Buy a home or save the money?

tryingtobreakthecycle

Hi everyone!
As you can see from my MSE name, I’m really trying to break the cycle of sitting just on the poverty line in my family. 

8 years ago, I took a huge step towards that and bought a home! Since then I have now met my lovely partner and we plan to get married next year. We have circa £50 k in savings and we are unsure whether to purchase our ‘forever home’ or keep our savings in a high interest savings account. We also plan to start a family and I would like to take as much time off for my baby as I can. (I’m hoping two years) our current mortgage is very affordable and our thinking is one of us should be able to pay the bills comfortably - where we are now. 

Our forever home would be considerably more expensive and a rough estimate of a mortgage about 3 times as much. I would not sell my current home for this so this may provide some rental income but not much at all. 

Any help with this huge decision would be greatly greatly appreciated

pramsay13

I'm not sure that becoming a landlord at this point in your life (having a baby) seems sensible especially given that the rental income will be "not much at all".
If you want your forever home and your finances stack up then go for it, but you will need to give a lot more detail on the figures for any meaningful help from others.

RHemmings

It sounds to me that you will be taking on a lot of debt to buy the 'forever home'. If you sell your current home, then that will minimise your mortgage debt. And, possibly be a better return than if you had a bigger debt but also some other income. 

You will likely pay tax both on rental income and also on interest on money in the bank. This needs to be calculated against the lesser mortgage payments (or faster repayment) you can achieve without keeping the other assets. 

Nobody can make the decision for you other than you. But, if I were you, I'd be motivated to keep debt to a minimum. 

On the other hand, if house prices go up a lot, then keeping your existing house may help. But, that's a gamble. 

thegreenone

If you can afford to live on one salary alone, at the moment, save absolutely every penny you can.  You are getting married next year so possibly looking at having children in two years time???? 

Stay where you are until first is born, saving, saving, saving so you can minimise mortgage on forever home.  Sell current (don't be a landlord, you'll be too busy with little one and don't need any stress) and with, hopefully, a huge deposit you will have a smaller mortgage and will have the options to stay at home or go part-time or whatever!

AlexMac

You already seem inclined to consider becoming a landlord, but I can only speak from my own experience, which would lean me to disagree.

I've never earned megabucks, but the best decisons I've ever made were to buy the best / dearest house I could afford to live in, even if it meant stretching the budget and taking on lots of DIY (call it "sweat equity").   Moved on several times since (over the past 50 years) but long term, they've proved a terrific  investment for me (even though a house should be viewed as a home, not a business asset or investment).  Your reference to a "forever home" and plans to have kids implies you are thinking long term (and confident the relationship will last?).  Whereas keeping your first home almost seems like an insurance against a break-up?  Or am I overthinking it? 

It's also possible that even if you are keen to become a landlord, your existing home might not be the ideal BTL (buy to let)? If you're emotionally invested in it, you'll be upset if a tenant trashes it, breaks things, misses rent payments or worse?  Even if you feel you're up to the legal responsibilities of being a landlord, read the many past posts here with cautionary tales of what can go wrong.  And even if they don't, do you fancy coping with a call from a tenant while on holiday cos their boiler has bust beyond repair? 

So if it was me, I'd keep it simple; flog my house, pool resources with the partner, buy the best place we could afford and think about BTLs or other investments ten-to-twenty years down the line.  

I effect, that's what I did; eventually aquiring two BTLs, 20+ years after I bought my own first home (ideally located, ex-Council flats with low Service Charges, low maintenance costs, in popular areas with great % ROI...)  And when that bust boiler call came in (while I was in Italy!), I had enough experience and contacts to commission a replacement (done in days) myself, rather than getting ripped off by a managing agent.

But whatever you decide, very best wishes for the next step in breaking the cycle;  I hope it goes as well as my journey; from childhood in caravan, hostels, BnBs, HPUs and eventually, a Council Flat, to now, a lovely big gaff in a posh neighbourhood!  Good luck. 

tryingtobreakthecycle

OMG!!!

