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  • FIRST POST
    • bobobski
    • By bobobski 15th Oct 16, 9:52 AM
    • 398Posts
    • 1,024Thanks
    bobobski
    Benefits of "starter" home?
    • #1
    • 15th Oct 16, 9:52 AM
    Benefits of "starter" home? 15th Oct 16 at 9:52 AM
    Until now my plan has been to save desperately for approximately 5 years before I can afford my "ideal" (still in a cheap area) house and that assumed the market didn't continue to rise at 8%-10% per year as it has been (*cries*). That would be house that in today's money would be worth approximately £325k.

    Various people have suggested that I buy a "starter" home, around the £250k mark in today's money (there really isn't much for less around here). Given that my "long term" plan was 5 years, and the earliest I could achieve this "short term" plan would be about 2 years, I question whether it's worth it. What with moving costs, SDLT, agents' fees and not much time to pay down the mortgage, my dodgy maths suggests that I would be no better than if I'd just waited, continued renting and saving, and sticking with Plan A.

    Now my head hurts and I thought I'd turn to you lovely chaps to offer your own experiences. Is a "starter" home worth it and, if so, under what conditions?
    #86: Save £12k in 2016: £7,792.18 / £10,000 (77.92%) | #[ ]: Save 12k in 2017: £0 / £12,000 (0%)
    House deposit by 31/12/2020: £10,763.60 / £60,000 (17.93%)
    Emergency fund by 31/12/2020: £294.91 / £5,000 (5.89%)
Page 1
    • Starchaser
    • By Starchaser 15th Oct 16, 10:20 AM
    • 3 Posts
    • 3 Thanks
    Starchaser
    • #2
    • 15th Oct 16, 10:20 AM
    • #2
    • 15th Oct 16, 10:20 AM
    Hi bobobski,

    I bought my starter home a year ago with a 10-year fixed (20 year term), portable mortgage. I initially wanted a bigger place but the area I bought in was ideal for me right now. Mortgage and bills are very affordable and leave me a nice amount of disposable income and/or money to save.

    House price rises may mean that I lose out in the long run compared to if I'd bought a larger place to begin with. However as there's just me at the moment a starter home is all I need, and the money I'm saving allows me to do other things in life.

    So for me, buying a starter home is definitely worth it in the short and medium term. Whether it turns out to be the best long term... that remains to be seen!

    Hope this helps
    • Bossypants
    • By Bossypants 15th Oct 16, 10:45 AM
    • 398 Posts
    • 723 Thanks
    Bossypants
    • #3
    • 15th Oct 16, 10:45 AM
    • #3
    • 15th Oct 16, 10:45 AM
    The benefits of a starter home are two-fold:

    1. It helps you keep pace with the property prices in your area in the event that property prices rise
    2. Assuming a repayment mortgage, with each mortgage payment you are increasing your equity in your property, in effect 'saving' money that otherwise would have gone to the landlord

    Combined, these two factors will in theory put you in a stronger financial position to buy your next home when you are ready to move on. I say 'in theory' because there are always exceptions (property prices may fall instead of rise and leave you in negative equity, or your particular property may be hit by large bills which you wouldn't have been liable for as a tenant). By and large, though, if you are relatively secure in your financial position and you know you want to own a property in the near-medium term, getting on the property ladder as soon as possible is usually the way to go. Good luck!
    Mortgage Overpayment Aim - £20,000 in 2016
    Progress: £1/20,000
    • Jackieboy
    • By Jackieboy 15th Oct 16, 10:46 AM
    • 251 Posts
    • 397 Thanks
    Jackieboy
    • #4
    • 15th Oct 16, 10:46 AM
    • #4
    • 15th Oct 16, 10:46 AM
    When you say "starter home", what sort of thing do you mean?
    • ellie27
    • By ellie27 15th Oct 16, 10:52 AM
    • 959 Posts
    • 649 Thanks
    ellie27
    • #5
    • 15th Oct 16, 10:52 AM
    • #5
    • 15th Oct 16, 10:52 AM
    Really not sure what you mean.

    I wouldn't buy a home with a plan of just spending 2 yrs in it, if thats what you mean. I think it would be best to save a bit more and buy something that you plan staying in much longer.
    • Bossypants
    • By Bossypants 15th Oct 16, 10:58 AM
    • 398 Posts
    • 723 Thanks
    Bossypants
    • #6
    • 15th Oct 16, 10:58 AM
    • #6
    • 15th Oct 16, 10:58 AM
    Really not sure what you mean.

