Should I spend all my savings buying a house?

newbian

The best way to ease your worries about putting all of your savings into the house is to buy "less house" as your first property. We're going from a city center flat to a more suburban (still in the city though) area, from a 1 bed rented to a 3 bed terraced. The mortgage payments will be lower than our rent because we are putting down a very large deposit. That way it compensates for the "lost" savings as we will actually be able to save more in the new home with a larger expendable income.

With our plans including a family, renting is just not a good long term option. Where we live (London) rents are just rising like crazy, and we've been turfed out with 2 months notice at the end of a tenancy before, so the insecurity of renting is not appealing.

If I were you I'd look for somewhere with a monthly mortgage payment nearer to what your rent is now. Terraced will be cheaper than detached. Remember that in many new build estates there are service fees that you'll need to pay on top of your own mortgage, so that could be £780 per month plus extra fees.

bodmil

I lost my job 5 months after buying my first place, and after having to replace the boiler, re-wire and re-decorate. Thankfully I had extra savings or I would have been stuffed!

Fizzymartini

I have saved diligently since the age of 11... I was really proud of my first account (anyone remember the Nationwide SMART account, and its free teenybopper CD?) and the passbook I was given, and did my best to add to it whenever I could.

Now I've just put an offer for somewhere, that will use every penny (leaving barely enough to scrape for stamp duty and solicitor fees etc.) if accepted, leaving me back down at zero. Am I terrified? Very; I've never been in this position before. Will it be worth it? ...Darn hope so!!

Dukesy

All of our savings went on the deposit for our first house, and when we bought our current house, we put half our savings on the deposit, which was 15% as this gave us a significantly better rate than 10%. Had we not had major renovations to carry out, we would have put the other 50% on the deposit, as that would have given us an even better rate. It's things like this that you need to consider.

That said, having no savings is not entirely pleasant. OH is self employed and I only work on an agency basis for the nurse bank, as we have a 16 month old baby. When work goes quiet, it's a bit worrying not having any backup.

bluedrop

I've asked myself this question for 2yrs and Im now buying.

Reasons: (not necessarily in the right order)

1. Renting is paying someone else's mortgage
2. Rents will always go up
3. Interest rates are pretty sad - so my deposit wont get me much
4. Lifestyle. I can afford a nice 3 bed house is a very good area for the rent(for a 2 bed flat)+£200

We are buying with a view to live in it long term and pass it on to my daughter (she is now 4)...so for us, its an investment from a very long term perspective...for now, its going to be our house. OUR HOUSE !!

Having said this, you need to be really careful about where you are buying.

We are using 75% of our savings towards the house.

BeestonBoy

Thanks again everyone. I get what you're all saying about buying a smaller (cheaper) property. But for help to buy it needs to be a new build. And this is pretty much the cheapest on all the new developments around us. We want this to be a long term family home, so dont want to go smaller than 3 beds really ...

At least with this development you get a 10 year warantee so shouldnt have any unexpected repairs to make ...

PollyOnAMission

Make sure you are aware of the risk of negative equity, especially with a new build property. If you put all your savings into a a property that keeps its value or appreciates, then you still have your money (and potentially more). You haven't actually "lost" it. But if you put all your money into a property and the value drops...boom. That's all your savings down the drain.

Personally I would set my sights a little lower for your first step on the ladder. Although it's tempting to go for the biggest and best you can afford (and sensible in some ways because moving house is expensive), it is a lot more risky with a new build. Especially if it means you'll have no savings and won't really be able to save any more easily as you'll be spending all you earn each month ("breaking even" as you said). Perhaps consider a smaller/cheaper property to start with that means you can a) possibly put down a smaller deposit, leaving you with some savings and b) keep on saving every month because your mortgage payments will be lower.

PollyOnAMission

Is there no way you could afford to buy an older (and cheaper) property without the Help to Buy scheme?

newbian

BeestonBoy wrote: »

Thanks again everyone. I get what you're all saying about buying a smaller (cheaper) property. But for help to buy it needs to be a new build. And this is pretty much the cheapest on all the new developments around us. We want this to be a long term family home, so dont want to go smaller than 3 beds really ...

At least with this development you get a 10 year warantee so shouldnt have any unexpected repairs to make ...

Is there a service fee in the development? You need to find out what it is and consider that it may rise in the future.

You also need to furnish it.

I am also FTB getting a new build.

BeestonBoy

Well if we didnt go through help to buy our 12k savings would give us enough to buy a 100k house. So need to double our deposit to buy one not using the scheme. So this seems like our only chance.

You can get older properties in the area for around 180k so could really have a bas for another couple of years and save the extra to get the 10% deposit needed for that option (though that will then prob be higher monthly repayments anyway as its a 90% mortgage compared to 75% under help to buy).

You can tell we're not very decisive people. And very hard to get an honest, impartial decision!