House Buying - 3 Options - Please Advise

Carpi09

Hello all,

I am 23 years old and have been saving since a youngish age, i have managed to save £30,000 and plan to do something with it instead of keeping it in a minimal interest ISA. For now, I intend to stay away from Stocks and Shares until I get into the property market. I can save between £1000-£1400 per month so hopefully should I decide to get on the market, this could help with the mortgage.

I joined the Armed Forces in 2009 and have been thinking about buying a property since to prepare myself for later on in life should I decide to leave the Forces.

I am moving out to Cyprus for at least 3 years and will be on a larger pay packet.

I have 3 options but unsure what the best one is, please could you help because I have no idea what's best for me so if you experienced people could help, that would be appreciated.

1. My parents have lived in a council house for years and I hate the fact they are paying all that money and getting nothing out of it (investment). They have hinted if I help with the deposit, they would also help with the deposit and pay the mortgage. 30k from me and 10k from them. How would this work in terms of who owns what? This sounds all well and good but will this cause problems?

2. Buy a property by myself and rent it out.

3. Save more money for a bigger deposit and wait until I am committed to live in the house.

4. Other suggestions

Thanks all.

hazyjo

Keep saving would be my choice.

You won't know where you'll want to live when you leave the Forces.

If your parents are in a council house, the chances are certain things are done/paid for them. Would they be able afford to maintain a house?! Really not a good idea to buy something with them IMO. They are getting something out of it - a bloomin' roof over their heads! At a very cheap rate, no doubt. Why should you put three quarters in when they're living in it? Would you receive any rent? Would they even get a mortgage? Jobs? Income?

Would probably struggle to get a BTL mortgage for a first property. You'd have to pay an agency, don't forget. It all adds up. I wouldn't be a landlord unless I was absolutely forced.

Please don't expect to make money from property (investment) unless you're in it for the long term. I bought a house for £227,500 in 2006 and sold in 2011 for only a grand more. That's despite putting in a smart new kitchen, new roof/guttering, etc, combi-boiler, shower, decor/flooring, etc.

It can lose you money. If you add up all I spent along with the interest I paid to the bank, I'd have probably spent less if I'd rented for those few years!

I would definitely go for option 3.

Jx

martinsurrey

with £30k in an ISA you can get 2.7% interest, with no risk and no worries

http://www.hsbc.co.uk/1/2/savings-accounts/cash-isa

After you consider legal fees, agent fees, management fees, plus potential problems with boilers and all the other things owning a rental property come with, 2.7% is a good yield.

House prices (in my opinion) wont be moving much in the near future, so you wont get much capital appreciation.

harsh as it sounds, I wouldnt buy with your parents. What happens if they cant pay the mortgage, what happens when you need your money back for your own place? (plus 100's of other hard questions)

option 3 ftw

tom9980

Carpi09 wrote: »

For now, I intend to stay away from Stocks and Shares until I get into the property market. I can save between £1000-£1400 per month so hopefully should I decide to get on the market, this could help with the mortgage.

I joined the Armed Forces in 2009 and have been thinking about buying a property since to prepare myself for later on in life should I decide to leave the Forces.

I would be putting max possible in S&S at your age and given your needs! with the intention of seeing it grow over the long term (10+years)

My goal would be keep the £30k cash isa's as a potential deposit, and invest the rest with the intention of staying in the forces for the full 22 years.

You mention nothing about potential partners and marriage, kids etc this can dramatically change your future plans and so i think it would be wise to be flexible and not tie money into bricks and mortar and having the £30k cash gives you that option.

Carpi09

hazyjo wrote: »

Keep saving would be my choice.

You won't know where you'll want to live when you leave the Forces.

If your parents are in a council house, the chances are certain things are done/paid for them. Would they be able afford to maintain a house?! Really not a good idea to buy something with them IMO. They are getting something out of it - a bloomin' roof over their heads! At a very cheap rate, no doubt. Why should you put three quarters in when they're living in it? Would you receive any rent? Would they even get a mortgage? Jobs? Income?

Would probably struggle to get a BTL mortgage for a first property. You'd have to pay an agency, don't forget. It all adds up. I wouldn't be a landlord unless I was absolutely forced.

Please don't expect to make money from property (investment) unless you're in it for the long term. I bought a house for £227,500 in 2006 and sold in 2011 for only a grand more. That's despite putting in a smart new kitchen, new roof/guttering, etc, combi-boiler, shower, decor/flooring, etc.

It can lose you money. If you add up all I spent along with the interest I paid to the bank, I'd have probably spent less if I'd rented for those few years!

I would definitely go for option 3.