    I wouldn't buy a home with a plan of just spending 2 yrs in it, if thats what you mean. I think it would be best to save a bit more and buy something that you plan staying in much longer.
    Originally posted by ellie27
    Respectfully, I think there is a significant gap between 'forever home' and 'buying a place you hate purely for the purpose of reselling'. I would never advise anyone to buy a place they could not see themselves living in for at least 5 years, but equally very few people can afford their dream home right out of the starting block. The trick is to to be realistic about what you can afford and then try to find something in that bracket where you think you'll be comfortable living for a good long while.
    Mortgage Overpayment Aim - £20,000 in 2016
    Progress: £1/20,000
    • bobobski
    • By bobobski 15th Oct 16, 11:52 AM
    • 398 Posts
    • 1,024 Thanks
    bobobski
    • #7
    • 15th Oct 16, 11:52 AM
    • #7
    • 15th Oct 16, 11:52 AM
    Thank you for all the replies.

    Respectfully, I think there is a significant gap between 'forever home' and 'buying a place you hate purely for the purpose of reselling'. I would never advise anyone to buy a place they could not see themselves living in for at least 5 years, but equally very few people can afford their dream home right out of the starting block. The trick is to to be realistic about what you can afford and then try to find something in that bracket where you think you'll be comfortable living for a good long while.
    Originally posted by Bossypants
    This is sort of my problem - my "forever" home is actually on the cheap end of the market here, but not the cheapest, so right at the top end of that sweet spot. So the price gap (at today's rates) between the starter home and the "forever" home is only about £75k, being 30%ish of the cost of the starter home. That's why the maths isn't clear enough that getting on the property ladder would be worth my while in the long run - when I ran the numbers I would break even compared to how much I would expect to save over the same period. Both calculations involve more assumptions than facts though, hence asking the question on here.

    Maybe the answer is to keep saving, wait til I would be ready to buy a starter home and see what the market is like at that stage? Reducing the assumptions, I suppose...
    #86: Save £12k in 2016: £7,792.18 / £10,000 (77.92%) | #[ ]: Save 12k in 2017: £0 / £12,000 (0%)
    House deposit by 31/12/2020: £10,763.60 / £60,000 (17.93%)
    Emergency fund by 31/12/2020: £294.91 / £5,000 (5.89%)
    • moneyistooshorttomention
    • By moneyistooshorttomention 15th Oct 16, 12:02 PM
    • 10,898 Posts
    • 30,657 Thanks
    moneyistooshorttomention
    • #8
    • 15th Oct 16, 12:02 PM
    • #8
    • 15th Oct 16, 12:02 PM
    I took the chance when I had it of getting a starter home (though somewhat different circumstances to yours).

    1. Yes - there will be "swop-over costs" to move up the ladder. However, it's counterbalanced by money saved on rent.

    2. You're more secure with the home being your own. No landlord deciding to kick you out when it suits them.

    3. You've made sure you've got a home of your own and, if things go belly up subsequently to how you've planned for your life to be, at least you've still got somewhere of your own while you wait/hope/etc for the chance to move on. That one is "voice of experience" time - because that's exactly what happened to me and I was in that starter home for way longer than I had planned for. But at least I wasn't in rented accommodation whilst waiting for a better house - I had a house of sorts.

    4. If you get made redundant at any point - no worries about landlords refusing to take on DWP tenants. Also a stronger position from which to "hold out" for a reasonable job to replace the one lost - rather than grabbing for the first one you can get your hands on.
    The unexamined life is not worth living.
    • Sus59
    • By Sus59 15th Oct 16, 12:27 PM
    • 50 Posts
    • 66 Thanks
    Sus59
    • #9
    • 15th Oct 16, 12:27 PM
    • #9
    • 15th Oct 16, 12:27 PM
    Is the starter home better or worse (smaller/bigger/better condition) than where you are currently renting?
    If it is better, then it is a no-brainer as you would be enjoying living in a nice home that was your own whilst putting your money into repayments of the mortgage instead of rent.
    If, however, the starter home is not as nice as where you are currently renting then you may need to get your calculator out and consider all the variables.
    • Planet Switzerland
    • By Planet Switzerland 15th Oct 16, 2:20 PM
    • 57 Posts
    • 35 Thanks
    Planet Switzerland
    Round where I live you could buy a 3 bed for around £325k around 5 years ago. Now these properties sell for £500k+ and some 1 bed flats cost more than £325k now.


