Saving For A House

[GregG]

Pele - That is speculation and I don't feel morally comfortable speculating on something that I consider a social need like housing. I would not want my greed to deprive someone else of a home of their own.

I'm intending to buy 1 house and live in it.

Edited October 29, 2008 by GregG

[marzipan]

No debt other than missus 25K student loan she will never pay off (and apparently doesnt factor into any mortgage calculation) earning the pittance she is on

woah!!! debt is debt! you really think that will just disappear? remember it still gathers interest until you pay it off, so by the time they come knocking on the door it could be a hefty bill.

you really believe it doesn't factor into a mortgage calculation? maybe last year mate, not now!

[clloyd]

woah!!! debt is debt! you really think that will just disappear? remember it still gathers interest until you pay it off, so by the time they come knocking on the door it could be a hefty bill.

you really believe it doesn't factor into a mortgage calculation? maybe last year mate, not now!

I believe the SLC write of unpaid student loan on retirement (or death if earlier) ... obviously this isnt to be confused with student bank loans or overdrafts.

[quad]

well done all on here who are managing to save for a deposit first. it gives a big middle finger to all the VI spinners of the last few years.

seems many on here are saving more than i earn, each month but manage a few hundered. while having a bit of fun as well.

but one day i hope to have a little place to call home.

[snowflux]

Hey all,

Me & my partner are about to embark on something we think is a bit radical and were wondering if anyone else is doing the same out there.

From next year we're going to put away £600 per month into savings for 15 years. Once we get to this point, we'll have £150k and should be able to buy a house outright in cash.

We're also 'taxing' ourselves to help boost the amount of savings we're putting away. So for example if we spend £10 on eating out, we've got to put £1.50 into the house fund. Also taxing groceries (5%) and alcohol (15% store bought / 20% night out).

Basically the reason we're embarking on this is because we had a little look at what mortgages were available for the sort of place we're after (£150 2 bed flat in the city centre - obviously the price will fall over time) and we'd end up paying more than double the price of the house in total - even if we put forward a 10-15% deposit and we just don't see the sense in it.

For the record, we'll be around 37-38 when we look to buy.

You have just discovered the "Bausparvertrag"! This, or something like it (you only save half the cost of the house) is the usual way of buying a property in Germany. You sign a contract to save a certain sum per month for a fixed period, typically 7 years, at a modest rate of interest. At the end of this period, the provider is obliged to match the saved total and lend it to you at the rate of interest defined in the contract.

My wife (who has since died) and I saved 600 euros a month at 2% interest; the rate of interest specified in the contract for the loan is 5%. The 7 year term has now finished, and I'm wondering what I should do now that I am looking to buy (sometime) a house in the UK.

[heinzbean]

Thats not a bad plan. Dont need to be so rigid though.

Ok i am a save Aholic if there is such i thing...........I remember when back in 1988-89ish i used to save about £3000 a month on my own earnings. Then i had about 15 years where i could only be arsed to work about 6months of the year. At the moment i am a stupid wage slave yet again.

It’s good to have a savings plan, but it doesn’t need to take over your life.

There’s going to be a stage where you will be able to have a mortgage where the payments are less than renting.

Also if you buy at the bottom which should be end of 2010 beginning of 2011.

Lets say your house £150,000 looses 25% more ( £37,500 )so you only need £117,500

By 2010-2011 you must be able to save £10,000. Meaning you would only need to borrow.

£117,500-£10,000=£107,500

From Lloyds mortgage calculator..Dont forget not all mortgages are 25 years.....go for shortest you can afford.

10 year mortgage repayments=£ 1,166.12 (Total cost =£139,934.40)

12 year mortgage repayments=£1020.89 (Total cost=£147,008.16)

25 year mortgage repayments=£659.50 (total cost=£197,850.00)

If you go for the 12 year The rent you are paying now + £600 your saving will probably cover costs and you will be debt free in 12 years.

10 year option might be pushing it a little..but a massive saving on interest.

25 year option i am quite sure your rent will cover that little amount. And you can get on with living.

Dont forget the sooner you pay for your £hitty pile of bricks YOU CAN LIVE RENT FREE TILL YA DIE.

