Saving For A House

[exception]

Nothing wrong with the original poster's plans in my view. We've been doing it for about 6 years already. When we came to England 6 years ago our life savings amounted to £1000. Never any recourse to the state and I'm hoping that in the coming years we can buy outright here or in another country of our choosing. More explicitly probably not outright but at the point where renting becomes more expensive than purchasing.

With regard to the ability of individuals to save certain amounts, I may be wrong, but it does seem as if there is a certain amount of shock at the rate at which some people can save. In my experience it isn't any great effort to save £2000 / month if a couple earn around £30k each and don't have to rent in expensive city centers. Although I'm not earning at the moment (self employed on self enforced leave) we're still managing to save a couple of hundred a month.

[dccarm]

Well that is where you are wrong. Being debt free is a utility in itself. As are savings. If I really need to, I can always use my savings in an emergency.

Plus renting you get things repaired for you and items replaced. Plus you don't need to worry about a depreciating asset when the market is going down - such as now.

There is no way that paying a mortgage is as good as renting.

It's unlikely that taking out a mortgage now to buy is as good as renting, but ten years ago it was different, and in a couple of years time it'll be different again. I've lived in a few places in the last 10 years, and until maybe three or four years ago, anywhere I've been, buying was always cheaper than renting.

The risk that I see with your plan is that you could be busy saving through the trough and then you'll be ready to buy when the market is back at the peak again.

[jimi]

2 comments:

1) If you decide to have children within the next 15 years you may decide owning your own property seems a good idea after all (it's the nesting thing)

2) If interest rates really do plummet in this country we may find ourselves in a situation where house prices have declined and there are also very good interest rates available. For example, if I could pick up a 15 year fixed rate mortgage at 3.5% and I could buy for 30% off peak prices I'd consider that a good deal, even though at current rates I'm hoping for somewhere nearer 50% off peak prices.

Well done on your savings by the way. If this country had more people like you we wouldn't be in this mess.

[ccc]

I am doing similar. For me to save almost 300k with buying a house in 2011-12 rather than buying one with a mortgage in 2006 the following has to happen. (% of how likely I think this will go my way)

(1) World financial system does not collapse. - 70%

(2) High inflation, including wage inflation, does not occur in the next 3 years. 60%

(3) House prices in Edinburgh fall about 40% plus from peak. 90%

(4) I can continue to save the 2k ish per month I do now. 50%

(5) My mum is fine with having me around paying cheap rent for the next 3 years. 80%

If all the above happens I will save close to 300k by doing the opposite of what I have always been told. All in all I reckon I have a good chance of success. At the very least I think the chance of me being WORSE OFF than having bought last year is incredibly unlikely.

So yes saving up can be a good plan but it all has to fit together. Same as someone buying a house with a huge mortgage 10 years ago. If they had brains they could have ended up saving/'earning' hundreds of thousands too. No reason you can't do the same on the downside. Wish us house savers luck !!

PS - FTB and every penny I have saved so far has been from working. Not one penny from inheritance or anything similar.

[AteMoose]

If this country had more people like you we wouldn't be in this mess.

or we would have been in the mess sooner ;p

[puppee]

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.

[5lab]

Well that is where you are wrong. Being debt free is a utility in itself. As are savings. If I really need to, I can always use my savings in an emergency.

Plus renting you get things repaired for you and items replaced. Plus you don't need to worry about a depreciating asset when the market is going down - such as now.

There is no way that paying a mortgage is as good as renting.

you do need to worry about a depreciating asset - cash. with inflation currently at 5%, and you'll be lucky to get 5% after tax interest rate on cash outside of an isa.

Money in housing is more volatile than cash, but that works two ways - you can expect greater gains at times as well. if you chose to save in 2000, vs investing in property, you'd be much worse off now, and you'd probably be worse off even after the crash.

renting vs buying is more a personal choice, if there was no money in buying there would have never been any market for BTL, as that exists purely on the profit from buying vs renting.

[Soul Reaver]

clearly a typo

Why a Typo? I save 5k monthly myself.

[Tiger Woods?]

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.

This is a good idea up to a point. I like the idea of your own personal VAT and luxury tax. However, at some stage, if houses drop as we expect etc., there will come a point where you have saved enough to have a significant deposit and the price of a house relative to the price of renting will mean that, unlike today, renting will be dead money. At that point you might want to consider buying...however it will be a few years away yet...

[ItsColdUpHere]

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 are basically making your life miserable to buy a house.

I'm 43 years old now and have my own house.

If I could take 20 years off you in exchange I'd gladly give it to you and start again with nothing.

You'd then be 43 with a house and I'd be 23 with my whole adult life to look forward to.

Would I then do without to save to get a house? Would I ******** - I'd live my life and if houses became affordable I'd buy one otherwise I'd rent.

