First time buyer- one off costs & savings buffer to keep
Discussion
So I'm currently saving for my first place, I'm at least vaguely familiar with most of the logistics/steps involved, but a couple of questions:
- What sort of 'buffer' of saving is it sensible to keep in reserve? Obviously, it's tempting to plough more into the deposit but I'm currently thinking of keeping back about 6 months of (estimated) monthly costs e.g approx mortgage, bills, car costs & basic living, food etc as a safety margin. The mortgage will be in my name only (currently single) and I'm an Architect, so the industry I'm in can be somewhat volatile. I'll be out of my probation period in the next month, and have no inkling that I'll be out of work, but obviously Brexity concerns abound in the construction industry. I'm also aware that in a rural area (Herefordshire) a well-paying job wouldn't necessarily be the easiest thing to find. I'm tempted to consider a lodger at least to begin with to ease some of the pressure and allow me to replenish savings a bit quicker after the purchase to help a little as well.
Essentially I'm wondering how much slack previous first time buys gave themselves in reserve? I guess it also depends how much work the house needs doing as well, but bar any super-urgent jobs I'd be happy to live as-is for a while to let the finances settle out.
At the moment I'm aiming for a 10% deposit on a circa £190- 200,000 purchase, I could drop that down to 5% to make life easier in terms of saving, but seems sensible to aim for a better LTV.
- On-off purchase costs. Currently, I'm estimating around £2,500 for costs associated with buying, e.g arrangement/booking fee, valuation fee etc. Does that sound about right? I've assumed a fairly minimal valuation survey, rather than the full-blown works, as I'm fairly au fait with poking around buildings, so would be happy spotting issues myself.
Essentially I'm trying to figure out how quickly I can get moving! I'm saving about 65-70% of my take home each month, but am doing so by cutting back dramatically and lodging with the parents. This is *somewhat* stressful, so it's nice to have a (relatively near..) date in mind to get the ball rolling.
So the ballpark figures are 20k deposit, 2.5k costs and circa 7.5k cash on hand, for a circa 200k purchase. Sound about right?
Thanks,
Craig
- What sort of 'buffer' of saving is it sensible to keep in reserve? Obviously, it's tempting to plough more into the deposit but I'm currently thinking of keeping back about 6 months of (estimated) monthly costs e.g approx mortgage, bills, car costs & basic living, food etc as a safety margin. The mortgage will be in my name only (currently single) and I'm an Architect, so the industry I'm in can be somewhat volatile. I'll be out of my probation period in the next month, and have no inkling that I'll be out of work, but obviously Brexity concerns abound in the construction industry. I'm also aware that in a rural area (Herefordshire) a well-paying job wouldn't necessarily be the easiest thing to find. I'm tempted to consider a lodger at least to begin with to ease some of the pressure and allow me to replenish savings a bit quicker after the purchase to help a little as well.
Essentially I'm wondering how much slack previous first time buys gave themselves in reserve? I guess it also depends how much work the house needs doing as well, but bar any super-urgent jobs I'd be happy to live as-is for a while to let the finances settle out.
At the moment I'm aiming for a 10% deposit on a circa £190- 200,000 purchase, I could drop that down to 5% to make life easier in terms of saving, but seems sensible to aim for a better LTV.
- On-off purchase costs. Currently, I'm estimating around £2,500 for costs associated with buying, e.g arrangement/booking fee, valuation fee etc. Does that sound about right? I've assumed a fairly minimal valuation survey, rather than the full-blown works, as I'm fairly au fait with poking around buildings, so would be happy spotting issues myself.
Essentially I'm trying to figure out how quickly I can get moving! I'm saving about 65-70% of my take home each month, but am doing so by cutting back dramatically and lodging with the parents. This is *somewhat* stressful, so it's nice to have a (relatively near..) date in mind to get the ball rolling.
So the ballpark figures are 20k deposit, 2.5k costs and circa 7.5k cash on hand, for a circa 200k purchase. Sound about right?
Thanks,
Craig
Edited by cRaigAl205 on Sunday 2nd June 16:46
Couple of things.
1) I assume you are aware of the tax free income you can receive from lodgers? Currently £7500 per year.
2) There are times when taking a bit of risk can be worth it so long as its short term risk or low risk. Saving £7500 extra is going to (I assume) take quite some extra months. I would say, as a short term solution that 3 months EF would be enough to help you get moving quicker.
In fact the buying process will probably take at least 8-12 weeks, so once you clear past your deposit + moving costs + say 1 month EF I would start looking for a property.
Its short term risk but its a calculated risk and then as each month passes you can re-build your emergency fund and the risk reduces.
One last thing, buying a property is stressful stay calm and enjoy finding a home as you will never be (probably) in this good of a position again as a FTB and remember property sales often fall through so keep on top of solicitors and avoid getting caught up in any probate sales etc.
1) I assume you are aware of the tax free income you can receive from lodgers? Currently £7500 per year.
