First Home - Options?
Discussion
Left uni last year, started my grad job 4 months later and I'm loving it. Salary is decent so after student loan, tax and a pension (both paying 5%) I'm taking home around £20.8k a year. Abit more this year because of how the tax year fell. There's also a bonus but this is only known a few weeks before its paid and profit based. (Company not looking to make much this year)
After rent (£325 PM), bills (£230 PM), fuel (£250 PM), insurances (works out as £120 PM, paid annually) and food (£120 PM) I'm left with £8300 or so.
Looking to put away £4k into my LISA a year, this will be a struggle as I am spending money on hobbies! (this is non-negotiable in my book, i'm young and rallying is still legal, future doesn't look so rosey for it) I think I save quite abit on clothes, bills etc which allows me to mess around with cars.
Girlfriend is looking to do the same and currently has £6k inheritance, saving extra money slowly because shes currently earning alot less sadly.
So, we have a few options if we want to get a £150k house:
Buy sooner, with a small deposit (93.33% LTV) - Not good in long term, little left over for emergencies.
Buy next year, with a (some borrowed from family) £25-30k deposit (80% LTV) - again, little left over and then having to also repay family.
Wait a two to three years, borrow money from parents to get £38k (75% LTV) - Abit more left over.
Wait even longer (5 years +?) and get a bigger deposit and some extra savings (75% LTV) - Lots left over and full independence from family, this is my ideal but I'm unsure of where the market will be?
Ofcourse there's the not-so-spoken about option which has got a few of my friends on the housing market - big inheritance. Luckily my family are all relatively young and healthy, unluckily they also don't have much money. So waiting for that is not really an option for me.
Now, I'm not asking for a time machine, but where is the housing market headed? of course currently prices are high, but interest is super low. If house prices drop, will interest soar? And what mortgage type is the best option, one with a long tracker or fixed rate offer or a shorter one and remortgage?
I don't want to spend my early twenties scrimping to afford a house (lifes too short etc) but I also don't want to try and buy 8 years down the line and feel like a mug. So does anyone with knowledge have any feedback/opinions on where things are headed and if I'm being naive/stupid.
After rent (£325 PM), bills (£230 PM), fuel (£250 PM), insurances (works out as £120 PM, paid annually) and food (£120 PM) I'm left with £8300 or so.
Looking to put away £4k into my LISA a year, this will be a struggle as I am spending money on hobbies! (this is non-negotiable in my book, i'm young and rallying is still legal, future doesn't look so rosey for it) I think I save quite abit on clothes, bills etc which allows me to mess around with cars.
Girlfriend is looking to do the same and currently has £6k inheritance, saving extra money slowly because shes currently earning alot less sadly.
So, we have a few options if we want to get a £150k house:
Buy sooner, with a small deposit (93.33% LTV) - Not good in long term, little left over for emergencies.
Buy next year, with a (some borrowed from family) £25-30k deposit (80% LTV) - again, little left over and then having to also repay family.
Wait a two to three years, borrow money from parents to get £38k (75% LTV) - Abit more left over.
Wait even longer (5 years +?) and get a bigger deposit and some extra savings (75% LTV) - Lots left over and full independence from family, this is my ideal but I'm unsure of where the market will be?
Ofcourse there's the not-so-spoken about option which has got a few of my friends on the housing market - big inheritance. Luckily my family are all relatively young and healthy, unluckily they also don't have much money. So waiting for that is not really an option for me.
Now, I'm not asking for a time machine, but where is the housing market headed? of course currently prices are high, but interest is super low. If house prices drop, will interest soar? And what mortgage type is the best option, one with a long tracker or fixed rate offer or a shorter one and remortgage?
I don't want to spend my early twenties scrimping to afford a house (lifes too short etc) but I also don't want to try and buy 8 years down the line and feel like a mug. So does anyone with knowledge have any feedback/opinions on where things are headed and if I'm being naive/stupid.
Edited by l354uge on Saturday 27th January 15:06
Edited by l354uge on Saturday 27th January 15:12
Depends on what house prices do, but if they keep increasing then the sooner you get on the market, the better. Buying with a 5% deposit is fine- had you done that 2-3 years ago, your LTV would likely be 75-80% by now. For example, buy at £190k in 2015 with 5% deposit, house worth around £240k now; assuming £5k cleared from balance of mortgage in that time, the LTV now would be about 73%.
Obviously, with a 5% deposit you could end up in negative equity should there be a market crash. But I can't see house prices going down any time soon.
Should add- the longer you wait, the harder it could become. Yes, you'll save more and will no doubt be earning more, but the house prices have increased faster than earnings.
Obviously, with a 5% deposit you could end up in negative equity should there be a market crash. But I can't see house prices going down any time soon.
Should add- the longer you wait, the harder it could become. Yes, you'll save more and will no doubt be earning more, but the house prices have increased faster than earnings.
From your current finances, I would sit tight and hunker down if you want to move out to your own property.
Your mortgage at 90% LTV on 150k will be approx double what you're paying now. If you look at a higher LTV you will be looking at less favourable/limited rates or shared ownership schemes. I would possibly be concerned about whether you would be offered 150k on current joint wages either, I think you maybe close depending on what your better half earns (using x4 as a guide.)