Save by all means, avoid short term debt to buy crap yes, but don't make the aquisition of somehere to live the purpose of your life - its that sort of thinking that got the country into the hole its in now "must buy a house, MUST BUY A HOUSE, M U S T B U Y A H O U S E!!!"

Cheers...

PS you're forgetting to discount the amount the bank will get by inflation.

[puppee]

hi mark if i was you wait a bit like next spring see what prices are like if prices seem right to you take out mortgage use as big a deposit as u can then do what i did i fixed a sum in my case 1000 extra each month then each month take it in to b.s or bank and make a capital repayment on top of your mortgage payment cleared my mortgage in 10 years saving a packet on interest as if you are renting plus also going to save for house the rent you are paying is a waste and you are not living where you really want to be

[5lab]

I am doing similar. For me to save almost 300k with buying a house in 2011-12 rather than buying one with a mortgage in 2006 the following has to happen. (% of how likely I think this will go my way)

(1) World financial system does not collapse. - 70%

(2) High inflation, including wage inflation, does not occur in the next 3 years. 60%

(3) House prices in Edinburgh fall about 40% plus from peak. 90%

(4) I can continue to save the 2k ish per month I do now. 50%

(5) My mum is fine with having me around paying cheap rent for the next 3 years. 80%

If all the above happens I will save close to 300k by doing the opposite of what I have always been told. All in all I reckon I have a good chance of success. At the very least I think the chance of me being WORSE OFF than having bought last year is incredibly unlikely.

So yes saving up can be a good plan but it all has to fit together. Same as someone buying a house with a huge mortgage 10 years ago. If they had brains they could have ended up saving/'earning' hundreds of thousands too. No reason you can't do the same on the downside. Wish us house savers luck !!

PS - FTB and every penny I have saved so far has been from working. Not one penny from inheritance or anything similar.

i make that a 15% chance of success. good luck!

[lurker07]

In your early 20's making 15-year plans about taxing yourselves like miserable boring stingy old gits - don't make me laugh.

You're either a troll or the biggest pair of saddos I've ever heard of...

sorry -- that was laugh out loud funny

[Vaevictus]

you're what? 23? Christ mate - don't worry about it, just live your life.

Dont piss money away on stupid stuff by all means but at least have some fun! Taxing yourselves like that will also tax your relationship, especially is your other half is not into the idea as much as you. She will grow to detest you!

save a little, spend a little, but make sure you live a lot. It's only a roof over your head, it's not worth it.

[ccc]

i make that a 15% chance of success. good luck!

That's not bad !!

A 15% chance of travelling through all my 20's having the time of my life, not even thinking about buying a house. Then at age 30 working my **** of for 5 years and buying one outright !! Simply to feck off again for a few years in the knowledge that I have a place piad for to come back to….

I reckon a 15% chance of that is all good.

[pablopatito]

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.

I bet you won't, I bet your house with be £300k or more. Buy in five years time and you'll almost certainly do well. Carry on saving in five years time and you'll earn meagre interest and give the government 20% of it as well, whilst house prices will steadily rise. My mate had the same plan as you in 1996 and strongly advised me against buying my 3 bed house for £45k and he regretted it.

[Wimbledon88]

In your early 20's making 15-year plans about taxing yourselves like miserable boring stingy old gits - don't make me laugh.

You're either a troll or the biggest pair of saddos I've ever heard of...

What a horrible comment! Who asked you anyway?

Go for it! A tip might be to also bet against sterling. If I were you, I would open a Citibank a/c in various different currencies and spread it out a bit. For example, 1/3 in sterling, 1/3 in Euros, 1/3 in Swiss francs. Once you reach a certain point, you should qualify for Citigold, which means free banking and very good exchange rates, virtually the same as the market rates, with no commission! In fact, I would go the whole hog and save in Euros right from the start!

In 15 years time, I think we will be getting close to 2 pounds for 1 Euro...

[Austin Allegro]

I admire your fortitude, but wonder if it's really worth all that scrimping and saving - no treats, holidays etc. And what about children - 37/38 is leaving it a little late IMO. There's also pensions to consider. Also, is there any form of agreement in place over what happens if you split up? People can do funny things when they go off each other but there's a big pot of money at stake.

[lurker07]

You only get one life (unless you believe in Mumbo Jumbo but that's a different thread).

You only get one chance, FFS don't waste it worrying about this crap. Don't waste chances to do things because you are saving. You WILL regret it. Conversely, don't get up to your eyeballs in debt. You WILL regret that more.

Have fun

a waft of Joe Cocker and Jennifer Warnes drifts from the school disco.

....Who knows what tomorrow brings....

[roadtoruin]

What a horrible comment! Who asked you anyway?

