Should I spend all my savings buying a house?

BeestonBoy

Hi wise people of MSE. What's your thoughts on my dilema?

Im 32, since leaving uni 10 years ago ive travelled the world, got married and had a child. After all this we've saved 12k and have no debt.

With the new help to buy scheme, this would enable us to buy a property in the area where we live. We know ww love it here, has good schools etc and we know we can afford the mortgage repayments on this scheme as it is not much more than we're paying to rent.

However, just not sure putting every penny we have to our name into a house is a wise idea. Part of me thinks go for it, you deserve it . .. but then a little voice pulls me back and says but thats all your hard earned savings gone ..

Shall I listen to my heart or my head?

Thanks

motherofstudents

But your hard earned savings won't have gone, you will have a house. If you keep your savings in the bank you won't get much interest. If you spend them on something else they will have gone. I would go for the house but it is your decision. Would you want to rent for ever, even when you retire ?

SomeIdeas

Hi,

I am a first time buyer looking to plough it all into a house! Here was my thought process....

Ask yourself:

• what are your savings for? do you need the money for something else now or later? (school fees, will your car die soon etc.)
• How does monthly mortgage compare to renting?
  • look at quotes for an idea: moneysupermarket
• Are you secure in your job?
• Do you feel secure about the housing market? (will it crash? Can you grab a bargain?)
• Can you afford any savings once you have a house?
  • for rainy days or stuff you would have spent the £12k on
• Think of added costs on top of mortgage too, e.g. life insurance if you don't have any already, buildings insurance, repairs....

I figure rent is wasted money, but what are savings for if not for spending? A house can be an investment too!

No straightforward answer. Any chance of keeping some savings? (£10k invest, keep the rest?)

I don't know anything about the government scheme so can't comment on that sorry! Pob Lwc

[Deleted User]

What is your yearly income? That is the most important factor, is that £12k the result of throwing in a few hundred quid every now and again or is it the result of watching every single penny?

House purchasing is a long term investment, you're not throwing that £12k away (make sure to account for fees by the way) but you're also risking it on a potentially poor investment -- potentially good too. A house purchase should be more about the ownership than the money with a low amount like that.

BeestonBoy

Thanks for all your quick and positive replies everyone.

We were saving quite well each month before having our baby. My wife then had a years mat leave and has gone back part time, so now means saving a couple of hundred each month. On paper it looks like if we bought this house we'd probably break even each month.

Obviously in a few years our daughter will be at school and wont have nursery fees etc so will be able to start saving again.

Current rent 580 a month for 2 bedroom terrace. Mortgage on a new build 3 bed detached is 780. (with help to buy we'd have an equity loan we'd owe the government.)

One minute I think do it. The next minute I think think wait another year or so ...

johncarlton76

Don't buy.. Just rent!

I think the property market has another sting in its tail.

If you research help to buy scheme, a lot of industry experts predict it to create another bubble which will burst!

japmis

motherofstudents wrote: »

But your hard earned savings won't have gone, you will have a house. If you keep your savings in the bank you won't get much interest. If you spend them on something else they will have gone. I would go for the house but it is your decision. Would you want to rent for ever, even when you retire ?

I'm agreeing with this. But remember everyone's situation is different, one mans freedom is another mans chain.

I've just ploughed every single penny I own, and then some more, into my first property, so maybe I'm bias?!

Tancred

BeestonBoy wrote: »

Hi wise people of MSE. What's your thoughts on my dilema?

Im 32, since leaving uni 10 years ago ive travelled the world, got married and had a child. After all this we've saved 12k and have no debt.

With the new help to buy scheme, this would enable us to buy a property in the area where we live. We know ww love it here, has good schools etc and we know we can afford the mortgage repayments on this scheme as it is not much more than we're paying to rent.

However, just not sure putting every penny we have to our name into a house is a wise idea. Part of me thinks go for it, you deserve it . .. but then a little voice pulls me back and says but thats all your hard earned savings gone ..

Shall I listen to my heart or my head?

Thanks

It's painful to see your savings go up in smoke, but buying a house is one of those things you need to do at some point. At 32 you are a good age at which to buy your first home - don't delay.

Fire_Fox

BeestonBoy wrote: »

Thanks for all your quick and positive replies everyone.

We were saving quite well each month before having our baby. My wife then had a years mat leave and has gone back part time, so now means saving a couple of hundred each month. On paper it looks like if we bought this house we'd probably break even each month.

Obviously in a few years our daughter will be at school and wont have nursery fees etc so will be able to start saving again.

Current rent 580 a month for 2 bedroom terrace. Mortgage on a new build 3 bed detached is 780. (with help to buy we'd have an equity loan we'd owe the government.)

One minute I think do it. The next minute I think think wait another year or so ...

So what are your plans if your wife has another pregnancy and it's difficult, or your child gets sick, or you fall ill or get injured and cannot work, or are made redundant? How will you cover the mortgage?

Have you factored decorating, repairs and maintenance into your calculations?

R_P_W

I would say most FTB have to use everythign they have as a deposit. Although do you really need a detahced house?

lessonlearned

R_P_W wrote: »

I would say most FTB have to use everythign they have as a deposit. Although do you really need a detahced house?

I would second both of these points.

Most FTB's are usually pretty stretched.

Buying a 3 bed detached house for a first time purchase is very uncommon - it is often just a stretch too far. Perhaps you are being just a tad ambitious.

A 3 bed semi or terraced might be more do-able and not push you over the limit.

As Martin says there bad debts and good debts. A house is generally considered a good debt because it can be an appreciating asset - at least over the long term.

£10k on a deposit ten years on will have given you an asset of increased value, £10K on a car ten years on will be worthless.

And .......never forget that buying a house isn't just about money.

Also remember if you are renting in the private sector then there is no security of tenure. You are at the whim of the landlord.

This may not matter too much if you don't mind having to move at a couple of months notice but it is less than ideal when you have children, especially if you have to factor in schools/nursery places etc.

The first couple of years may well be a bit of a struggle but over the long term buying will win out over renting.