Moving Out After Uni - Buy a House or Go Travelling?

For many students, life after university involves wanting to ‘see the world’, particularly when the obvious - and humdrum - option is returning home after university to live with your parents! The 'University of Life' has a very strong lure; this is entirely understandable as you are young and wanting to be educated about the real world by discovering cultures different from your own. But is there a smart time to travel?

You could rent, save up and then spend all you earnt on travelling. The problem with this is there are no direct benefits for you financially. You earn the money, you spend it, it’s gone. In contrast, putting down a deposit for a house can actually save you money in the long term - and this could be put to uses such as travelling. Click here to read examples of saving by buying.

Is it a question of one or the other?

The question of using savings to travel or make longer term investments might not necessarily be an ‘or’ question. Both can be achievable if you make good financial decisions. Perhaps it is more a question of priorities; holding off that desire to spend all that money you worked so hard to earn in one trip and investing in a long-term plan.

What are the benefits of both?

In the long-term, it is an obvious statement to say putting down a deposit for a house will give you more financial returns than travelling will. This isn’t to say you shouldn’t travel. Travelling can be a wonderful time and a very memorable experience that can stay with you for years to come. The question is whether it is economical to travel for a year or longer straight after you graduate. Travelling for a shorter time, say a month or two, could free up savings that could go towards putting down a deposit for a house.

The benefits of putting down a deposit for a house are you are free from any restrictions of living with Mum and Dad and continuing the freedom you developed at university. You also are getting on the housing market and beginning to develop equity. You are putting plans in place for your future that will continue to bear fruit.

Your thought could be ‘My savings aren’t enough to put down a deposit so I’ll go travelling instead’. There are various ways to enhance your savings in order to put down that vital first deposit. You could be lucky enough that your family could give you a gifted deposit or you could consider a Help to Buy ISA. Alternatively you can halve the deposit with a friend and share a mortgage.

If you do put down a deposit there are various ways for this to benefit you whilst you are travelling. It doesn’t just have to be monthly mortgage repayments that are nagging at the back of your mind while you are out in the big wide world.

Rent out one of your rooms

If you put your savings towards a house deposit on a freehold property, you can go travelling and rent out your room whilst you are away. You should bear in mind that Shared ownership and Help to Buy schemes do not allow you to sub-let. If your home is a freehold property you can rent out your dwelling while you travel whilst also continuing to pay back the mortgage.

In the main, mortgage lenders do not have a minimum period of time that they require the borrowers to live in the property before they allow you to rent out your home. However, as a result they may increase your mortgage or charge an administration fee, which is only a small price to pay in terms of the bigger picture. You could come back from your travels to a house rather than your childhood room at Mum and Dad’s house.

If you want to know the parameters regarding renting a spare room out, please visit the Money Advice Service's Rent a Room Scheme page which also explains the tax incentives involved.

Remortgage to travel

Remortgaging could free up a lump sum for you to put towards your travelling. This is essentially borrowing more money from your lender which increases the total mortgage sum you must repay. You can normally expect your overall interest rate to rise when you do this. The length of time you need to have been repaying your current mortgage before you can remortgage depends on your lender. Some might expect you to have been making timely repayments for 6 months before you can apply for a further advance, others may require a higher or lower time period. Overall, you should factor in that you'll have a larger debt to repay when you return from your adventures.

To Summarise

If travelling is something you have always dreamed of then by all means, buy a one way ticket and go and see the world. If you know you want to return within a set time, it is good to ensure you have considered the investment opportunities that could make your life easier on your return. Arguably the smartest time to travel is after you have put down a deposit for a house. In the meantime, shorter term holidays put less of a hole in your pocket whilst still giving you the new experiences you crave. It doesn't have to be one or the other.