Should you get a mortgage or pay cash for your home?

[Deleted User]

OP,
Kudos for your mature outlook. I wish I had started saving when I was your age! Retirement and purchasing a house now (aged 36) might be a bit more probable. I would caution not to put your eggs in one basket, i.e. don't be too rigid in your plans because things could change unexpectedly (look at the last year, for example).

However, in your situation, it seems like a mortgage with a decent deposit would be a good bet. Paying cash is advantageous in some scenarios (first time, cash buyers are very appealing to sellers and may give you the edge). However, the interest rates of mortgages tend to be significantly lower than the interest you could accumulate over time with investments so might be better for your savings to still have an, albeit reduced, mortgage. Good luck!

grumiofoundation

YoungFIREman said:

woodsford said:

Haha this thread made me chuckle.

Can you explain why please?

I guess maybe people think the figures are unrealistic and therefore thread is a 'wind-up'?

I disagree and I would say your figures are doable but on the 'extreme' end.

4 years at university saving 100k* - 12.5 k each per year - 75% saving = 16.7k 'income per year. ~17k income  from a combination of student finance and part time jobs seems fine but  living costs of 4k per year each is pretty low (but with cheap rent eminently achievable)

You aim to save 100k* in 2 years after graduating despite the fact you will earn not much more than 100k after tax in those 2 years.

Assuming you are training in the highest need subjects so bursary/scholarship of £24000/£26000, plus 2 x maintenance loans of £12,000 each.
First year salary of ~£28,000 is take home of ~£21,000 (after tax/student loan/pension)

Therefore max total over 2 years = £118,000 (2 x 26k + 12k + 21k). 

Meaning you would aim to live on £9,000 per year which is pretty low (as above). 

*I have ignored investment growth in all figures above -  I guess you have factored in investment growth into your figures which means living costs would be higher than above.

In your first post you asked for any obvious downsides

- any investment growth is not guaranteed. In particular over a short (6 year) timescale.
- you runs the risk your house deposit drops by 10-50% (depending on investments) before you come to buy....
- downside to buying in cash is your inability to use lifetime ISA - over 6 years worth at least £12,000 in gov bonuses (which will more than offset any mortgage fees), buying with a mortgage also allows you to better ride out any stock market drops since you don't need all your cash. 

YoungFIREman said:

Like I said, I know it seems crazy but I didn’t ask for a lecture about how to live life, I just wanted to give context to see if paying cash for a home is smart. But thanks for all of your help everyone! 😁

If you have a lifetime ISA (if you don't I would look at getting one) you need to buy with a mortgage.
 

FTB_Help

Wow, what job do you and gf have to be able to save over £1k/ month each as 19 yr old uni students @youngfireman?

When i was at uni i worked 20 hrs a week and only took home about £500/ month!

Good on you for having drive, but at the same time do enjoy life while you're young, espec if you're planning to have kids in your late 20s.

When are you ever going to travel, see the world, be spontaneous and do memorable stupid things with young friends?

Skiddaw1

OP, on presumption thread is genuine, whilst I applaud you and your partner's hard-headed financial sense, you are indeed both very young. Wouldn't it be an idea to factor in a bit of having fun/enjoying your youth into your plans? With the amount you've saved (and intend to save by the time you graduate) you could have a lovely time going around the world/working abroad for a year or two before you settle down. Not everyone's bag I know, but blimey- you're only young (and free) once...

root

FTB_Help said:

Wow, what job do you and gf have to be able to save over £1k/ month each as 19 yr old uni students @youngfireman?

I can think of one student 'job' that would net more than that 

MalMonroe

Having been a full time undergraduate student and having worked part time during those three years, I really am wondering where on earth those fantastic salaries come from. Being a university student is hard. It's not all about drinking and having parties, you really have to work if you're going to end up with a decent degree. Plus you have to have a social life - which can be done without spending a lot of money, just getting together with other students and having a laugh is great. But where is your work/life balance? How on earth are you both able to study and work and earn fantastic salaries and do the normal everyday things like shopping and cleaning and having a good time while you're students?

It's all well and good planning for the future but there is no allowance in your plan for FUN!! At 19 years of age, there should be plenty of allowance for living, fun, having a great time before settling down. I'm not being funny but your relationship may not last. If you are 19 you have at least two more years of Uni to go and anything could happen. One of you could fall madly in love with someone else (it happened to a friend of mine - thought she was with her life partner until she met the real love of her life).

My advice - live and enjoy life while you're young. Responsibility can wait. 

Your post, if genuine, made me feel so claustrophobic. . . lives far too planned out for my liking. And I really would like to know how you and your partner are earning such fantastic salaries at such young ages and managing to keep on top of your uni work. Because I know that uni study takes up not only time but also great effort - that is if you want to get a 2.1 or above.

As for buying a house - I'd buy one with cash.  

moneysavinghero

Maybe they are Youtubers / Instagrammers / Influencers.

root

moneysavinghero said:

Maybe they are Youtubers / Instagrammers / Influencers.

ah you mean paid shills

saajan_12

I'd give it a month, and then start the process, 4 months to the expected completion date.

Due dilligence would usually take 2-4 months, so at the lower end, you're expecting to exchange with ~2 months to go, might just sneak in within the mortgage validity. At the longer end, you're right on time for the expected completion, and one mortgage offer renewal shouldn't be too hard. 

JJR45

We have cash but will get a small mortgage to leave us some cash, we will get an offset mortgage, so even though we will have more than we need we won't be paying interest on the borrowing we didn't need.