Deposit of £150k, what would you do in my situation?

dave_100

I live at home with my parents happily in Reading
I have £150,000 saved and am looking to buy my own place also in Reading. The options are either a 2 bedroom place for about £180k which with help from parents I would not need a mortgage. Alternatively I could stretch to a 3 bed place at £210k or so, with a mortgage of £60k.

At the moment I'm in a relationship but not at the stage of moving in with her and would like my own place.

I'm trying to take best advantage of the money that I have saved and not sure what is best, is it to buy somewhere cheaper but not quite big enough for a family home with no mortgage (2 beds), or go for the 3 bed place which I could start a family home in (though we might outgrow it, the third bedrooms at this price range tend to be small) with a mortgage. The 3 bed option would get me higher on the property ladder, but I don't like the whole prospect of borrowing so much money in the form of a mortgage and how much of the repayments are interest! Also I'm not sure it would be big enough for a "home for life".

House prices in Reading have stayed stagnant and possibly slightly rising over the last few months. I'm in a job where I bring home £1.9k a month and at the moment am saving about £1500 of it a month. I'm not in a rush to move out but at 25 feel I should and do want to grow up soon!

I'm looking for the most sustainable plan, ideally one that I can use my savings to my advantage that I can lead a life where I can even retire early due to my head start in life savings wise.

If anyone has any advice on the above or alternative suggestions on what you would do in my situation, they would be gratefully received.

[Deleted User]

Everything you've said and all the considerations involved with purchasing a home lead me to the conclusion that you should go with the 2 bed outright purchase and steer clear of any mortgage at this point.

1. Selling (and buying) costs time and money. There are the costs of instructing solicitors, surveyors and the actual move process, these can quite easily eat up £5,000+. You want to avoid selling and moving as much as you can.

2. Having monthly outgoings will greatly reduce your saving potential. Even with a small mortgage you'll have the amount you can save per month reduced to 3 figures because of the costs of home ownership (utilities, food, repairs, council tax, insurance etc). If you had no mortgage and were sensible you could easily continue to save £1200+ per month even while living alone.

3. I grew up in a small 3 bedroom house, 2 reasonable sized bedrooms and a box-room. This sort of living situation was not great and if my parents had been able to upgrade they would have, someone in your financial situation is bound to upgrade if you have more than one child. This means that no matter what you do (2 bed or 3) you'll need to move to a new home once you do start a family.

4. Your relationship sounds to be still in early stages (relative to a lifetime of marriage) so it's possible you're going to break up and then you'll decide you want to travel the world for a year to find yourself, if you own your own home outright you'll have the flexibility you need to do this, if you're tied down with a mortgage (and renting out your property is rarely a solution) you're going to be stuck.

So with all that in mind (cost, flexibility, suitability) I can't see any situation where taking out a mortgage at this stage makes any sense, you're financially secure and clearly have the financial sense to make use of your money properly, you'd be much better off just putting the money you would be spending on a mortgage in a bank account and then when time comes to upgrade to a family home you can just use the cash you've had to hand, if your life changes and you abandon the idea of a family, well you've got cash and a property!

Kudos on ending up in this situation, you're the envy of almost everyone reading this thread!

Lord_Baltimore

I agree with citricsquid. A mortgage is not an inevitability in your circumstances and you should still be able to progress up the housing ladder provided you buy sensibly (which I'm sure you will).

A mortgage is a millstone and you have no need to have that particular burden hanging around you through the best years of your life.

Don't start paying through the nose to some financial organisation that only exists because it can bleed its 'customers'. The concept is alien to you and you ought to keep it that way imo.

Reue

dave_100 wrote: »

The options are either a 2 bedroom place for about £180k

A £180k 2bedroom house in Reading is going to be in a right dump or total disrepair!

Personally I'd get a ~70k mortgage and get a bigger house in a nicer area for £250k.

Lord_Baltimore

Reue wrote: »

A £180k 2bedroom house in Reading is going to be in a right dump or total disrepair!

Personally I'd get a ~70k mortgage and get a bigger house in a nicer area for £250k.

Yep, and when the OP ends up with debt he neither needs and can avoid, a lot of other people will be happy he's suffering too.

Don't fall for it dave_100.

Reue

Lord_Baltimore wrote: »

Yep, and when the OP ends up with debt he neither needs and can avoid, a lot of other people will be happy he's suffering too.

Don't fall for it dave_100.

That depends what the quality of life is like in his fully paid £180k house. The Reading suburbs go from huge victorian mansions to 1980s council slums. Ive lived in the worst of the worst and would rather have a mortgage I can pay off (£70k for someone on £1.9net p/m is affordable) than be debt free living back there.

Lord_Baltimore

Reue wrote: »

That depends what the quality of life is like in his fully paid £180k house. The Reading suburbs go from huge victorian mansions to 1980s council slums. Ive lived in the worst of the worst and would rather have a mortgage I can pay off (£70k for someone on £1.9net p/m is affordable) than be debt free living back there.

The OP was born and raised and still lives in Reading. He knows his way around and will know where to live and where not to. I agree about quality of life but that's something I reckon he's got covered.

The choice is not necessarily 'debt' or 'slum'.

ReadingTim

£150-180k should get you a small-ish 2 or 3 bed victorian terrace in central Reading, or something slightly more modern and larger further out. While fine for the moment and for a small family, if you have more than a couple of kids you'd probably find it a push - therefore you're unlikely to find a "home for life" without a mortgage.

While I appreciate the concept of 25+ years of repayments of a sum of many thousands of pounds seems pretty scary, you're young and (hopefully) your income will rise over the next few years as you go from the graduate entry type of roles to gaining new skills and experience. Therefore what may seem like a stretch now might be pretty comfortable in 5 years time - it certainly was for me, and I wish I was a little less cautious/risk averse when I bought my house 7 years ago when I was 29.

With your income and deposit you could be looking at a morgage of £200k, giving a potential purchase price of £350-380k, so looking a places in the £400k asking price range, which isn't bad for Reading, and could well be a "forever home".

dave_100

Some great advice here thank you very much all!

I'd just like to add that I live very frugally and sensible with money, I don't have any major outgoings (I don't drink, smoke etc)

I am quite confident on where is nice in Reading, just as an example, there is a 2 bed place that is certainly not a dump in a nice area of Reading, for £172k (can't post link, check out 2 bedroom houses in Calcot on Rightmove, if interested )

I guess my further questions from all points raised are:

-Rather than saving money and putting it into a bank, isn't it better to invest that money in property (ie have a larger mortgage) than have it just sitting in the bank? Surely the interest I receive will be worse than gains in property value over the years (great if not- as Lord Baltimore mentioned I don't want to be paying some financial institution through the nose!)

-Once I have a home, any thoughts on how I could give up work early (say mid 40s?)/ reduce working hours, using my savings to benefit my quality of life, in the sense of work/ life balance?

AndyPK

think I would buy the cheaper house as long as you like it.

What's her house like?

dave_100

she lives with her parents!