Buying a house without a mortgage

Frugaldom · 23 November 2007 at 10:48PM

Is it still possible, do you think, to aim for being mortgage free when you haven't actually got a mortgage? (I rent) Technically, that makes me, and anyone else in this situation, mortgage free, but it also makes us "home-less". So, when everyone on here is trying desperately to rid themselves of their mortgages, is there a way that us non-home owners can join in and attempt to, for example, save to buy a house outright in x number of years?

Is it possible?
Is it wise?
Is it beneficial in the long run?
I have searched and can't really find much information about this.
Is it because it's a bad idea?

Handy Links
Nationwide's house value calculator
UpMyStreet house prices
Propertyfinder website
Nethouseprices.com

By searching the likes of UpMyStreet, you can locate the date a particular house was sold and the price it made. Then, by using the likes of Nationwide's house value calculator, you can estimate very roughly how much that house is likely to be worth now. There are several ways of doing this and I'll add any handy links I find to this post as I find them. Sites like Propertyfinder are handy for seeing what the current prices are in whichever location you choose, and there are still plenty of bargains to be found.

seven-day-weekend · 23 November 2007 at 11:57PM

If you mean save up and buy a house outright, what's wrong with that?

i think it's a great idea if you can do it.

However the people here who are striving to be mortgage-free are not having to do so with the amount they owe rising, which you would have to take into consideration when house prices are rising.

Although they do fall too.

Why not just savee up a decent deposit, get a mortgage, and then strive to pay it off. as quick as you can.

Having said that, if I buy another property it will be a cash sale, but that's bcause I have two mortgage-free houses and am now too old and too poor to get another mortgage!

Good luck whatever you decide.

busy_b · 24 November 2007 at 12:03AM

It's not a bad idea at all BUT obviously it depends where you live and what the prices are and what you can afford to save, whilst renting.

We have friends who did exactly that. (Although we live up North where you can still get a reasonable first home for less than 100k. It's a whole different ball game South of Birmingham as I'm sure you know!)

Our friends used their maximum ISA allowance as a saving vehicle and then bought an old mid terraced cottage in a lovely area that needed updating. (Cost 98k and sold for 138k, bought their next property for 150k outright and it's now valued at 275k). They have no mortgage and enjoy life to the full.

They rented for many years and everyone thought they were mad but they had a plan and it worked!

Good Luck, hope it works for you !

PasturesNew · 24 November 2007 at 12:05AM

nykmedia wrote: »

?
Is it possible?
Is it wise?
Is it beneficial in the long run?
I have searched and can't really find much information about this.
Is it because it's a bad idea?

Yes, yes, yes.

Right now, in my opinion, is the time to start to do this.

But in order to achieve it, you have to set an achievable target and decide on your savings vehicle.

You will have to look at things like:
1) House you want to buy - how much is it?
2) How much are you earning? How much of that can you save?
3) Can you do more than 1 job?
4) Will your wages improve significantly?
5) Can you stay in and eat beans with the light out for the next X years?

For the saving:
6) how much risk do you want to take?
7) What are the rates on savings?
8) Will you be investing in other ways/things to save more/quicker?
9) What would be the tax rates on savings/investments?

Have you started a spreadsheet to see how achievable this is?

In my opinion, if you were to pick a house at today's price - then save for 8-10 years, you could buy it then at the same price. Because I believe prices are now falling and will fall for 5-6 years, before recovering. Which gives you about 8-10 years to save up.

Frugaldom · 24 November 2007 at 12:13AM

Thank you for responding.

I do realise that property prices have been rising at an incredible rate and I did, once, have a joint mortgage. However, as a divorcee who is self-employed and works from home (a 'debt free, starting to save now' one, I might add :j ) property within my price range is almost impossible to find. I looked at commercial mortgages and priced around for the best deals. The best interest rate deal I could find wanted 45% deposit which, on reflection, would probably be enough to buy my cheap fixy-up! Also, having had a mortgage when interest rates hit 14% + it is difficult to ignore the possibility that the same thing could happen again. It would be great for the savings, though

PasturesNew · 24 November 2007 at 12:22AM

As a self-employed person, once you've got a few years of books under your belt, mortgaging will become easier.

