I know this is mostly going to be a personal decision, and involves factors other than money, but just wanted to check I wasn’t missing anything from a financial perspective.
My wife (36) and I (39) are in the middle of a house purchase, having already sold our previous property and currently living in temporary accommodation belonging to a family member. An opportunity has come up meaning we could stay here for the next 5 years or so, with minimal rent, allowing us to aggressively save and accumulate enough cash so that by then, we could buy a place outright or take on a minimal mortgage, and be very comfortable.
We’ve been weighing up the pros and cons of taking this opportunity vs continuing with our purchase, which is probably about a month or two from completion, but we’re struggling slightly with the decision so I wanted to get some third party opinions on our situation.
Key facts and figures
- the property we are buying is £700k
- We have £320k in cash, currently in a Chase account at 4.5% (easy access as we need it for the purchase)
-£20k in an existing ISA
-Our mortgage on the new property will be £400k over next 25 years, repayments nearly £2k/month. -Total monthly expenditure around £3.5k.
- Our combined net monthly income is about £6.8k.
The plan if we decide to stay here: both max out our S&S ISAs each year for 5 years. Move the capital into a 5 year gilt (if this is the best option for the time period and tax perspective?) I estimate that we’d be able to grow our cash to about £650-700k at the end of the period. I know this includes a huge assumption on the investment side but I’ve based percentage on my previous growth experience here, so well aware this part will be variable.
So far this might sound like a no-brainer, but the pros and cons as we see it:
Pros
- Chance to buy a property with no or low mortgage by mid 40s
- increased disposable income and chance for earlier retirement
- Wife can stop working once moved
Cons
- miss out on the house we’re currently purchasing (not perfect but ticks a lot of boxes)
- Let down the lovely sellers who we’ve met (I know we need to take that emotion out of it)
-£700k in 5 years time will buy less house than it does now (although given the benefit, we’d happily lower our budget accordingly)
- Our ‘temporary’ accommodation is not the best (sounds ungrateful but 5 years is a lot longer than a few months) and we are still paying a small amount of rent albeit to a family member
So, can anyone weigh in with advice either from a financial perspective, or just a general life one?