worlds really then. But don't you get a limit on how much you can overpay with most mortgages?

Sorry for all the questions, but I haven't been around on this board for long, as it was only less than 2 years ago I had my lightbulb moment and spent all my time on the DFW boards. I never dreamed my new home would be the MFW boards!!

Thanks

sKiTz

RenovationMan

sKiTz-0 wrote: »

I have had it in my head that I never actually wanted a mortgage in the first place. I begrudge paying back all that money in interest. Also, as a person buying a house on heir own, I wouldn't be able to afford repayments on mortgages thanks to massively inflated house prices.

I paid off all my debts a year ago now, and have stayed frugal (although quit the second job I took on to pay the debts off). If I really really try hard I can save 10k a year, so I did the sums a couple of weeks back. Adding 10k a year to my savings pot, and compounding a modest 3% interest rate, I took the average house price and compounded a modest 5% yearly price increase. I found that the price of the house due to the increase had eradicated almost the entire amount I'd saved up!!!

This left me somewhat deflated, and then I went into looking at mortgages. To get a decent rate with affordable repayments I'd need a 30% deposit.

I have seen a place I like, up for 120k, no garden though. But even to get a mortgage on that I'd need a 40k deposit. I could save that amount in 10 years of living as frugally as I have been doing, but where's the fun in that? I'm 27 (only just) now so I'd be nearly 40 by the time I could enjoy myself. And if house prices double in that 10 years as they have in the past then I'm still only on 50% of the price. So I'm wondering if it's worth saving the 30% deposit to get affordable repayments and begrudgingly paying the interest to the banks as it effectively locks in the low price of the house - i.e. a house worth 120k now could easily be worth 240k in 10 years.

What are people's thoughts/opinions on this?

Has anybody bought a house with 100% cash before on here? What was your experience?

Could maybe getting the 30% deposit, taking out a mortgage to lock in the price then overpaying by as much as I can to minimize the interest paid over the full term be the best way to go? Best of both worlds really then. But don't you get a limit on how much you can overpay with most mortgages?

Sorry for all the questions, but I haven't been around on this board for long, as it was only less than 2 years ago I had my lightbulb moment and spent all my time on the DFW boards. I never dreamed my new home would be the MFW boards!!

Thanks

sKiTz

For a £120k house, you'd realistically need to save up a 10% depositr, which would be £12k with a £100k mortgage. At 4x salary you'd need to be on £25k, at 5x salary you'd need to be on £20k.

Have you tried contacting a bank or a mortgage broker to see how much you can borrow? We were amazed when we went to see a financial advisor and he got us a mortgage with the Abbey at 5x my annual salary and this was about 3 months ago.

A lot of banks are now looking at ability to pay rather than salary multiples, so you could be OK if you have no loans/credit agreements and a good credit score. Don't get hung up about being mortgage free, or you'll never buy your own home. Mortgages run for 25 to 30 years for a good reason.

sKiTz-0

Credit score should be perfect, not one blemish. Salary is slightly under 20k, like £19,725. Apart from my student loan, there's no credit cards/loans anything debt-wise to be paid.

I have 12k, but that would leave me nothing in an emergency pot, nothing for decorating/furniture etc.

Might be worth going seeing a mortgage broker/financial advisor then. From a quick play though with online calculators, with only a 10% deposit, the repayments are a very large % of my monthly take home pay.

EDIT: It's 2 bed as well, so would be looking to take a friend in as a lodger. Although this wouldn't be straight away and may not be forever so I couldn't realistically include it in my calculations and rely on it as income.

theoretica

sKiTz-0 wrote: »

I begrudge paying back all that money in interest. Also, as a person buying a house on heir own, I wouldn't be able to afford repayments on mortgages thanks to massively inflated house prices.

Don't you also begrudge paying rent -- which may well be going to the banks in interest anyway on your landlord's mortgage? When I changed from renting to mortgaging the interest portion of the mortgage + maintenance and upkeep adds up to less than the rent I was paying before, while the more I repay the sooner the flat will be all mine. Paying neither rent nor mortgage in retirement is one of my long term plans.

sKiTz-0

Good point theoretica. And your plan sounds the same as mine, to have neither a morgage nor rent to worry about at retirement age.

sKiTz-0

Although at the moment I pay a very modest rent to my Dad as I'm living at his. I cover the cost of my bills (phone, internet, food etc) as these aren't included in the rent. But he's not charging me through the roof as 1. - he is mortgage free himself so doesn't need the money to put towards that, and 2. - he knows he is helping me find my feet after paying my debts off. My family aren't wealthy by a long way, and so I cannot rely on a chunk of money from the bank of Mum & Dad to help me with a deposit, but in letting me rent a room cheaply with him, that's my Dad's way of helping me out.

So the begrudgingly paying rent doesn't really come into it in my personal situation.

CrazySaving

I agree with many of the comments on here. I have not told anyone except family (who are very supportive) about paying off my mortgage because I know that friends would not understand. It has been hard sometimes when you want to speak to someone about the journey especially when you are having a bad day. Also I find myself making up other excuses when I can't go out to social events as I am trying to save money to pay off the mortgage.
However I think this has been made be stronger and also there is such support on this site which really helps.

tootallulah

To Skitz, look at what it would cost you to rent in your area and then consider what the interest on your mortgage would be. If they are pretty similar then buying makes sense over the long to middle term. If renting is much cheaper then financially buying would really just be because you want it. I don't know how anyone on an average wage could save fast enough to buy outright but there may be people on here who can prove me wrong.

LittleJane_2

I would worry, most of my friends love shopping and i hate it. It is just a different of opinion. I am 42 will be MF next month and i have saved enough money to have a year off work.
Life is about choices, i have worked very hard for the last 10 years and have enjoyed every minute but need a break, by watching my spending over the years i have the choice to do this. Go for it, valuing money is great.