It was always my intention to purchase a home once I built up a sufficient deposit. The time had finally come, but unfortunately where I'm from house prices have skyrocketed. I am no longer able to afford the type of home I want. Even if I decided to save an even bigger deposit, I see this as a crazy idea as I believe prices are way above what their true worth is due to a lack of a housing supply.
I believe house prices will come down in about 2-3 years at which point I would hope to jump on the market again. In the meantime, I'm not sure what to do with both the deposit I have saved or the monthly savings I am putting away.
I have about €40k to my name which is sitting in a savings account earning about 1.5% interest after tax. I am also putting away €700 per month into the same account. I do not like the idea of leaving this in savings for 3 years as it is generating less interest than the current inflation rate. I am contributing 2.5% of my salary on top of this to a retirement fund, along with my employer contributing 2.5%. Where I am from I can contribute up to 20% to my retirement fund with tax relief.
I believe my options are as follows:
- Continue saving as I am currently and have an additional €16-€25k to put towards by deposit when house prices come down (not guaranteed they will), also leaving my €40k lump sum in a savings account
- Max out my tax relief contributions to my pension fund (20% by me, 2.5% by employer) with €300 per month left over for my savings account along with my €40k lump sum
- Max out my tax relief contributions to my pension fund (20% by me, 2.5% by employer) and invest my €40k lump sum (plus €300 monthly) gradually into an ETF, withdrawing my deposit for a house when required
- Invest my €40k lump sum (plus €700 monthly) gradually into an ETF and maintain my current 2.5% contributions to retirement
There are also a good number of different combinations I could do, but the above are the main ones I am considering at the moment. I'm thinking the 3rd option sounds the best, but my only fear is that I will not be given a mortgage when the time comes as all of my savings are going into retirement funds and ETF's and banks would think I do not have the ability to make monthly mortgage repayments as this money isn't technically being saved.
Any thoughts on the best approach for saving in the medium term as in my circumstances? Thanks.
Submitted February 17, 2018 at 08:06AM by engineerfear1 http://ift.tt/2F9hHY4