And, if you're lucky enough to have a lucrative business/skill, then your earnings will, presumably, grow steadily (perhaps exponentially?!) over the coming years.

Save the money - you never know when a sudden change of circumstances will catapault you, no matter how briefly, into a high earning opportunity that will make the difference between "almost" and "yes".

I spent my life being always £5k short of being able to get a mortgage - no matter what price the houses/my wages, it always seemed the closest I could get was £5k off.... until one random lucky break in 1 year. I was mortgageable and bought something/anything. However, I then had a nosedive in circumstances, so I then had the house, but couldn't afford the bills/life... clung on. Then sold.

But I did do it once! And you might too!

Good luck with the saving.

P.S. I was 40 when I bought my first (er, only) house.

Frugaldom · 24 November 2007 at 1:20AM

Many thanks for the responses.

I can live on a shoestring, I use spreadsheets for everything, I'm taking full advantage of my ISA allowance, have a few premium bonds and live far enough north that there are still properties selling for under £70,000.

I don't mind taking a few risks here and there but can't afford to risk too much. If you mean sports gambling, then no, I don't do that, but I do trade a few shares online now and again. I'm also following the 'increase your income' thread and have set myself a challenge to raise at least an extra £3,000 working from home next year. I love the threads about 'starting a cottage industry'!

I can't save fast and I can't save much. Christmas shopping is almost exclusively from the online auctions and wherever MSE recommends bargains. I save my Tesco Points, I recycle, I save my Co-op dividend points, which are now converted into cash, and have joined several savings type groups. But none of them are major, like "how to raise £100,000 (my magic number) without borrowing it". (Please, no 'rob a bank' type jokes because I have heard them all). My conclusion is that I'll have to up my own personal money-making challenge and start a new thread. Never mind how to pay off your mortgage in 2 years, I want to buy the whole house outright. It HAS to be possible, somehow

Toto · 30 November 2007 at 2:26PM

I'm doing exactly this, I sold my house in January to pay off debts from starting our business. This was a great move because rather than spending almost £3000 in interest payments (including IO mortgage) I now pay £960 a month in rent.

I have just done my projections for 2008 and by living on the minimum sensible amount each month (not beans on toast but not champagne and caviar either) we can save 1/4 of a price of a house. So, my aim is to buy outright in 4 years (less if we can). We do live in the expensive south but we also are lucky that we have a good income.

Nothing makes me more determined to save every penny than seeing my % towards saving goal increase each month on my spreadsheet, no gadget, holiday or item of anything beats seeing my goal come closer and closer.

Good luck with getting there, really we are no different to the MFW we're all aiming for the same goal, only we pay rent rather than a mortgage.

Frugaldom · 30 November 2007 at 11:12PM

Well done and good luck Toto! I can't begin to imagine being able to afford to save for a house in 4 years but I'll not say that it is impossible. Anything is possible. But right now, your monthly rent is more than my entire monthly income! LOL There's always that glimmer of hope that one of my premium bond numbers comes up with more than £50 of prizemoney and I do 'fiddle online' with some shares now and again. Apart from that, it's a case of just keep setting myself challenges and aim for success in them all

Toto · 1 December 2007 at 12:58AM

And good luck to you too. As I said, we are both self employed and are really lucky that we earn a decent living. That said, I know many times in my life when I've had nothing but didn't seem to be any poorer than when I had money. I've always spent what I earn and always seemed to be skint!

Making the little changes have made all of the difference. Even silly tiny things like buying value custard creams instead of brand names adds to the general goal getting closer. Learning the good money habits has taken me too many years and probably cost me the price of a house. Still, it's never too late. I really do hope you get there, you're certainly on the right road x

EdInvestor · 1 December 2007 at 1:21AM

nykmedia wrote: »

Is it still possible, do you think, to aim for being mortgage free when You haven't actually got a mortgage? (I rent)

The general theory underpinning home ownership is that you trade in the rental payment for the mortgage.

Otherwise you are paying the landlord's mortgage for him.

The rental payment is deemed "dead money".

Buying a house without a mortgage

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free