FTB, Buying outright or Mortgage

Trigs

Hello, first post here. Need a couple of opinions/thoughts on my thoughts.

Im a first time buyer, so no experience to go by.

Im looking at buying an £85000 property, and i have £90000 in the bank. Wage is £19824 before tax.

To me it makes more sense to buy the property outright, although by the time ive paid it plus the other fees, im not likely to have much savings left. And have been called nuts for even considering this.

So im told it would be better to take out a mortgage with a large deposit of 40000 or so, so that i still have savings left for emergencies.
But when i look at this id be paying quite a chunk of money back just on interest, which seems a waste when i can afford it outright at the moment.

So i looked at personal loans from halifax, and i could get £10000 at 7.9% over 5 years, which is £200 a month, and id be paying back £2058 in interest over the 5 years.

Im thinking this route makes more sense. If i buy outright, run tight for cash, i could take the loan, and be paying back quite a bit less than what id pay on the mortgage. And if i dont needall of the cash, i can make early repayments and get rid of it sooner,although obviously having cost myself money for no reason perhaps.

The other option which i was advised of elsewhere is buy outright, and get a 0% credit card to pay for anything else that comes up.

Im pretty sure that after buying outright,even with homeowning costs, it wont take me long to start gathering some savings up again.

So what would be my best option here? Am i nuts for considering buying outright with as little budget beyond the house cost?

Cakeguts

Why can't you buy it outright and put what would have been the mortgage repayments into a savings account instead so that you could soon build up your savings again?

warby68

Or just wait a bit longer to buy until you have a savings reserve as well as the purchase price.

Its always a good idea to have a little money spare after purchase - there's often an unexpected cost or two in a new home.

If you've got this far with your savings, starting with personal loans and credit cards might not be best for you

glasgowdan

Buy a more expensive property with a mortgage :-)

Debtslayer

You would still have a couple of thousand in savings if you bought outright. Would you also need furniture etc?
You will be continuing to save while the house purchase goes through I assume? House purchases can take several months. Have you found a property.
Where do you live currently? If you rent then there would be no rent to pay. If you bought outright you wouldn't be paying anything out in mortgage so would soon be able to build savings back up again

Personally if it were me I'd definitely be purchasing outright if I could!

kilby_007

Save a bit longer and see what happens over the next few months as it looks pretty uncertain. If the market crashes or freezes you'll be quids in. It depends where you live of course, but we adopted this tactic when we sold our house in Feb, and we're still renting and watching the house prices drop here in Yorkshire. If you're in London or the South East, you might want to disregard that advice and just get on with it as prices are still rising fairly rapidly in those areas.

Running_Horse

glasgowdan wrote: »

Buy a more expensive property with a mortgage :-)

I'm not normally one to encourage people to borrow money unnecessarily, but there is something in this. Every time you move up a £10,000 price band, you will notice the quality of house improving. If you can buy a second-time quality house as a FTB, you will be saving the cost and hassle of moving again in five or ten years.

HappyMJ

I would also suggest buying a house that is not your typical first time buyers home and more typical of a family home.

In my area we have hundreds of homes around £90,000 which are usually very basic 2 bedroom terraces homes with very expensive energy bills and with no parking....but spending £120,000 and you get a property which is twice as good as the one valued at £90,000. Better location, better quality home, larger rooms, less maintenance, better garden etc... The homes valued at around £150,000 are most probably going to be 3 bedroom fairly new build semi-detached homes with a garage in a very nice quiet area where the children can play on the front with no fear. There will most probably be parks nearby and they won't be inhabited by teenagers drinking or smoking.

So...if you can borrow money I would be getting a mortgage and buying something that will be your "forever" home.

You can also think of property as a tax free investment. For as long as you live in it you have tax free capital gains. As you are paying off a mortgage you are saving...you're forced to save. If you don't pay your monthly contribution to your savings account it doesn't matter. Many people may be tempted to spend it or choose to work less but you must always make the monthly mortgage repayment and that will make you want to work harder to achieve your goal. Assuming you live in the property for 10 years you will make and save more than you would have done had you purchased a smaller property.

marksoton

I don't understand the wage stated, is that annual ?

eddddy

One option you could investigate is a flexible offset mortgage.

e.g. In simple terms - take out a mortgage for £50k, and then put £50k in the offset account.

The net result is that you pay no interest - but have access to £50k in low cost borrowing, should you ever need it.

But there are the upfront arrangement costs.

I've seen this work very well in the past, but I don't know if lenders have tightened their t&cs etc to make this less viable.

Trigs

Why can't you buy it outright and put what would have been the mortgage repayments into a savings account instead so that you could soon build up your savings again?

This is my preference, though im told that its nuts to consider doing due to having as low funds left after, in case of job loss/illness etc. I personally think id manage, and feel id be able to save quite quickly again after it. Short of being unable to work or bills from the roof blowing off, i think id manage. But thats why im here, incase i am nuts

You would still have a couple of thousand in savings if you bought outright. Would you also need furniture etc?
You will be continuing to save while the house purchase goes through I assume? House purchases can take several months. Have you found a property.
Where do you live currently? If you rent then there would be no rent to pay. If you bought outright you wouldn't be paying anything out in mortgage so would soon be able to build savings back up again
Personally if it were me I'd definitely be purchasing outright if I could!

This is true, i would need some furniture, perhaps white goods too. (Not sure what would come with property, still early stages. This is all assuming i even offer for this property, just trying to measure options/opinions.) Id be happy to manage with relativly little furnishings wise.
I live with parents at the moment, so i pay them rent, and would still be saving while in purchase process.

I don't understand the wage stated, is that annual ?

Yes

In my area we have hundreds of homes around £90,000 which are usually very basic 2 bedroom terraces homes with very expensive energy bills and with no parking....but spending £120,000 and you get a property which is twice as good as the one valued at £90,000. Better location, better quality home, larger rooms, less maintenance, better garden etc

I have looked at 2 or 3 bedroom homes in nearby areas, and while they are roughly the same price range, they are in worse areas and usually terraced. The one im looking at is only 1 Bed, but in a far better area, with own parking. I have looked at homes nearby slightly bigger, but your paying at least £20000 more for an extra room.

All other options are worth considering. Ive also not looked at the flexible offset mortgages, so that sounds like its worth a look.