2) There are times when taking a bit of risk can be worth it so long as its short term risk or low risk. Saving £7500 extra is going to (I assume) take quite some extra months. I would say, as a short term solution that 3 months EF would be enough to help you get moving quicker.
In fact the buying process will probably take at least 8-12 weeks, so once you clear past your deposit + moving costs + say 1 month EF I would start looking for a property.
Its short term risk but its a calculated risk and then as each month passes you can re-build your emergency fund and the risk reduces.
One last thing, buying a property is stressful stay calm and enjoy finding a home as you will never be (probably) in this good of a position again as a FTB and remember property sales often fall through so keep on top of solicitors and avoid getting caught up in any probate sales etc.
red_slr said:
Couple of things.
1) I assume you are aware of the tax free income you can receive from lodgers? Currently £7500 per year.
I am indeed. Do people reckon the intention to rent out a room limit my choice when it comes to mortgage providers?1) I assume you are aware of the tax free income you can receive from lodgers? Currently £7500 per year.
I also assume it will also bump up house insurance a little. But seems like worth considering, at least as an option to manage risk in the early days, particularly as a sole applicant. (and would help offset that fear that losing my job would be a big deal, and make the emergency fund last a good while longer)
red_slr said:
2) There are times when taking a bit of risk can be worth it so long as its short term risk or low risk. Saving £7500 extra is going to (I assume) take quite some extra months. I would say, as a short term solution that 3 months EF would be enough to help you get moving quicker.
In fact the buying process will probably take at least 8-12 weeks, so once you clear past your deposit + moving costs + say 1 month EF I would start looking for a property.
Its short term risk but its a calculated risk and then as each month passes you can re-build your emergency fund and the risk reduces.
red_slr said:
One last thing, buying a property is stressful stay calm and enjoy finding a home as you will never be (probably) in this good of a position again as a FTB and remember property sales often fall through so keep on top of solicitors and avoid getting caught up in any probate sales etc.
Thanks! I'd like to think I've got a fairly sensible head when it comes to this sort of thing (I've been involved with helping ex's and family with buying places) so can hopefully look at places fairly objectively and not get too carried away!cRaigAl205 said:
So the ballpark figures are 20k deposit, 2.5k costs and circa 7.5k cash on hand, for a circa 200k purchase. Sound about right?
When I bought my first house in 2003 my figures were:Deposit: £0
Costs and furnishing: Added £5k to the mortgage
Cash on hand: £0
On a £120k purchase
My disposable income should really have been paid directly to the landlord of my local!
Given that, what you are proposing looks very sensible!
I would ask Sarnie on here about the mortgage (he will sort it for you) but IIRC casual lodgers are treated differently to sub lets. Hence the tax break.
It may be prudent to put the lodger on the back burner, get the mortgage sorted and once you are in and have some payment history with the lender then approach for consent - assuming its required.
It may be prudent to put the lodger on the back burner, get the mortgage sorted and once you are in and have some payment history with the lender then approach for consent - assuming its required.
I've obviously heard good things about Sarnie on here, so I'll drop him a PM in due course!
I have been wondering about the lodger, and as you say, if it's better to keep things simple to begin with. I know there are places such as Bath Building Soc who do a 'rent a room' mortgage https://www.bathbuildingsociety.co.uk/mortgages/mo... (a bit niche, I know!)
But I'm not really doing it to get outside normal affordability criteria, just as a potential way to replenish emergency fund savings and as a mechanism to save up for any required longer-term refurb work. (plus garage build, obviously!
)
I have been wondering about the lodger, and as you say, if it's better to keep things simple to begin with. I know there are places such as Bath Building Soc who do a 'rent a room' mortgage https://www.bathbuildingsociety.co.uk/mortgages/mo... (a bit niche, I know!)
But I'm not really doing it to get outside normal affordability criteria, just as a potential way to replenish emergency fund savings and as a mechanism to save up for any required longer-term refurb work. (plus garage build, obviously!
)
Definitely aim for 10% deposit.
If you get a 95% LTV property and the property doesn’t increase in value and you don’t over pay in the 2 or so years your mortgage deal is for, you could end up on a 95% LTV again.
Them 2 years fly and once you have redecorated ,furnished your house and been on a holiday rewarding yourself for saving up for the deposit, you might not have cash to overpay and make it less than 95%LTV.
£1200 solicitors
£400 or so for survey
Booking fee should be free
Good luck. Best thing you can do.
If you get a 95% LTV property and the property doesn’t increase in value and you don’t over pay in the 2 or so years your mortgage deal is for, you could end up on a 95% LTV again.
Them 2 years fly and once you have redecorated ,furnished your house and been on a holiday rewarding yourself for saving up for the deposit, you might not have cash to overpay and make it less than 95%LTV.
£1200 solicitors
£400 or so for survey
Booking fee should be free
Good luck. Best thing you can do.
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