Go for it! A tip might be to also bet against sterling. If I were you, I would open a Citibank a/c in various different currencies and spread it out a bit. For example, 1/3 in sterling, 1/3 in Euros, 1/3 in Swiss francs. Once you reach a certain point, you should qualify for Citigold, which means free banking and very good exchange rates, virtually the same as the market rates, with no commission! In fact, I would go the whole hog and save in Euros right from the start!

In 15 years time, I think we will be getting close to 2 pounds for 1 Euro...

Well nobody had to ask for permission last time I checked.

In all seriousness, if people want to play life so safe fine, I was certainly overly cautious at that age and wish I hadn't been.

However, what a bummer when the meteorite hits the earth at 14 years and 6 months and you've p1ssed your youth away for nothing...

[loon]

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.

Yes - we're doing something similar, but we already own our (small) house, so there is no rent to pay.

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.

Have a look at the Buying vs Renting thread, which should help you compute the real cost to you of buying now vs buying later. Whilst it's likely that buying later is the lower real cost at the mo, at some point buying now will become cheaper. That may be when you've saved 90% of your desired house price, but I'd be surprised if it didn't happen sooner - there's a crash on! Stay on top of your options as rents, house prices, inflation, interest rates etc change.

we'd end up paying more than double the price of the house in total

That's only really true when faced with the choice of buying outright now vs borrowing to do so, and your earnings remain the same. In practice, you'll repay the debt in future-money which may be worth less to you (inflationary times, your earnings rise) or more to you (deflationary times, your earnings fall) than today's money.

[5lab]

That's only really true when faced with the choice of buying outright now vs borrowing to do so, and your earnings remain the same. In practice, you'll repay the debt in future-money which may be worth less to you (inflationary times, your earnings rise) or more to you (deflationary times, your earnings fall) than today's money.

the only thing i'd add to that is if you buy you don't have to pay rent. so while total paid for the house is double, half of that is covered by the cost of renting

[noddage]

I find this post very depressing. You're in your early 20s. Enjoy your life and your money. I'm off to Poland tomorrow to have mad weekend. I doubt that I'll ever look back and wish I'd not gone and saved that little bit extra in October 2008. What's the opposite of "grow up"?

[xux42]

What's the opposite of "grow up"?

Finding in your 40s that you are still juggling your finances and having to explain to your kid why they can't go on the school trip like everybody else.

I think some of the posters on here are a bit naive about just how many people around them are quietly saving hundreds or thousands a month or massively overpaying their mortgages. If you start young it creates a virtuous circle and you find that you can start doing more and more fun stuff out of investment income.

You also find some of your erstwhile fun loving mates start making excuses about why they can't come to the show, gig, meal etc.

Not a very rock and roll tale, but you never did really believe all that born to be wild nonsense.. did you...???

[guitarman001]

1. Wow, some people here are saving a LOT! Selling books online; I must look into self-employment. Has to be easier and pay more than engineering, by the sounds of it.

2. You could save for a decade and then get run over by a bus. I value this opinion, from my girlfriend; it's good to save, but you also must make sure to live life now. I am still making the 'mistake' of saving and working a bit too much, and it's impacting negatively on my health and social life (turned 24 a few days ago).

3. Good post on page 3, I think... this line of reasoning is insane. To sacrifice one's life, take out a lot of the joy in life, in your earliest years, for the sake of owning a house in future. Don't do it, man!

4. I would struggle, living near Edinburgh, to rent AND save decent money for a place. As a result I'm at home and saving some (About £600-700 per month). I don't think I could rent for years while saving, the money I'd be losing on rent.... I think I'd rather go straight into getting a mortgage on a place. In a reasonable market, of course. Right now... no way. Maybe if I was earning a shedload I'd buy outright.

5. It's the mindset of this generation now. I'm the same. We're mostly in debt (just paid off my car, only *pfft* £15k student debt now) and a subset of us are basically sacrificing our early years to get rid of that debt and start saving so that we can get a place when the time is right; seeing what's been going on in the last decade, it's been pretty horrific and I would never get another loan again, except for the mortgage.

6. Quality of life has to be the most important thing in anybody's book. When you're long dead, nobody's going to remember you. So don't work too much, money isn't everything, and enjoy your life while you have it. My goals are to get good at what I do until I can afford to work part-time or contract, have more time to myself. As soon as I have enough dosh to retire on, I'll quit, simple as!

7. If I told my girlfriend we'd be renting for years until we had enough to buy outright, she would actually listen to me. But I don't think either of us would wait long; at the end of the day you have to take a risk at the right time for you. A house sooner is a house better, but make sure you're not massively losing out, and will be happy renting (especially as circumstances change and you want to have holidays, kids etc!)

EDIT - to cut a long story short.... I'd say that the moral is to save, but also to make sure that you enjoy your life and what your money can bring you, rather than cutting back and being miserable. Save but have fun

Edited October 29, 2008 by thomasross20