To reach 90% LTV on 150k - you'll also need another 5k on that 10k. This will pretty much exhaust your saving fund at the same time. Keep in mind you will want roughly another 2k on top just for the privilege of moving.
A mortgage at double your current rent at current income may leave you a little more stretched than you want to be. Especially as you have rightly said at your age, you want to be out enjoying life. Also when you own your own home you pay for everything (boiler / washing machine breaks down / maintenance / decorating etc).
I personally wouldn't advocate borrowing off family either. You rent is VERY low at the moment and the fact you're thinking about getting a mortgage is good and will give you some focus. Ultimately at this point in time if I were in your shoes I would be just stashing the cash and living a little until it was more financially viable to make the next step up comfortably.
Your mortgage at 90% LTV on 150k will be approx double what you're paying now. If you look at a higher LTV you will be looking at less favourable/limited rates or shared ownership schemes. I would possibly be concerned about whether you would be offered 150k on current joint wages either, I think you maybe close depending on what your better half earns (using x4 as a guide.)
To reach 90% LTV on 150k - you'll also need another 5k on that 10k. This will pretty much exhaust your saving fund at the same time. Keep in mind you will want roughly another 2k on top just for the privilege of moving.
A mortgage at double your current rent at current income may leave you a little more stretched than you want to be. Especially as you have rightly said at your age, you want to be out enjoying life. Also when you own your own home you pay for everything (boiler / washing machine breaks down / maintenance / decorating etc).
I personally wouldn't advocate borrowing off family either. You rent is VERY low at the moment and the fact you're thinking about getting a mortgage is good and will give you some focus. Ultimately at this point in time if I were in your shoes I would be just stashing the cash and living a little until it was more financially viable to make the next step up comfortably.
Classy6 said:
From your current finances, I would sit tight and hunker down if you want to move out to your own property.
Your mortgage at 90% LTV on 150k will be approx double what you're paying now. If you look at a higher LTV you will be looking at less favourable/limited rates or shared ownership schemes. I would possibly be concerned about whether you would be offered 150k on current joint wages either, I think you maybe close depending on what your better half earns (using x4 as a guide.)
Joint income before tax is around £50k so £150k should be doable, borrowing £134k over 30 years gives £478 at a decent rate, so less than our £650PM rent, but like you said theres surprise bills we'd have to pay for and all the fees with moving (feel like these aren't explained well to youngsters) Your mortgage at 90% LTV on 150k will be approx double what you're paying now. If you look at a higher LTV you will be looking at less favourable/limited rates or shared ownership schemes. I would possibly be concerned about whether you would be offered 150k on current joint wages either, I think you maybe close depending on what your better half earns (using x4 as a guide.)
Like I said, I'd rather take your advice and just build savings if the market allows. But i'd be fuming if it meant ending up with a 13% mortgage like my parents!
Allows the flexibility to take a sabbatical and going traveling for a few months like I have always wanted to, I guess doing this with a mortgage would be difficult?
Edited by l354uge on Saturday 27th January 15:36
Aren't house prices in the midlands doing quite well at the moment?
I'd be tempted to buy something now whilst interest rates are still low. What are you renting and what would be the cost to buy similar?
Depending on the mortgage company you can sometimes convert to a BTL for a small fee and go travelling. I think I paid Santander £300 sometime ago.
I'd be tempted to buy something now whilst interest rates are still low. What are you renting and what would be the cost to buy similar?
Depending on the mortgage company you can sometimes convert to a BTL for a small fee and go travelling. I think I paid Santander £300 sometime ago.
Edited by jmsgld on Saturday 27th January 16:09
jmsgld said:
Aren't house prices in the midlands doing quite well at the moment?
I'd be tempted to buy something now whilst interest rates are still low. What are you renting and what would be the cost to buy similar?
Depending on the mortgage company you can sometimes convert to a BTL for a small fee and go travelling. I think I paid Santander £300 sometime ago.
Still rising unlike London. Renting a two bed with garage for £650 a month, next door just sold for £170k. Area has good schools so abit more expensive compared to the area.I'd be tempted to buy something now whilst interest rates are still low. What are you renting and what would be the cost to buy similar?
Depending on the mortgage company you can sometimes convert to a BTL for a small fee and go travelling. I think I paid Santander £300 sometime ago.
Edited by jmsgld on Saturday 27th January 16:09
How would transferring to a BTL work with a LISA? Allowed?
If you have the deposit (and other associated costs) available to you then you would be mad not to buy.
It is your home and release from spending dead money renting, not an investment.
Having said that, it is also an investment in your financial future and independence.
If property prices rise or fall then this will impact at similar rates with all other properties in the same area at similar price point.
Also be aware that interest rates are likely to rise, so your mortgage payments will follow suit (though, so would any rental payments, so this does cancel such risk out).
If you were talking about an investment then I would advise you differently. You are not though, you are talking about securing your own home.
It is your home and release from spending dead money renting, not an investment.
Having said that, it is also an investment in your financial future and independence.
