One of my goals from the list last week was to work through some options for housing since this is by far our biggest spend.
As so often happens, once the thought was there, things started to move around it. I had a call from our landlord saying they are moving back to Denmark from overseas, meaning that we definitely have to move by June 2021. We love our house but in some ways this is good news – since we have to move anyway, it’s forced me to look at options.
In this blog I use all my real figures, except… I have never shared the real cost of my rent. Because it’s HUGE and makes me feel ridiculous. It’s not super expensive within the Danish market, given the size of house etc, and we already chose to live out in the ‘burbs to save. But the real cost is (gulp) £3,350 per month. That’s the equivalent to more than £40,000 per year or one-third more than the total average salary in the UK. Copenhagen is 16th most expensive of 589 cities in the world, but I still do a little vomit of terror every time I pay rent.
To note – in my figures to date, I have removed a chunk of the cost of living benefit I received, and the same amount off the rent. So the figures balance, but it’s not exactly accurate.
Before I get into the finance side of things, one of the things I have realised during this blog is that as a single mum, my approach to financial decisions has a big chunk of emotion in the mix. Whilst that’s probably true for a lot of people, being solely responsible for small people means that I focus a lot on home, safety, and planning for what would happen if I lost my income. We also moved around a lot when I was a kid, then as a serial-expat, moving has been something I do at least every few years, often living in company-managed accommodation where I know it’s only temporary. And whilst home is super important, my work (and personal and other financial issues) mean that my 11 year old son has lived in 11 homes to date. So – lots of emotion around decisions about where we live.
So I came from the position of wanting security, and wanting to see where we could make savings (and potentially make some money at the end, but it’s not guaranteed). I have four years on my contract here, and the kids are loving Copenhagen. So I decided to look into buying a home. Doing that whilst an expat is complicated – there is a fantastic and very detailed guide here. If you want to buy before you have lived here for five years, you need a special permission and you are also obliged to sell the property within six months if you leave the country. So there is a higher risk that you might have to sell at a bad time. For me this has meant thinking more about the home I would buy and discounting some which I like because there are things which might make it hard to sell – road noise in particular seems to be a no-go.
With that in mind, I started to explore mortgages. And I have to say, coming from the super-cautious (at least after the 2008 crisis anyway) UK, this has been really easy. I need a 10% deposit, but the mortgage interest is only 1%, fixed, for 30 years. At that level, even living here for five years means I would pay off a decent chunk of capital in addition to having lower monthly costs. I will have to pay taxes which are included in my current rent but with this, the amount I will save on monthly outgoings (including paying off a small loan I need to take out to get to the 10%) and capital paid off is as below:
|Two years||Three Years||Four years|
|Savings on monthly outgoings||£ 31,617||£ 47,425||£ 63,234|
|Capital paid off||£ 30,713||£ 46,511||£ 62,610|
|TOTAL saved + capital owned||£ 62,330||£ 93,936||£ 125,844|
For me, there is enough wiggle room in there to take the risk that the house will need major repairs (these should come out in the ‘condition report’ which is like a survey) or the value goes down, for it to be worth it. It’s not a totally fair comparison since the amount we can borrow means we will have to move a couple of train stops further out where rent would be slightly cheaper anyway, but it’s close.
All the reading and reflecting I have been doing the last few weeks has reminded me again that FIRE, and financial decision making in general, is based so much on what we want out of life, and what that translates into in terms of balancing risks and benefits.
So this week I am going to start looking at houses!