To buy or not to buy....a 26 year olds question!!!

ceebeeby

Buy!

Borrow deposit from parents if needs be.

Badger_Lady

Yeah - I'm with ceebeeby, buy a house! Best thing you'll ever do.

I bought my first flat at age 22 on 100% mortgage with a hefty student overdraft and a debt to my (retired) parents of £4k. My budget only got me a tiny flat, and the repayments weren't cheap, but 2 years later (last month) I sold it for 13% more than I paid, and now have a ready-made deposit lined up for the next house.

My parents allowed me to count their £4k as a portion of the property value, rather than repay them immediately, which means that their investment has also risen 13% - better than any savings account! Maybe your parents envisage something similar with their investment in you?

The earlier you get on that ladder, the better - your parents may love having around, but at 26 surely it's better for everyone for you to gain some independence and start making money the property way.

As a side-note, don't necessarily think about staying put for 7 years - to be sensible, your first property should be an investment, and I would choose something that's likely to increase in value over a 2 or 3 year period, such as an 'up-and-coming' area or something that you can improve.

You might not love living there, but if you can put up with it (like I did), you can grab up the increased equity and move to your dream home afterwards. (I've moved from my poky 1-bed flat into a 3-bed house with gym, recording studio and cinema in the basement!)

morg_monster

DON'T PAY OFF YOUR STUDENT LOAN!

It is only going to be 4.8% for a year! I would bet you anything that next year it will be lower, perhaps down to around 3.5%. It was unlucky that the RPI was so high in March. By March 08 we will know what the interest rate will be for the next year. Remember you can never get back the money you pay off the Student Loan. It is MUCH better going down as a deposit for your mortgage. Even ignoring the fact that you can get higher interest on your savings than you can paying off the student loan (even if it is only a little higher this year), once that money is in your mortgage, it is saving you the interest rate of your mortgage which is MUCH higher than 4.8%!!!!

Seriously, don't do it... I can't think of any situation where someone would be financially better off in the short or long term by paying more off their loan than they have to.

(Also - student loan is not considered in the same way as a 'normal' loan when you apply for a mortgage and they look at all your debts).

FBThree

I'd be hesitant about taking 100% mortgage, and your income is so good you really should have a larger deposit already. As someone else said, the difference in deals when you have a reasonable deposit, c.f. nothing can be amazing.

If I were you, I'd cost up expected monthly outgoings as if you had bought a house. Include everything, expected mortgage payments, electric, gas, council tax, insurance, parking permits, £100 extra to cover emergency monthly maintenance, £100 extra towards holiday savings. Then set up a standing order for that total amount, to go out of your account on pay day to a high savings account. Start that up immediately. Live on the rest or less than the rest. Then when you do get a mortgage, a. you'll have more of a deposit saved, and b. monthly bills won't hurt so much.

Use your cash-ISA allowance up now! You must be able to do that within a couple of months on your salary. Don't pay the taxman if you don't have to.
Consider using up your share-ISA allowance too - using it as a long term vehicle to pay off your mortgage.

I was 26 when I first bought my house, but I had a 10% deposit AND my parents guaranteed the mortgage (still have Dads signature on the docs). That might be an option for you as it doesn't involve your parents putting down any of their money. Of course, they'll still worry - my interest rate went up 3 times in the 5 months after I completed (days of 15%), and Dad phoned me everytime. The only other times he ever phoned was when my Mum was sick!

As for student loan - as others say, depends on the interest rate you pay c.f interest rate you can get.

As for petrol costs, Barclaycard have a new premier card advertising 2% cash back on petrol/grocery. Some discussion as to if you get 1.5 or 2, but we've signed up for it.

morg_monster

Badger_Lady wrote: »

Yeah - I'm with ceebeeby, buy a house! Best thing you'll ever do.

I bought my first flat at age 22 on 100% mortgage with a hefty student overdraft and a debt to my (retired) parents of £4k. My budget only got me a tiny flat, and the repayments weren't cheap, but 2 years later (last month) I sold it for 13% more than I paid, and now have a ready-made deposit lined up for the next house.

My parents allowed me to count their £4k as a portion of the property value, rather than repay them immediately, which means that their investment has also risen 13% - better than any savings account! Maybe your parents envisage something similar with their investment in you?

