Is this achievable? moving up the property ladder

[GiraffeInABath]

My goal is to buy a cottage in my favourite village for my 30th- 2 bedroom cottages are on the market currently for around £280K

I am 26 years old and own a flat- bought for 122K in 2021, originally on the market for 140K but bought at the start of covid so price was hugely reduced. I put down a 15% deposit so currently there is still 103K owed on the mortgage. I have renovated the flat with a new bathroom, new decor etc and believe it would now be valued at around 150K (has garage, shared garden, converted Edwardian house so period features).

This leaves me around 47K in equity at present.

I am a professional currently working freelance- if my work continues at the rate it has been, I can save around £1.2K a month. Over the following 3 and a half years this would give me £42K.

Mortgage wise I can achieve a loan of around £145K. In total the 145K, predicted savings plus equity on flat would give me £237K.

How should I manage this? Am I better off overpaying my current mortgage to gain equity rather than saving? Should I put my savings into a stocks and shares isa for 3 years? I will turn 30 in October 2025. I’m not sure what the best way to go about it is/how to move up the property ladder in this case.

any tips welcome, thank you!

I feel too tired and feverish to do the maths but can I be nosey and ask what part of the county this is? It all sounds like bargain village!

In general, being this organised and having a plan is the way to drive things forward, so you’re doing well.

It’s good to have a dream, and very sensible to save towards it, but my advice is not to get too hung up on it. The 30th birthday thing is very specific. You don’t know what your personal circumstances (job, relationships, life priorities) nor the housing market and economy will be at that specific time. Don’t forget to enjoy your life on your way to your goals.

the thing you have to remember is the 280k of that cottage is not static. so if your flat goes up by 10% it's likely the cottage goes up by at least 10%.

This is my concern re it isn’t static. That’s why I’m looking to make the most out of what I can save/equity gained. Are stocks and shares ISAs the best way to gain on the money? Because my savings account seems fairly pointless

Exactly. Or, as there is a lot of evidence that the property market is overheated at the moment, there could be a housing price downturn or even a crash. It’s just too unpredictable.

Well there’s a pay off between security and better returns that only you can call. There are stocks and shares ISAs where the risk is spread over several investments so if one dives, you may still make a profit. I rate Martin Lewis for good advice on this sort of thing.

I have a stocks and shares ISA and it’s earning 4-5% atm. If interest rates rise that will probably shrink.

If interest rates you will probably also find it harder to get a mortgage. I think your beat bet if you are freelance is to look at increasing your income; can you plan some rate rises over the next couple of years which would get you a bigger mortgage? Or somehow take on more/higher value work. I think this is the variable you could control which will have the most impact and not everyone is able to so I would try that.

I wouldn't do stocks and shares with an end date in 3 years time. It's too short term to ride out any dips in the market.

Savings rates are pretty pants, unless you cam find a decent fixed rate somewhere.

I'd put quite a lot into the mortgage right now, but remember moving costs, and to keep enough for emergencies, stamp duty, solicitors, estate agents etc as cash.

3 years is too short term to guarantee make money on stocks and shares ISA. Values go up and down. They are a good idea in the longer term. You could make tax free money taking in a lodger. You can earn up to £7500 from that tax free. If you have a one bed flat, you could convert lounge into a bedsit. £350 a month for 3 years would give you another £12,600. So total up to £250k.There are Regular Savings Accounts that pay higher interest. You have to save so much a month, You can open them with as many different banks and building societies as you like. You're still looking at finding more or better paid work.

The other factor is your earnings, you're probably going to need to increase your earnings to make this work. Both so you can save more and secure a larger mortgage

It’s almost always better to pay off a debt (mortgage) first. There are online calculators showing how much interest you’ll save or how sooner your mortgage will end if you overpay, as it’s compound interest. I would guess you’ll save thousands. This will then give you more equity which may also provide better interest rates in your next property.

Interest rates are pants in any sort of savings currently.

Unless you know about investing, a stocks/shares ISA is a risky move, particularly if you want a return over 3 years and given a looming recession when stocks are all over the place.

I would 100% overpay but ensure you have some savings for a rainy day scenario.

Is your current valuation based on Rightmove? Or can you get an agent to value?

Is your mortgage fixed or can you get a better rate? What are the rules on overpaying?

S&S ISA would probably be too short term over 3 years, although the market is down currently

Are you putting anything into a pension to get the tax relief?

Overpaying mortgage is probably the best bet as that is likely to grow more in value so give more equity, but your future property is likely to go up by a similar percentage

Stocks & shares should be a 5-year plus plan. They’re not suitable for a 3-year investment.

If your plan is to move up the property ladder, I’d concentrate on overpaying the mortgage you have. What’s the interest rate on your mortgage? It’s almost certainly higher than any savings account will offer over 3 years.

Check the terms of your mortgage for his much you can overpay without penalty.

As you are freelance, you should keep a very healthy amount of cash savings (at least six months expenses) - regard this separately to your house fund.

Stocks and shares are really for a 10+ yr timeframe as they will go up and down in the short term but overall rise. I think your plan is ambitious but will ultimately depend on what happens in the property market and to interest rates over the next few years. I hope you succeed.

Other consideration is whether you think you will buy alone or may be in a committed relationship by then
If so, it depends what the other person is bringing to the party. For example, you can't save in a LISA as you already own a property, but if they have, they would have the 25% extra and you would be allowed to use that buying a property together

Use your extra money to pay extra on your mortgage (being careful of any overpayment fees). You will save much more on that than you can safely make in interest anywhere else.