Financial Advice from Jessie Hewitson
Are you grappling with financial anxiety, dilemmas, or tough choices? Look no further! Jessie Hewitson, a seasoned money journalist and editor, is here to help as the new financial agony aunt for The i Paper. Jessie will be addressing readers’ questions while consulting top experts in the financial field—many of whom charge high fees—to ensure you receive the best advice possible. She’ll also share insights from her own life experiences, which include navigating her own financial missteps. Feel free to email your questions to [email protected], with “Ask Jessie” in the subject line, and she’ll get started on your query.
A Reader’s Inquiry: Vicy’s Quest for Homeownership
Vicy writes:
I am eager to get onto the property ladder in Glasgow and secure a home of my own, ideally a two-bedroom place in or around the West End or the northern parts of the city. Living on friends’ sofas and in spare rooms has become quite tiresome. I have managed to save around £125,000 in a cash ISA. However, I am currently unemployed as I just completed my degree, although I have had previous work experience. After two decades of sacrificing and saving diligently, I have cut back my spending significantly. I have applied for various jobs and am awaiting responses—some positions offer salaries of up to £45,000, while others are around £29,000. Should I pursue a mortgage now, or is it wiser to purchase a property outright with my cash savings?
Jessie’s Response:
Dear Vicy,
You come across as a person who tends to see things in black and white, and I say this as someone who shares a similar mindset. Initially, I was concerned for your situation, but your second paragraph surprised me. It’s not typical to find someone sofa surfing in a position to buy a home outright in cash.
I admire your discipline and the sacrifices you’ve made, but your current situation appears to be quite extreme. Therefore, I must suggest something you might not want to hear: it may be time to find a middle ground and consider renting.
Given that you won’t qualify for a mortgage without employment—most lenders require at least one paycheck, and some prefer you to complete your probation period—your options are as follows:
- Purchase a home quickly using your cash savings.
- Continue living temporarily with friends, secure a job, and then apply for a mortgage to buy a larger home, possibly with an extra bedroom.
- Opt to rent for about six months (if your rental agreement includes a six-month break clause, you can give notice after four months), allowing you time to ensure your job is a good fit before committing to a mortgage.
My preferred option is the third one. You might feel that renting signifies failure, but it truly does not. As David Hollingworth, a seasoned mortgage broker at L&C Mortgages, has pointed out, without a permanent address, banks might view you as a higher risk, which could negatively impact your borrowing options. While it may not directly affect your credit score, lenders typically prefer stability.
Renting will not only provide you with a stable address but also allow you to experience the area where you’re considering buying, giving you a taste of life there before making a commitment. It also gives you breathing room to ensure you are happy in your job—rather than rushing into a mortgage that could leave you feeling trapped if you end up disliking your work.
Moreover, if you exhaust all your savings to make a cash purchase, you’ll be left with no financial cushion—ideally, you should have at least three months of living expenses saved. If you allocate £100,000 of your savings for a deposit and secure a job with a £30,000 salary (the lower end of your expectations), you could still obtain a mortgage of up to £120,000 towards a £220,000 property, while retaining £25,000 in savings.
Lastly, I have to ask: where is the joy in your life? I may be reading too much into our brief exchange, but it seems like you might benefit from shifting your perspective from viewing life as a series of challenges to one where you actively seek out opportunities for happiness.
You’ve made significant sacrifices in your quest for homeownership and have done remarkably well. Now is the time to ease up a bit. As another person who has learned to navigate the nuances of life, I encourage you to find a balance—both literally and figuratively.
House prices are not expected to rise dramatically this year, so taking a portion of your savings to invest in making the right decision now could save you money on borrowing in the long run. Plus, it will enhance your comfort and security in the present moment.
