Quickest way to pay off mortgage v when to buy

Dorney1

Hi everyone,

First post so be gentle

I pondered whether to put this in the mortgage free section but actually that's just what I want to be but my questions are mainly about house buying.

So, my wife and I live in London and earn fairly good wages meaning we can save £1500 a month. Instead of buying something here for £500k for a two bed flat we want to buy a house in Wales (where my family are from) for circa £150k, pay it off as quickly as possible and then semi retire early (still work but just not in stressful jobs).

So what I'm trying to get my head around is whether we should buy now on a mortgage with a 10% deposit to secure today's house prices? Or would we be better to wait a year or two where we will have £30-£50k and get a better rate? Or even more extreme do we wait 4 years, buy outright, and hope the house prices haven't risen dramatically?

Also, we're not the smartest with money, it just sits in our bank and I'm wondering if I should be doing more with the monthly savings to make it accumulate quicker?

Sorry for the long winded post but any insight appreciated.

James

theartfullodger

Divorce your partner & each marry an old, rich, widow/widower...

Cheers!

Pidge_jen

It's really difficult to say. If you can purchase somewhere with a loan to value ratio of below 75%, your rates will be significantly better. However look at the area you're buying in, if prices are increasing rapidly there, you may be better off jumping in with a higher loan to value now, as your equity gain should mean when it's time to remortgage (if you fix for 2 years) your loan to value will have improved and you can take advantage of the lower mortgage rate, as long as the market continues in an upward direction. If prices are stable/falling in the area you're looking in, I'd be inclined to wait it out and save up.
As for ideas with savings investments, I'm afraid im useless! Never had enough of it to worry :rotfl:
Maybe try posting on the savings board?

Old_Git

Dorney1 wrote: »

Hi everyone,

First post so be gentle

I pondered whether to put this in the mortgage free section but actually that's just what I want to be but my questions are mainly about house buying.

So, my wife and I live in London and earn fairly good wages meaning we can save £1500 a month. Instead of buying something here for £500k for a two bed flat we want to buy a house in Wales (where my family are from) for circa £150k, pay it off as quickly as possible and then semi retire early (still work but just not in stressful jobs).

So what I'm trying to get my head around is whether we should buy now on a mortgage with a 10% deposit to secure today's house prices? Or would we be better to wait a year or two where we will have £30-£50k and get a better rate? Or even more extreme do we wait 4 years, buy outright, and hope the house prices haven't risen dramatically?

Also, we're not the smartest with money, it just sits in our bank and I'm wondering if I should be doing more with the monthly savings to make it accumulate quicker?

Sorry for the long winded post but any insight appreciated.

James

if you wait a year or more ,where do you live during that time .
Are you renting .
What is the market like in Wales .

enthusiasticsaver

Property prices are a bit like the stock market I am afraid in that they are both very difficult to predict. You will get the best mortgage rates if you put down a large deposit though and even though you may not be living in it for a few years you will still need to pay for upkeep, council tax etc so are you planning to rent it out until you live in it full time? If so, bear in mind there will be tax implications and all the other duties a landlord has to consider so that will need to be taken into account.


As for making your money work harder it all depends on what access you want to it. If you are higher rate taxpayers and will be leaving it a few years before buying the property you should probably look into stocks and shares isas. At the moment current accounts often pay higher rates than cash isas but again your tax rate needs to be taken into account.

Snakey

If you think prices in London will rise faster than prices in Wales then you should buy in London, use the money you save on rent to pay extra on the mortgage, and then when you have £150k of equity sell up and move to Wales.

This has the advantage of retaining flexibility, should your ideal area turn out not to have suitable jobs for you when you need them (or indeed should you change your mind about leaving London).

In the meantime, use current accounts for getting a good return on your money. Santander are good and you can have an account each plus one jointly which should cover the amounts you're talking about. It's a better rate than anything you'll get in an ISA (the best I could find was 1.5%, unless you want to tie up your money long-term which you obviously don't, so even if you pay tax at 40% you're still better off with a 3% current account), and it would be foolish to put anything into the stock market if you might need to take it all back out again in a year or two.

BabyBoots

I'm not quite clear on the options you're considering

- is it whether to relocate to Wales now, versus in a few years with a bigger deposit?

- or is it whether to buy a house in Wales now (whilst still paying for your London accommodation) versus waiting til you move to Wales to buy?

If it's the first situation, the financial merits need to be considered alongside the change of jobs lifestyle choice.

If it's the second scenario, are you ready to put up with maintenance/security issues of an empty property, or the admin involved in letting the property, alongside your stressful jobs? Are you prepared to be potentially paying for 2 properties while only living in one, with the resultant drop in disposable income?

Anyway, your question was about paying off the mortgage more quickly. The quickest way to pay off the mortgage would be to save up the biggest deposit you can before buying, all other factors being equal. It all depends on your assessment of the variables: future interest (mortgage & savings) rates , future house prices, your future income & outgoings, including rental payments if you currently rent your London home, and rental income if you intend to let the house in Wales whilst living in London.

I don't think anyone can tell you how those variables will change over the time period you're looking at so you need to make your own assumptions and take on commitments you're comfortable with, given your own personal attitude to risk and the lifestyle implications.

princeofpounds

We can't answer with certainty as we have no crystal ball for house prices. Though personally I doubt Wales will ever be off to the races...

However, you do not need to worry too much because your earnings power relative to the house value is high.

If you buy soon on a high mortgage rate just go for a variable or short term fix, and refinance as soon as you raise more money to inject into the equity.

If you buy later, house prices would have to go crazy to keep pace with your savings rate. That could happen for a year or two (though I severely doubt it) but not every year.

So use the flexibility you have is my advice. Wait for the right property. If you see it in a year with a 15pc deposit, great, if you see it in five years and only need a chicken feed mortgage, also great.

Make sure you have a buffer for legals and any necessary urgent renovations or contingencies too.

princeofpounds

The quickest way to pay off the mortgage would be to save up the biggest deposit you can before buying, all other factors being equal.

Not quite true. It really is an 'it depends' answer that depends primarily on savings rate, house price rises and interest rates.

It can often be quicker to pay off a mortgage by buying asap with a small deposit and refinancing as house price rises and savings create equity. That has probably been the case for most of the last 20yrs in the south-East for example, though I doubt it will be the case going forwards.

makeyourdaddyproud

Tread carefully. Do you really want to give up a cushy 9-5 job with well spoken colleagues? Your job prospects will also be brutally relegated. Best not to open your mouth unless you keep your wording below 6 letters.

carefullycautious

makeyourdaddyproud wrote: »

Tread carefully. Do you really want to give up a cushy 9-5 job with well spoken colleagues? Your job prospects will also be brutally relegated. Best not to open your mouth unless you keep your wording below 6 letters.

Well that insult has backfired, if you could read you would have seen that the op is from wales.