The earlier you get on that ladder, the better - your parents may love having around, but at 26 surely it's better for everyone for you to gain some independence and start making money the property way.

As a side-note, don't necessarily think about staying put for 7 years - to be sensible, your first property should be an investment, and I would choose something that's likely to increase in value over a 2 or 3 year period, such as an 'up-and-coming' area or something that you can improve.

You might not love living there, but if you can put up with it (like I did), you can grab up the increased equity and move to your dream home afterwards. (I've moved from my poky 1-bed flat into a 3-bed house with gym, recording studio and cinema in the basement!)

You would have to be very brave / fairly crazy to look at buying a property now with a view of it as investment to be "cashed in" in the next 2-3 years - especially on a 100% mortgage - and especially on a flat. No-one knows what is going to happen to the market but it looks increasingly likely that tne next 3 years will not show the same level of growth as the past 3 years.
I think the OP is sensible to be worried about his parents investment if he is only going to be in the house for a couple of years. Unlike the quote above I think you DO want to be thinking about staying there at least 5 years at the moment if you want your money to be safe.

My opinion is stay at your parents, save like mad, and keep your eye on the housing market. I personally think you will be able to get more for your money in a year or 2, and you will have a nice fat deposit.

morg_monster

sorry one more point - 13% in two years is what you would get from saving for two years at 6.3% - there are ISAs with that level of interest at the moment (eg NS&I Direct ISA). Obviously this is only good for 3000 a year (3600 from next year though, roll on the good times!)

meanmachine_2

So this property fan "made" 13% in 2 years.

Meanwhile their next property will ALSO have risen by 13%.

Meanwhile you'll need to pay X amount more in stamp duty because your next property has risen.

Er, yeah, that's really a cause for celebration.

Oh, and what about the opportunity costs on your poor parents' investment? I presume you're now going to pay them back with interest?

So that means you'll be WORSE off thanks to property inflation.

Doh.

PJD

I agree with most of the above, - certainly if I was in your position I would stick it out at your folks place and save, - put your savings in a top rate ISA first, and spill over to ICESave second.

Move your current account to one which offers a £100 cash incentive, - maybe start up a regular savings account (where you can pay a max of £250 a month for 3 years etc) - and yes, save save save.

Interest rates are going up, so this will favour someone like yourself with savings, - as more and more people's fix rate mortgages come to a close and they have to remortgage at higher rates, - it was start to take hold, - then, I believe in a couple of years time, people like you in a flexible first time buyer position with wads of cash in their back pocket will find themselves in a nice position with bargain power and options on the table.

I appreciate you wanting to move out, but its not that much of a hardship living with your parents as you're around your GF's a lot of the time. I'd stick with it for the moment

Mr._H_2

alant1000 wrote: »

ti'd use that to pay off the student loan, if you could have that finished off in 8 months it will be a big burden got rid of.

Do not ever pay off your student loan faster than you have to. It is a unique type of loan that has very different characteristics to standard loans. Yes, this year there will be quite a high interest charge, but it'll go down again next year. The amount you owe does not appear on your credit reference, you can't get into arrears as payments are taken straight out of your pay before you get your money, and it is written off when you are 60. Basically, ignore the student loan and it will disappear eventually.

The extra money that you might use to pay off a student loan faster than you have to will always be better used elsewhere.

brummie_boy wrote: »

Any ideas on sensible monthly saving levels based on my income? I do spend a fair amount on petrol going to see the gf (she lives 40mins away), and probably go out more than I would do if i had my own place - I feel too old to get mates round to sit in my bedroom!!!!!!

I'm 27 and have an income of about £12k. I save £350 a month and have a mortgage to pay! I don't have a car, but allowing for that and your additional income, I see no reason why you shouldn't be able to save £1500 a month.

Saving up a substantial deposit (15 - 20%) will give you access to much better mortgage deals than 100% ones.

Turnbull2000

meanmachine wrote: »

So this property fan "made" 13% in 2 years.

Meanwhile their next property will ALSO have risen by 13%.

Shhh, don't you go confusing people now :mad:

"You know, HPI makes upsizing more expensive"... DOES NOT COMPUTE DOES NOT COMPUTE DOES NOT COMPUTE DOES NOT COMPUTE!!