[Spoony]

I had that idea in 1998. Well sorta. Bought a shared ownership house in 1996 when prices were low. Thought I can pay off the 17K quite quickly, saying that I was only 22 and not earning a lot at the time. Had an idea about buying the next house but not living in it renting it out. EA said bad idea unless I had lots of capital (before BTL mortgages came about) so I forgot the idea. gf wasn't keen either. Bloody wish i had done it now.

So in the end I split with missus in 99, got a better job eventually paid off the mortgage and had to buy out the ex!! . Buts its only 40% share and I have rent to pay, and am saving up hard so that hopefully when the time is right I won't have to borrow anything at all.

Why follow the normal route that people take without question and become a debt slave to the bank for your slave box? You have a solid plan but make sure you still spend some and have fun.

We can all look back to our younger years and wish we had more fun its human nature. Ifyou are happy with what you are doing then go for it.

Edited October 30, 2008 by Spoony

[nobrakes]

I encourage you to do it.

I bought my first house for cash following a similar approach. Basically I graduated in 1989 with zero debt (had scholarship and worked when I travelled in summer hols). By 1997 I had saved enough to buy a house for cash (140k) and also had quite a bit invested in investment trusts as a retirement fund. I was never stingy with things like holidays but was about things like eating and drinking out, buying expensive clothes and flash cars. I hated buying anything that lost significant value the moment I bought it. I rented a fairly basic 2 bedroom flat in that period but as I was working or out playing sport most of the time that was not an issue at all. I have no regrets, quite the reverse.

My rules of thumb were NEVER to pay for something unless I had earned the money for it first and to avoid all debt. I also saved my money mainly in investment trust monthly savings schemes, not cash. It takes a while for this approach to get going but if you stick with it you get into a virtuous circle whereby your savings are growing by a really significant amount every year. The regular savings takes the psychology out of it as well.

I was an avid reader of investment books (e.g. Jim Slater, Warren Buffet etc), the FT, ITS Online and Investors Chronicle in that period. I advise you to do that as well if you are investing the market rather than cash.

Good luck, your plan is good and you may reach your goal sooner than you expect.

[dave]

Why a Typo? I save 5k monthly myself.

There are some very rich people on this forum are you sure you lot aren't successfful BTL'rs in disguise.

I dont like following the herd mentality myself, when everyone was buying house I scrimped and saved and nearly doubled my life savings. Now everyone in the country is on about savings, cash is suddenly become very important, I hav spent all my money in opening up an estate agency, I pride myself in doing opposite of the herd mentality. Millionaires are born this way. Has not worked for me yet, but one day!

Edited October 30, 2008 by dave

[dave]

Great to hear folks are doing the same as we are, saving as much a possible reducing debt to have a lot more choices in life

We have saved for 6 years and should have enough to buy outright buy late 2010/11

What my QUESTION to you is

Instead of buying a place outright Im thinking of spreading the money to buy a few houses and then use the extra money over the rent that my tenents will pay me to pay my mortgage.

Then having a few houses will increase my wealth when prices rise by 20--

If you only have one house you will of course have a mortgage free life but will never have any real money

What an original idea, brilliant. You should write a book, no better still, make a TV programme about it. Are you doing any seminars that I can attend, I dont mind paying through the nose, you obviously have a million dollar idea here. What surprises me, no one else in this country has ever thought of it before. Maybe, if they did, they could have avoided all the trouble there has been off late. Really, you should take the idea over to america, they will love it there. Call it something like 'Buy houses to let them out' or something. Actually 'Buy houses to let them out' BHTLTO, sounds very catchy, I want a percentage of the venture if you use that name. I thoought of extending the name to Buy houses to let them out to tennants, you know BHTLTOTT, but I fear that might be a tad to long.

Edited October 30, 2008 by dave

[heinzbean]

In my previous post Sorry i misquoted and offered you a mortgage you cannot actually have , sorry about that but You cannot buy your house now and the chain has collapsed.