Can I please just take a moment to thank everyone on this post for helping me with this. I’m not trying to get out a violin but both me and my partner were orphaned relatively young (probably why we bonded so well) but it’s tough not having elders to help with these decisions. Schooling never teaches you about money management and Google is a rabbit hole of doom scrolling into the wee hours hoping not to get scammed. 

Real advice from real honest people

THANK YOU THANK YOU THANK YOU! 

ReadySteadyPop

tryingtobreakthecycle said:

Hi everyone!
As you can see from my MSE name, I’m really trying to break the cycle of sitting just on the poverty line in my family. 

8 years ago, I took a huge step towards that and bought a home! Since then I have now met my lovely partner and we plan to get married next year. We have circa £50 k in savings and we are unsure whether to purchase our ‘forever home’ or keep our savings in a high interest savings account. We also plan to start a family and I would like to take as much time off for my baby as I can. (I’m hoping two years) our current mortgage is very affordable and our thinking is one of us should be able to pay the bills comfortably - where we are now. 

Our forever home would be considerably more expensive and a rough estimate of a mortgage about 3 times as much. I would not sell my current home for this so this may provide some rental income but not much at all. 

Any help with this huge decision would be greatly greatly appreciated

Not  a good time to throw savings into property, interest rates can still go up in my opinion, better to keep the money safe in a money market fund or something (Premium bonds would be a better bet than property at this stage) Forget the landlord thing, BTL as an investment vehicle for the masses is over, there are many many threads on here about why that could be a shockingly bad decision.

ReadySteadyPop

tryingtobreakthecycle said:

OMG!!!

Can I please just take a moment to thank everyone on this post for helping me with this. I’m not trying to get out a violin but both me and my partner were orphaned relatively young (probably why we bonded so well) but it’s tough not having elders to help with these decisions. Schooling never teaches you about money management and Google is a rabbit hole of doom scrolling into the wee hours hoping not to get scammed. 

Real advice from real honest people

THANK YOU THANK YOU THANK YOU! 

Be wary of the "property as route out of poverty" meme, if that involves borrowing money it is the people who do the lending that benefit most, the landlord thing is for cash buyers who really know what they are doing in my opinion.

ReadySteadyPop

tryingtobreakthecycle said:

OMG!!!

Can I please just take a moment to thank everyone on this post for helping me with this. I’m not trying to get out a violin but both me and my partner were orphaned relatively young (probably why we bonded so well) but it’s tough not having elders to help with these decisions. Schooling never teaches you about money management and Google is a rabbit hole of doom scrolling into the wee hours hoping not to get scammed. 

Real advice from real honest people

THANK YOU THANK YOU THANK YOU! 

https://www.amazon.co.uk/Investing-Demystified-Speculation-Sleepless-Financial/dp/0273781340

https://www.goodreads.com/book/show/106835.The_Intelligent_Investor

BarelySentientAI

ReadySteadyPop said:

tryingtobreakthecycle said:

OMG!!!

Can I please just take a moment to thank everyone on this post for helping me with this. I’m not trying to get out a violin but both me and my partner were orphaned relatively young (probably why we bonded so well) but it’s tough not having elders to help with these decisions. Schooling never teaches you about money management and Google is a rabbit hole of doom scrolling into the wee hours hoping not to get scammed. 

Real advice from real honest people

THANK YOU THANK YOU THANK YOU! 

https://www.amazon.co.uk/Investing-Demystified-Speculation-Sleepless-Financial/dp/0273781340

https://www.goodreads.com/book/show/106835.The_Intelligent_Investor

So your advice for someone trying to provide a secure home for themselves and their family is to start speculating on investments whilst paying someone else's mortgage.

C'mon Crashy, don't pick on the newbies.

Jemma01

I would stay put if I were you until you have a baby, and figure out your finances with a new baby and a single salary.

Too many variables in your situations that are unknown to you just yet. Keep saving.