Life after university can be a strange time. The obvious living options are continuing to rent, or moving back in with Mum and Dad. However are these your most productive options? You can get on the property ladder by clubbing together to buy a home with the friends you made when studying...
Renting and returning home are not your only affordable options.
With property prices rising rapidly and salaries not, the average age for first time buyers to join the property ladder has increased to 33 years old (Source: English Housing Survey 2016 - 2017 (Department of Housing, Communities and Local Government)). You can combat this by getting a group of young adults together, getting on the housing ladder and beginning to develop your own equity by sharing a mortgage.
What are your options after university?
- Renting
- Moving back home
- Buying a property
Renting
Most students will rent at university. You know how to do it and you've done it before. Even though this seems like an easy option and gives you your own space away from home, it has it disadvantages. Renting means you are not developing equity and it is often an expensive option. You'll see your newly-acquired salary decrease - but you won't have anything to show for your rent payments in terms of ownership.
Moving back home
The boomerang phenomenon - this is simply returning to the house you grew up in after years of studying. In the last 10 years the number of young people between the ages 20 and 34 years old still living with their parents has increased by over 700,000 (Source: Office for National Statistics (ONS) - Young adults living with their parents - November 2017). The benefits of moving back home are obvious; no/low rent, Sunday roasts and a free washing machine. The familiarity is an understandable comfort and often parents love having their little ones back home. Additionally, smart saving during a period of living at home can be the key to achieving that all-important home buying deposit.
But there are things to consider. Daily routines can clash with those who are at home, and when you have a new job this can be tricky. After living away from home for at least three years and developing your independence, you need to consider whether you want to lose that for a long period of time. Understandably, a short period of time at home is inevitable for you to make these decisions, however also like with renting, you are not developing equity and so it is a stand-still position. As a young adult you want to be putting plans in place for your future.
Buying a Property
If you are lucky enough to be able to afford a deposit for a house straight out of university – great! However, the reality for most students is that buying a property initially feels like an impossible dream.
A common attitude is to say ‘I’ll just live with Mum and Dad until I can afford to put down a deposit for a house’. Say you want to buy a property worth £200,000 with a 10% deposit. That 10% deposit is worth £20,000. If you save £200 a month, it would take over 8 years to save up for a £20,000 deposit, which suggests living at home with Mum and Dad until you are around 30 years old.
Wouldn’t it be nice if you could half the time you’d need to save up for this deposit? You can! If you share a mortgage with a friend on this house, you can halve the deposit with them. Your half of the deposit would be £10,000 so it would only take 4 years to save up, which is only 4 years living at home. Saving up £400 a month would reduce it to 2 years, and suddenly 2 years living at home with a long term plan in action doesn’t seem so bad. Not only will you be back into the freedom and independence you had at university, but you will be developing equity and be on track for being the first of your friends to own your own place.
Initially it may seem daunting having to trust and rely on your peers, however the Shared Ownership Protection service ensures security in the event of a dispute, exit support and other policies, which you all mutually agree before you start your home share. The Deed of Trust, which you'll construct, is countersigned by a solicitor and is legally significant if for any reason you had to go to court regarding your home share.
