Buying a house with savings instead of a mortgage - good idea?

[CunnningStunt]

We want to buy somewhere but hate the idea of a 25 year mortgage. Dh works as a contractor so no paid holidays, no sick pay etc but reasonable pay.

If we live frugally and save VERY hard for the next x years (much less than 25!) we could potentially save enough to buy a house outright or with a very small mortgage. Is this a good idea or are there pitfalls we haven't foreseen?

I know we're very lucky to be in this position but we're wondering whether we're missing something. Once we had a house we could afford for me to not work. So this plan would mean hard work for dh fr a few years but a house and no need to work for me at the end of it.

Any views or advice on what we've missed gratefully received. Ta.

Even if you start out with a 25 year mortgage as long as you have the option to over pay (or get a one account style mortgage) then if you are overpaying, the mortgage wont take 25 years to pay off anyway.
In order for savings to be a better bet than paying off your mortgage you have to be making more from the savings after tax than the mortgage is costing you.
I suppose for you to decide whether to buy now with a mortgage, or wait till you can buy outright you need to think about how much you want to have your own house, and how much the mortgage would be costing you in interest compared to whatever you are paying for where you live at the moment.

I'm sure i've probably missed something out, hopefully if i have someone else will correct me!

You don't know how much houses will be in x years. They could be much higher than they are now.

I would go with the mortgage and overpay. I assume you are paying rent now plus savings so you could consider your mortgage payment your "rent" and the extra your "savings" iyswim.

We started out with a 25 year mortgage in 2000 and started overpayments 3 years into the mortgage. If we stay here, the mortgage will be fully paid by April 2009 with no penalties!.

So my advice is to start with 20 or so year mortgage and pile in the overpayments from the beginning.

The thing is, some of the money you're spending on rent now could be used to pay off capital costs, so it would probably be more efficient to get a mortgage now, but like others said, one that is flexible to let you do overpayments.
You have to be disciplined about money, to manage the overpayments. A mortgage is also a good bet if you aren't so disciplined, in fact, because it's a bill you have to prioritise.

My DH has recently started work as a contractor and as we now have more money than before we have stuck 3 months worth of what we need to live into savings which we will not touch.

We are hoping to move house this year and will be either doing a one account mortgage and over-paying every month or getting a fixed rate for a couple of years, putting our money aside and then when we re-mortgage we would use the lump sum to reduce the amount we need.

We like the idea of the one account as we would have access to the savings should we ever need it. You never know what is round the corner so being able to dip into savings when required it always a good idea.

A mortgage all the way - plus Martin Lewis from www.moneysavingexpert.co.uk would tell you never to pay off your mortgage even if you could, always leave a small amount as you can always increase your mortgage back up to release equity if required.

Thank you for all these views. The maths is that we can save £4k a month for 4 odd years, we are assuming we will get a house for £250k. We are expecting house prices to go down ish or not move overly.

And I had no idea there was a catch or any downside to this idea so thank yuo all for telling me there is!

If you have £4k a month for 4 years plus interest thats about £200k isn't it? In the meantime you will have paid 4 years worth of rent.
Buy a house, move into it, make it how you want it, and add the rent money to the monthly payments which will make it quicker to pay off.