A Savings but also a 'life' Question.

DannyWhoWorks

I am 25 and just graduated from University. I worked after school until I decided to get back into education and also worked during university/college, so, as a result, I have managed to save a decent amount. Continuing to work during the summer, at the end of August I should of reached the goal of 60k in savings.


Now, of course I am chuffed with this but finishing university I am kind of in a cross roads. What should I do next? I am looking to live with my girlfriend in the next few months but I am not sure if I should continue to save while we rent a property (of course, would not be able to save a lot due to paying rent but with two wages and going half on rent, still would be able to save) or, buy a house but then leave me with no savings and a huge mortgage.


It just seems a strange situation where I have a decent amount of money but in reality, I can't do much with it which would be life changing!


so, this post is a bit confusing but I guess I am asking, if you was in my position what would you do?


Many thanks!

Your_Hero

Well done on the savings.


Your option is pretty obvious I think. Use the money to buy an affordable flat/house (be aware of interest rate rises), instead of paying rent you will be paying off your mortgage. Surely this makes the most financial sense?

RickyC_IFSWP

Agreed with Your Hero. If your incomes & credit are sufficient for borrowing, you can take advantage of your savings (which would make a good deposit) to buy a property. Then instead of paying rent to someone else, you're effectively paying rent to yourself (equity in property).

If you do buy a property together, another thing to consider is to have a contingency plan if you guys do break up somewhere down the line because you would both be liable for the outstanding mortgage.

jamesd

At some point you should buy a home. It's too soon to be doing that when you're just moving in and haven't lived together for a while but it is not too soon to be saving to accumulate the money you will need for a mortgage deposit.

Mortgage interest rates depend on the loan to value ratio. The lower the LTV, the cheaper the interest rate. They vary from over 5% at 95% to under 3% at 75%. That makes a big difference to your ongoing costs.

I wrote about a home, not a house, deliberately. The issue is cost. A house costs more to maintain, more in bills and more in mortgage cost. The mortgage cost is due both to the higher amount borrowed and the lower LTV you will use when buying. If you want to maximise the value you'd probably be better off going for an inexpensive flat that needs work for a few years. That will keep your costs down and let you continue to save or invest to cover future needs. After a while you'd be able to afford to upgrade to a better property, at lower ongoing cost than if you'd started out in the most expensive place you could afford.

DannyWhoWorks

Thanks so much to you all for your very helpful advice!

theoretica

Just to add, how settled are you in your job? Buying somewhere and then six months later wanting to move for a better job across the country would be a hassle.

kidmugsy

A word of advice to a young man: cars are really expensive, motorbikes are really good fun.