Author Topic: Buy my first home or save while the going is good  (Read 2651 times)

Mr stuble

  • 5 O'Clock Shadow
  • *
  • Posts: 14
Buy my first home or save while the going is good
« on: April 01, 2015, 11:17:57 AM »
Hi everyone, I'm 21 new to the forum but excited about starting my path on becoming a moustachioed young fellow.
I'm looking for advice on a major financial decision I have coming up, I have two obvious options that will be approaching over the next few months, whether to buy my first house, or to save/invest the deposit and carry on living with the old man.
I'm based in the UK so all my figures are in GBP. I have 16k saved up, at the time of buying I would have more like 20k to put down on a deposit. The master plan is to get a 3 bed house and lodge out the spare rooms to my friends, which is tax free here in England up to 6k p/a, which would effectively pay my mortgage for me.
The alternative is carry on living with very low living costs at home, I'm currently saving around 800 per month, and look at index forums to invest in.
I suppose I'm not asking a direct either or question but just searching for advice, or maybe another suggestion that I may have over looked. So for a reference point interest rates are hovering just above 0 here, my savings account is earning me a measly 0.5% p/m but that also means interest on the mortgage would be around 3%.
Thanks for taking the time to read, I look forward to hearing your frugal wisdom!

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3054
  • Location: Emmaus, PA
Re: Buy my first home or save while the going is good
« Reply #1 on: April 01, 2015, 11:24:30 AM »
Gotta move out sometime. Earlier the better.

Forcus

  • Pencil Stache
  • ****
  • Posts: 714
  • Location: Central Illinois
Re: Buy my first home or save while the going is good
« Reply #2 on: April 01, 2015, 12:31:59 PM »
I bought my first house at age 24 (I think). It was 105k (USD) and a high interest rate (this was before the housing crash in the U.S.). I paid ~$1100/mo and an average of $150/mo in repairs, + $10k for a roof and $5k for a new heating / air conditioning system. In addition it was a very inefficient house so I would average 300-500/mo in heating / ac bills. I had it for 8 years and sold it a couple weeks ago for 97.5k. I won't do the math here but I lost many, many tens of thousands of dollars whereas my apartment I moved from was $425/mo, with a nice pool and two carports and no crime which would have allowed me to save so much money.

With what you posted, it might be an ok move but you MUST MUST MUST account for repairs, property taxes (if applicable in the UK) and other expenses to be able to understand the big picture. That is what I did not understand going in to my first house.

Just my $.02. But I remember I was so proud I wasn't "throwing away money on rent" when I bought my house and it ended up being a money pit. I know that's not exactly your situation but something to think about.

Sibley

  • Walrus Stache
  • *******
  • Posts: 5239
  • Location: Northwest Indiana
Re: Buy my first home or save while the going is good
« Reply #3 on: April 01, 2015, 12:46:56 PM »
There's a huge difference between renting and buying. You're really young, and things can change a lot in a few years when you're in early adulthood. I'd hold off on buying for now, because if you want to move 100 miles away you'd have some problems doing that.

Prairie Stash

  • Handlebar Stache
  • *****
  • Posts: 1795
Re: Buy my first home or save while the going is good
« Reply #4 on: April 01, 2015, 10:16:24 PM »
2 rooms pay for the mortgage, sounds pretty good. If you rented out all 3 rooms and stayed at home what would the rental look like?

Mr stuble

  • 5 O'Clock Shadow
  • *
  • Posts: 14
Re: Buy my first home or save while the going is good
« Reply #5 on: April 02, 2015, 03:17:08 AM »
Cheers for the responses, I'm leaning on the side of buying but from a position of only if its perfect. In response to Prairie Stash, the laws here dictate that if you want to buy to rent you have to put down a 25% deposit and pay taxes on the revenue. If you lodge out a spare room or two while you are living in the house it is legally seen as the lodger 'helping out with the bills' so you can keep a standard mortgage and don't have to pay as much tax.
For one house I'm looking at, purchase price is 130,000. To Rent you would be looking at 8/900 p/m and to lodge you could easily get 350 per room. If I got a 110,000 mortgage repayments would be something like 450 p/m until interest rates increase again.