If property prices rise or fall then this will impact at similar rates with all other properties in the same area at similar price point.
Also be aware that interest rates are likely to rise, so your mortgage payments will follow suit (though, so would any rental payments, so this does cancel such risk out).
If you were talking about an investment then I would advise you differently. You are not though, you are talking about securing your own home.
Classy6 said:
I would possibly be concerned about whether you would be offered 150k on current joint wages either, I think you maybe close depending on what your better half earns (using x4 as a guide.)
To reach 90% LTV on 150k - you'll also need another 5k on that 10k. This will pretty much exhaust your saving fund at the same time. Keep in mind you will want roughly another 2k on top just for the privilege of moving.
He says his net income is 20k, must be a gross of about £30k? Should be able to borrow 4x that no problem, so you're almost there just on your income, before you even consider adding on 4x your girlfriend's as well. With your combined income, you should be able to save up to a 10% deposit within a year easily. And at that point I'd be looking to buy. The only thing that would concern me is how stable you are with your gf. That's going to be more of a risk than house prices going down (and even if they do, and you find yourself in -ve equity for a time, as long as you can sit tight and keep paying the mortgage then it's a non issue for the long term). But splitting up when you jointly own the house is where things can get messy. So a bit of a safety net would be being in a situation where your income and equity would be enough to take over the property solely, should that need ever arise. To reach 90% LTV on 150k - you'll also need another 5k on that 10k. This will pretty much exhaust your saving fund at the same time. Keep in mind you will want roughly another 2k on top just for the privilege of moving.
Remember that all the time you're renting, you're effectively throwing money away (compared to the alternative of repaying a mortgage, beyond the interest on it), aside from the costs of maintaining it - just don't buy a basket case.
I'm from LE10 area, and it's generally a decent, desirable area, with good housing demand for people looking to get out of Leicester or Coventry. House prices are pretty stable, and not over inflated like they (potentially) are in the SE. So I don't think a crash nationally would hammer prices in LE10.
mjb1 said:
He says his net income is 20k, must be a gross of about £30k? Should be able to borrow 4x that no problem, so you're almost there just on your income, before you even consider adding on 4x your girlfriend's as well. With your combined income, you should be able to save up to a 10% deposit within a year easily. And at that point I'd be looking to buy. The only thing that would concern me is how stable you are with your gf. That's going to be more of a risk than house prices going down (and even if they do, and you find yourself in -ve equity for a time, as long as you can sit tight and keep paying the mortgage then it's a non issue for the long term). But splitting up when you jointly own the house is where things can get messy. So a bit of a safety net would be being in a situation where your income and equity would be enough to take over the property solely, should that need ever arise.
Remember that all the time you're renting, you're effectively throwing money away (compared to the alternative of repaying a mortgage, beyond the interest on it), aside from the costs of maintaining it - just don't buy a basket case.
I'm from LE10 area, and it's generally a decent, desirable area, with good housing demand for people looking to get out of Leicester or Coventry. House prices are pretty stable, and not over inflated like they (potentially) are in the SE. So I don't think a crash nationally would hammer prices in LE10.
Good advice for the OP. Do listen.Remember that all the time you're renting, you're effectively throwing money away (compared to the alternative of repaying a mortgage, beyond the interest on it), aside from the costs of maintaining it - just don't buy a basket case.
I'm from LE10 area, and it's generally a decent, desirable area, with good housing demand for people looking to get out of Leicester or Coventry. House prices are pretty stable, and not over inflated like they (potentially) are in the SE. So I don't think a crash nationally would hammer prices in LE10.
In 5 years that £130k mortgage will seem like nothing. Just do it. Its difficult to look into the future but too many people wait for tomorrow and end up chasing the market forever. Just buy the best free hold property you can afford ideally in a decent area and with a garden and garage or driveway and you will be set. Avoid leasehold and flats, strange properties with upside down layouts etc.
You wont stay there forever so just think about the re-sale features a little but don't get too hung up. Remember the market can get quite busy from April to September so you have a few months before silly season.
You wont stay there forever so just think about the re-sale features a little but don't get too hung up. Remember the market can get quite busy from April to September so you have a few months before silly season.
Also if you need extra cash and have a spare bedroom you can rent a room and get up to £7000 a year tax free from your lodger. Im not sure what a single room let would be near leicester, or what size property £150k gets you but should let out at £250-300/m including bills at a guess, which is £3000-3600 per year tax free. The mortgage company wont take it into account as income when you apply which is the only down side.
So go for the mortgage with the lowest initial interest offer that allows overpayment? (lets say 25 year mortgage)
then switch to a better mortgage once more money has been put in to get the LTV up? (30 year mortgage this time that allows overpayment, for more flexibility)
Also, I don't mind getting somewhere larger and having someone stay and pay most of the mortgage, i would LOVE that. Girlfriend is less keen..
then switch to a better mortgage once more money has been put in to get the LTV up? (30 year mortgage this time that allows overpayment, for more flexibility)
Also, I don't mind getting somewhere larger and having someone stay and pay most of the mortgage, i would LOVE that. Girlfriend is less keen..
Edited by l354uge on Monday 29th January 12:38
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