If you wait for the price crash...

Fuchsia_a

PasturesNew wrote: »

Therefore, at the bottom of the market, I don't expect to put down my entire cash pot and mortgage on top of that to buy some super-mansion... I plan to spend 60% of my cash pot and invest the remaining 40%. I will then be financially independent at a subsistence level. This will then allow me to be free to work/not work at whatever salary I choose to. I will be able to resign if I have a rubbish manager or save and holiday if I have a good one.

I will no longer be owned by "The Man".

This sounds very sensible to me. I hate the thought of being massively in debt to anyone. I'm saving up like crazy so that I can put a large chunk of money down on a house, or buy outright if I move to a cheaper area (and prices fall back to the historical trend - I'm seeing this as a possibility, not as an assumption, so please don't criticise me for assuming it's going to happen, all of you people who're still bullish about the market!)

I currently have approximately 20% of an average 2-bed on the London outskirts where I've been looking, and I'm saving roughly 5% a year at current prices. I've noticed that asking prices for a lot of the places I've been watching are down about 10% on what they were in January, too. Why bother buying now when I'm getting both interest on the money I haven't spent yet and a percentage cut off the type of house I want as asking prices drop?

Even looking at the government best scenario estimate of 5-10% for drops this year I'd have between a 34% - 38% deposit in two years time if we have similar drops in 2009-2010. If prices revert back to the historical trend or even dip below it as they have before, maybe my savings would be up to around 50% of the price at the bottom, who knows?

As it is, I'll be buying jointly in cash, so mortgages aren't an issue for me, but I'm living with my parents and not earning a lot, so if I can save a 5% deposit in a year on a house in one of the most expensive areas in the country, I'm sure lots of other first time buyers can too.

poppysarah

mircea wrote: »

We have a joint income of 60k. At the end of the year we will be lucky if we have 5k in our savings.

Mind to share how you made your calculations?

You take home 60k and need 55k to live on?
You explain that to me first!

poppysarah

mitchaa wrote: »

Anyway, childcare should be absoloutly free IMO. It's criminal some parents get it for nothing, but others have to pay for it.

Childcare is free for everyone if you don't go out to work.

Perhaps it's the fact people can't live on one wage anymore is the problem?

PasturesNew

mr.broderick wrote: »

No disrespect but you are talking as though a crash is a given, i am not convinced.

Ah, but it's easy for me to have an opinion, because if I'm wrong I just buy something cash anyway - and if I am right I end up with more savings.

Without a specific job tying me to a specific area, I couldn't even guess where I will want/need to buy. So the lull will suffice... and the lull needs to be lulling for about 5 years

mitchaa

poppysarah wrote: »

You take home 60k and need 55k to live on?
You explain that to me first!

£60k salaried income = £40k (ish) after taxation. Unless you know a way of avoiding taxation??

Save £5k, meaning they spend £35kpa on living. If you have a £1500pm mortgage, there's half of that already. Never mind car(s) council tax, food, heating, fuel, insurances, social spenditure etc

AnotherHB

It is total madness to sink 60% of your wealth into housing, or even 50%. It'd be bad enough if you didn't actually live in the place, but as you do you have absolutely no possibility of getting access to the money if you run into problems.

Mortgages are cheap debt. You can easily beat mortgage interest rates with even moderately performing investments. So why on earth would you sink cash into an investment that looks likely to stagnate at best over the next few years and will most probably depreciate? It's far better to put the cash somewhere else where it is accessible and where the gains can be used to offset any losses from paying interest while maintaining the value of the capital. If you have 100K sunk into a house which drops in value 10%, you have lost 10K from your capital but saved £6K or so in interest, so you're down £4K. If you invest the 100K for a 6% return, you have paid £6K in interest, offset that by £6K in interest but maintained the value of your capital, which most importantly you can move to other forms of investment rather than having it locked into residential bricks and mortar. So you are well up on the deal. Even if there is no fall in values you have broken even.

The key to building wealth is diversification and taking measured risks across a range of investment types. It is not about shaking a monkey off your back for reasons which are basically nothing more than psychological. There is no financial logic at all in reducing mortgage debt at the expense of other investments, until the time when you can't match returns. I would take a 100% mortgage if I could, and never repay it. Because I know I can easly beat the repayments by other forms of safe investment.

mitchaa

poppysarah wrote: »

Childcare is free for everyone if you don't go out to work.

Perhaps it's the fact people can't live on one wage anymore is the problem?

Yup:T

Especially if your mortgage is based on joint salary

LittleMissAspie

HouseBuyer wrote: »

How many people can realistically afford 25% deposit? If you are lucky and live rent free with the oldies, I can see that happening

See my sig. We are renting privately. I am saving my ISA allowance and additionally topping up my "mortgage savings pot" as much as I can. That's on a salary of £18k. My boyfriend will match my savings (he earns more than me but I insist on paying half). The £25k target will hopefully be a 20-25% deposit.

HouseBuyer wrote: »

but even with us (as reasonable wage earners), we will struggle with paying our 250,000 repayment mortgage of about 1900 each month.

You've taken on a mortgage that you will struggle with? WHY???!

lostinrates

mitchaa wrote: »

It should be funded just like school is.

It would obviously cost a lot, but then the governement would save a considerable amount by not handing out benefits to stay at home parents.

The only reason most are stay at home parents is because childcare is too expensive and they're caught in a trap. You work just to pay childcare, so whats the point?

The only way around that is to make childcare free, this way parents can get back to work and then start contributing in taxation, which in turn pays for their 'free' childcare;)

I don't really gt this.....:o

I agree that for many childcare costs equal one wage, BUT I don't think thats the ony reason to be a SAHparent. Why is it ok to pay for chilcare but not a full time parent?

Personally I would rather, if I had children, be able to afford to SAH full or part time to help them grow and develop. I see that as a valid choice (as I do work) and can't see why the government shoul pay for someone ELSE to take care of a child when the parent is often the best suited.

(I am for choice not for state pushing either choice, so I persnally would give a choice of childcare or the equivalent in TAX RELIEF or, if amount exceede that, benefit, to SAHMs.

HouseBuyer_2

LittleMissAspie wrote: »

See my sig. We are renting privately. I am saving my ISA allowance and additionally topping up my "mortgage savings pot" as much as I can. That's on a salary of £18k. My boyfriend will match my savings (he earns more than me but I insist on paying half). The £25k target will hopefully be a 20-25% deposit.


You've taken on a mortgage that you will struggle with? WHY???!

25k here is only 10% deposit, less if we move to London itself.

Why are you giving up your ISA which is another investment for your house?
That means all your savings will be a deposit for your house, you have not diversified your portfolio. Is this what most people do? I could give up my ISA but it doesn't feel right not to have a safety net.

Not taken the mortgage yet, just wondering how other people are doing in a similar (ish) situation.