With only a 10% deposit you would need £11750 And would have to go for a 90% LTV

25 Years=£807.37 Total=£242,211

12 Years=£1,189.02 Total=£171,218.88

10 years=£1,345.58 total=£161,469.6

[Wait & See]

If you only have one house you will of course have a mortgage free life but will never have any real money

You will if you get a property bought and paid for by your mid thirties. Just think about it -

Get to 35 debt and mortgage free,

Continue to earn, let's say 30 - 35k a year,

35k a year = 2k a month after tax, roughly,

Continue saving 1k a month @ 5.25%,

after 5 years = £66,731.41,

after 10 years = £148,704.04

So, by 45, this could be a very real proposition,

by retirement at 55 =

20 years of 1k a month @ 5.25% = £373,092.22

A tidy sum and no mortgage.

[Bobajobbob]

Jesus, you need to get out more and stop worrying about buying a house. Go and buy some drugs and have fun for a few years. Don't borrow and save whatever you can but really, having a 15 year plan at your age? Your girlfriend will have probably have dumped you before next Christmas and taken any savings anyway. The only thing that a man should ever plan that far ahead is the size of his girlfriends/wife's knockers. If you don't go for a good rack now you will regret it later.

[Wait & See]

Jesus, you need to get out more and stop worrying about buying a house. Go and buy some drugs and have fun for a few years. Don't borrow and save whatever you can but really, having a 15 year plan at your age? Your girlfriend will have probably have dumped you before next Christmas and taken any savings anyway. The only thing that a man should ever plan that far ahead is the size of his girlfriends/wife's knockers. If you don't go for a good rack now you will regret it later.

£373,092.2 would get her a decent set anyway.

[Guest mattsta1964]

Hey all,

Me & my partner are about to embark on something we think is a bit radical and were wondering if anyone else is doing the same out there.

From next year we're going to put away £600 per month into savings for 15 years. Once we get to this point, we'll have £150k and should be able to buy a house outright in cash.

We're also 'taxing' ourselves to help boost the amount of savings we're putting away. So for example if we spend £10 on eating out, we've got to put £1.50 into the house fund. Also taxing groceries (5%) and alcohol (15% store bought / 20% night out).

Basically the reason we're embarking on this is because we had a little look at what mortgages were available for the sort of place we're after (£150 2 bed flat in the city centre - obviously the price will fall over time) and we'd end up paying more than double the price of the house in total - even if we put forward a 10-15% deposit and we just don't see the sense in it.

For the record, we'll be around 37-38 when we look to buy.

The thing to bear in mind here is that the whole system is set up to favour borrowerrs rather than savers, thus saving money has become very inefficient.

The underlying rate of inflation, that's inflation based on money supply rather than the CPI (Comedy Price Index) is much higher than we have been led to believe. Money supply has consistently grown at between 11-14% in the UK for several years. GDP growth was around 2-2.5% and now is negative so even while the going was good, the underlying inflation rate was 8-9% and this inflation manifested itself in the housing market. This is why house prices soared. All that liquidity found a home in the housing market.

So buying a house back in 1995-1998 would have been a good investment, particularly if you had sold up before the $hit hit the fan. You would have made considerably more money than if you had been a saver during that time.

The entire system is totally dishonest and doesn't favour prudence or saving money at all.

If you are young and it sounds like you are, I would emigrate and go find somewhere cheaper to live. This country is totally screwed. The massive growth of money supply over the last decade is still a huge danger to this country. Although we are in the deflationary stage of this recession, the underlying liquidity in the system could come back to bite everyone on the a$$ and we could see much higher inflation in future and that is a further disincentive to save money.

In short, I think you should seriously reconsider your plan.

[5lab]

You will if you get a property bought and paid for by your mid thirties. Just think about it -

Get to 35 debt and mortgage free,

Continue to earn, let's say 30 - 35k a year,

35k a year = 2k a month after tax, roughly,

Continue saving 1k a month @ 5.25%,

after 5 years = £66,731.41,

after 10 years = £148,704.04

So, by 45, this could be a very real proposition,

by retirement at 55 =

20 years of 1k a month @ 5.25% = £373,092.22

A tidy sum and no mortgage.

this is true, but if you take inflation into account you're looking closer to £150k real money. still a tidy sum. but you'll be old and stiff, and you could die the next year. more money in later life is a good thing, but not at the expense of enough money to live your life now!

H

[SarahBell]

If you can save quickly enough then yes it's a great plan.

That TV program that showed people how to pay off their mortgage quicker had a few ideas but he tended to ignore the extra tax you'd pay on income.