Jx

Thanks Jx, I think my parents are thinking about my brother, sister and I and being in a council house will not leave us anything. They are quite capable of keeping up with mortgage payments but don't have a deposit.

martinsurrey wrote: »

with £30k in an ISA you can get 2.7% interest, with no risk and no worries

http://www.hsbc.co.uk/1/2/savings-accounts/cash-isa

After you consider legal fees, agent fees, management fees, plus potential problems with boilers and all the other things owning a rental property come with, 2.7% is a good yield.

House prices (in my opinion) wont be moving much in the near future, so you wont get much capital appreciation.

harsh as it sounds, I wouldnt buy with your parents. What happens if they cant pay the mortgage, what happens when you need your money back for your own place? (plus 100's of other hard questions)

option 3 ftw

Exactly what I was thinking. Thanks

tom9980 wrote: »

I would be putting max possible in S&S at your age and given your needs! with the intention of seeing it frow over the long term (10+years)

My goal would be keep the £30k cash isa's as a potential deposit, and invest the rest with the intention of staying in the forces for the full 22 years.

You mention nothing about potential partners and marriage, kids etc this can dramatically change your future plans and so i think it would be wise to be flexible and not tie money into bricks and mortar and having the £30k cash gives you that option.

I have tried understanding Stocks and Shares for over 2 years and have looked into so much but I just can't get my head around how it all works. I don't have the time or patience to self select S&S.

I went into Halifax about 2 years ago and spoke to someone and I said I'd like to put £600 into S&S per month and they then said I needed to see a Specialist. I spent an hour or 2 with her and she gave me projections a week or 2 later. My most predicted outcome was below what I would be getting from a savings account. However, if the S&S would perform well above average it would earn me more.

I was put off by this and have never really looked back at it.

I really do want to do something about it but really I don't know where to start. Should I seek advice from someone, not from a bank.

I have looked on HL and a few others but again, no idea where to start, it confuses me too much with the amount they chuck at you.

uk_american

Option 3.

Keep saving and buy outright, mortgage free, in a few years when you're ready to start the next phase of your life/leave the Forces, etc, as your wants/needs may change greatly in a few years.

I wasn't in the Forces but was working abroad and squirrelled away the cash for five years. Bought mortgage-free once I was ready to settle down in 2009. Three years later, it was the best decision I made.

tara747

Option 3. Definitely.

hazyjo

Being able to afford a mortgage, and actually being offered one (at the level they would want) are two different things. Wouldn't presume they can get one if they've not had one.

Also, if they can afford a mortgage and want a house, why don't they buy a house? There must be something beneficial to being a council tenant. Or do they not more of a deposit than £10k?

If you have a brother and a sister, surely that makes things even more complicated? How would they get hold of their inheritance?

Would you own 3/4 of the house, or would you just want back your £30k, then split the rest between you all? What happens if one parent needs care and the house has to be sold? Would you ever live in the home, or would you be basically lending them £30k to buy a house? If you expect that money back, or want to make money on it, it's not a gift. What if it's in negative equity/hasn't made a profit when you sell?

If your parents can afford a mortgage, can they afford to save instead and put that money away for you and your siblings? It doesn't have to be in bricks & mortar.

As above, think long term. You will probably meet someone, want your own home together... I know it can all seem like an eternity away, but, trust me, the older you get, the quicker it goes lol!

Save/invest - best option by a mile.

Jx

jules888

I would go for Option 3.Being mortgage free if poss.

Carpi09

hazyjo wrote: »

Being able to afford a mortgage, and actually being offered one (at the level they would want) are two different things. Wouldn't presume they can get one if they've not had one.

Also, if they can afford a mortgage and want a house, why don't they buy a house? There must be something beneficial to being a council tenant. Or do they not more of a deposit than £10k?

If you have a brother and a sister, surely that makes things even more complicated? How would they get hold of their inheritance?

Would you own 3/4 of the house, or would you just want back your £30k, then split the rest between you all? What happens if one parent needs care and the house has to be sold? Would you ever live in the home, or would you be basically lending them £30k to buy a house? If you expect that money back, or want to make money on it, it's not a gift. What if it's in negative equity/hasn't made a profit when you sell?

If your parents can afford a mortgage, can they afford to save instead and put that money away for you and your siblings? It doesn't have to be in bricks & mortar.

As above, think long term. You will probably meet someone, want your own home together... I know it can all seem like an eternity away, but, trust me, the older you get, the quicker it goes lol!

Save/invest - best option by a mile.

Jx

Perfect answer, you seem to know what you are talking about.

Thank you! :beer: