Can you run me through how you managed to purchase, upgrade and pay off a house in 9 years on a low wage?
- Deposit paid - source of this?
- Purchase price
- Average Monthly payments made
- What your wage was that you consider low
- Other income - spouse, inheritance etc?
I'm not having a go but, if you re-read what you have said in both your last posts as an "outsider" without this info, it doesn't appear to add up.
Likley a cheap house or he borrowed well within his means. The problem these days is people go to the bank and borrow as much as they possibly can not understanding the interest or long term consequences should something change.
I can speak from experience that I didn't do this I as a first time buyer went for a 21 year mortgage what that means is my monthly payments initially for the first 5 years were sky high compared to the purchase price and my interest was sky high too because the rate offered to low LTV buyers is worse. So I had incentive to overpay my already built in overpayments because of the reduced term so I was overpaying essentially twice compared to if I had just done what everyone else does these days which is take out a 35 year mortgage. I wish I had gone for a 2 year fix now as I would have been able to secure a much better rate because of the substantially better LTV after 2 years. 5 years in and now sat at 40% LTV so 60% paid off within 5 years. I've now done the opposite and stopped overpayments and extended the mortgage to invest elsewhere. What this will allow me to do is in 10 years time just buy my next home cash and I expect the next home to cost 3 times as much as my current home did as I will be looking to move to the absolute best area with the best public school in the country and parents just sold their home there for circa £800k a couple of years back to downsize so I'm taking 10 years of gain into account too when I will be looking to buy in 10 years time prices will only be higher.
People are fighting compound interest by borrowing the absolute maximum they can and looking to move up the ladder too early. I know someone for example who took substantial money from parents to buy 6 years ago. Borrowed the max. Is now moving again and again is taking money from parents to do so and again is borrowing the max. Living well above their means.
Terrible financial decisions and no business acumen are to blame for a lot of people's problems money wise. Buy low, pay low interest, save your disposable instead of leasing fancy cars 3 levels above your station and invest it to gain from compound interest or compounded returns from gains and dividends.
If on an average wage you put 15% into a S&S ISA and invest in a world index tracker. You would have circa £3 million iirc after 30 years sitting there.
That's 15% of the average wage and £3 million. Yet folk would rather spend it all to pretend to be doing well when they actually could be doing well.
It always amazes me when friends ask me for advice on cars I tell them to just get something from lexus for £15k second hand and invest the rest they come home with a £70k audi then complain about being skint all the time and they aren't making enough money.
I believe the rule is 50-30-20.
50% should be going on what you need to survive, the essentials, home, car, utilities, food, clothing, insurance and fuel.
30% is luxury spending holidays and days and nights out.
20% should be put into savings.
If everyone did that then I have absolutely no hesitation to say they wouldn't be struggling financially and would be able to easily afford to pay off their homes and move up the ladder.
Sit down make a spreadsheet with budgets for each of the 3 pots and then go write down what all your bills are and see how far off the 50-30-20 ratio you are.
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