Saving for a mortgage .

Sparx8

Hi I need all your expert opinions as my dad thinks he knows everything .

But about me , I'm 23 years old , a self employed electrician . I have saved £20,000 for a mortgage. We saved this in 2 years as we are lucky enough to still live at home( me and my gf ) I earned last year £25,000 give or take . Girlfriend earns 15k . I've always got work all year around for the last 5 years ,so not really worried About having ni work .

Anyway me and my girlfriend want to buy a house ( only a 2 bedroom house ) nothing to fancy and will look for something as cheap as possible just so we can get on the market .

Here's the problem, my dad thinks I should save up £100,000 and just stay at home because he keeps telling me house prices are gunna go down , but he's got no proof just thinks he's right .
So guys what would you do ? Any help thank you

pathtofreedom

No one can tell the future, a metorite might wipe out london tomorrow. Are you employeed as a permanent employee or self employed as that might mean you need to work a couple more years to have enough accounts to get a mortgage anyway.

It depends what you think interest rates might do as well, if you think they won't rise for another year or two then you have time to get something fixed at a lower rate. If you wait you might have to pay more interest in the long run even if it is on a smaller mortgage that might just even out anyway.

edinburgher

Nobody can predict the future and it's a bit reckless of your Dad to hope that his hunch plays out in terms of you buying a home (granted, he's still letting you stay at home).

More to the point, neither you or your wife are going to be satisfied staying at home for another 8 years, surely?

This calculator suggests that a bank might consider you for a loan of £100k-140k based on the figures you have provided. How much might a house cost in your neck of the woods?

I think you're right to be sceptical about your Dad's Mystic Meg bit

Sparx8

Thanks guys , and yes I'm self employed but I've worked for the same guy for 4 years now ( no time off , other than 2 weeks off at xmas unpaid )
So how long do I need books upto being self employed ? A guy at work said he only needed 3 years of accounts !

I was thinking of saving another 20k so that's 40k we can put down , but I definitely want to move out in the next two years if I can save that .

Houses down near me are not that expensive , there's 3 bedroom houses going for £120,000 . Some are even cheaper if they a but run down

jamesd

Three years of accounts should do it. There is some value in trying to get to 25% loan to value if you can manage that. The trouble is that in much of the country prices have been rising and that may continue, meaning they could rise faster than you can increase your deposit.

If you can handle a refurbishment that's a good way to go since it'll get you a quick value increase and you can live in the place while spending to get the work done..

What you should do depends mostly on how happy you are living where you are now. moving out to a one bedroom flat rather than a house could make it possible today at 75% LTV.

Sparx8

jamesd wrote: »

Three years of accounts should do it. There is some value in trying to get to 25% loan to value if you can manage that. The trouble is that in much of the country prices have been rising and that may continue, meaning they could rise faster than you can increase your deposit.

If you can handle a refurbishment that's a good way to go since it'll get you a quick value increase and you can live in the place while spending to get the work done..

What you should do depends mostly on how happy you are living where you are now. moving out to a one bedroom flat rather than a house could make it possible today at 75% LTV.

Im thinking maybe save a bit more . I definitely don't want to move into a flat if I can help it . I'd rather have a house , just a 2 bedroom will do for now . But think a run down property Atm is just about my chance unless I get a bigger deposit . I'm grateful for still living at home and paying just £50 a week . But I want to get on the ladder as soon as , and dad just saying they will keep going down soon is all just guesses .

Thing is I haven't had any meetings with the bank or anything ; but if I was to save another 10k so I've got 30k deposit for £120,000 house. Surely that would be doable on my gf and mine wages .

xmodz

If I was in your circumstances,

I personally would invest in the 20,000 in shares

and live at home for another year or two while earning more to put towards a deposit.

in terms of house prices your dad may or not may be right, only time will tell

Sparx8

xmodz wrote: »

If I was in your circumstances,

I personally would invest in the 20,000 in shares

and live at home for another year or two while earning more to put towards a deposit.

in terms of house prices your dad may or not may be right, only time will tell

I don't really know anything about shares ? Is there a link to know the basics ? If I was to do this it would have to be low risk or is it even risky ?

EDIT: Also would like to add that my savings is only in a cash isa at Barclays , so if anyone's got better investment options Id be inclined . Thanks

jamesd

There are:

1. Regular saver accounts paying 6% taxable.
2. Current accounts paying 5, 4 and 3% with various limits and conditions.
3. Peer to peer lending at 10%+ or lower from a range of providers, with some risk to capital and term lockins.
4. Conventional investing, with the long term UK stock market return being about 5% plus inflation. A UK index tracker fund could be used for this but I suggest a global tracker instead.

Only the first three are really suitable for your likely timescale before purchase.

In share investing "risk" is usually used to mean "volatility", the rollercoaster in reverse that is investing in shares and share funds. An upward trend but down times of 20% or so two or three times a decade and 40-50% once or twice a decade. Those drops are OK if you can just stay invested until a recovery. the catch is that you can't, because you have a need to spend the money at a fairly short time. This is why five years is often given as the minimum time for share investing.

edinburgher

xmodz wrote: »

If I was in your circumstances,

I personally would invest in the 20,000 in shares

This is a moronic suggestion, thanks to jamesd for some practical ideas :beer:

Sparx8

edinburgher wrote: »

This is a moronic suggestion, thanks to jamesd for some practical ideas :beer:

I think the best option for me would be to keep saving for another 2 years and keep the money in a good savings account .
Once again thanks guys for helping me out