    So basically if its going to take 5 years to be in a position to buy somewhere for that price, you may find you can still only afford a starter home anyway.
    • bobobski
    • By bobobski 15th Oct 16, 2:22 PM
    • 398 Posts
    • 1,024 Thanks
    bobobski
    Is the starter home better or worse (smaller/bigger/better condition) than where you are currently renting?
    If it is better, then it is a no-brainer as you would be enjoying living in a nice home that was your own whilst putting your money into repayments of the mortgage instead of rent.
    If, however, the starter home is not as nice as where you are currently renting then you may need to get your calculator out and consider all the variables.
    Originally posted by Sus59
    The starter home would be worse than where I am currently living and about £150 more per month on the mortgage. That's why I've been avoiding this idea so far - although I'm paying more than 30% of my net salary on rent (and another 7% on bills), my current home is perfect except that it's small. It's also worth about £200 more in rent per month than I'm paying because I got lucky. A starter home would be about 4x further from work time-wise (cycling instead of walking), in a less nice neighbourhood, and would probably require some work which would eat into any overpayments I'd want to make on the mortgage.

    So back to the calculator it is! I've called upon a friend who studied maths at university to help me on this one...
    #86: Save £12k in 2016: £7,792.18 / £10,000 (77.92%) | #[ ]: Save 12k in 2017: £0 / £12,000 (0%)
    House deposit by 31/12/2020: £10,763.60 / £60,000 (17.93%)
    Emergency fund by 31/12/2020: £294.91 / £5,000 (5.89%)
    • teddysmum
    • By teddysmum 15th Oct 16, 2:22 PM
    • 5,840 Posts
    • 3,442 Thanks
    teddysmum
    Are you confined to the area you live in, as in other parts of the country £250000 would get you a detached house with garden and garage ?
    • bobobski
    • By bobobski 15th Oct 16, 2:25 PM
    • 398 Posts
    • 1,024 Thanks
    bobobski
    Round where I live you could buy a 3 bed for around £325k around 5 years ago. Now these properties sell for £500k+ and some 1 bed flats cost more than £325k now.


    So basically if its going to take 5 years to be in a position to buy somewhere for that price, you may find you can still only afford a starter home anyway.
    Originally posted by Planet Switzerland
    Yep, sadly I'm aware that this is a reality. Which is why I'm wondering whether I should jump into property ownership as soon as I can, or wait and hope I can play catch-up!

    I did a search on Rightmove for my area today - within about a 20-30 minute cycle from my work, and with my only requirements being parking and under £250k, only about 10 properties showed up (that's including SSTC). And I would rule most of them out because they're in dodgy areas or completely run down.

    Oh the woes of my generation...
    #86: Save £12k in 2016: £7,792.18 / £10,000 (77.92%) | #[ ]: Save 12k in 2017: £0 / £12,000 (0%)
    House deposit by 31/12/2020: £10,763.60 / £60,000 (17.93%)
    Emergency fund by 31/12/2020: £294.91 / £5,000 (5.89%)
    • bobobski
    • By bobobski 15th Oct 16, 2:31 PM
    • 398 Posts
    • 1,024 Thanks
    bobobski
    Are you confined to the area you live in, as in other parts of the country £250000 would get you a detached house with garden and garage ?
    Originally posted by teddysmum
    I want to be in this town, and if I moved I'd have to take a significant pay-cut as I'm paid well above market salary at the moment even for this town. So, sort of yes, but by choice, and because if I moved that £250k may be out of reach anyway.
    #86: Save £12k in 2016: £7,792.18 / £10,000 (77.92%) | #[ ]: Save 12k in 2017: £0 / £12,000 (0%)
    House deposit by 31/12/2020: £10,763.60 / £60,000 (17.93%)
    Emergency fund by 31/12/2020: £294.91 / £5,000 (5.89%)
    • Cakeguts
    • By Cakeguts 15th Oct 16, 4:12 PM
    • 953 Posts
    • 1,142 Thanks
    Cakeguts
    Have a think about this. Although you would take a salary cut it isn't the amount that you are paid that is important it is the difference between what you are paid and what it costs you to live in any area of the country. So for example £30K a year where cheap housing starts at £250K is not as good as £25K a year where cheap housing starts at £80K. What you have to work out is the disposable income after travel costs and housing costs and other bills.
    • getmore4less
    • By getmore4less 15th Oct 16, 5:41 PM
    • 26,278 Posts
    • 15,803 Thanks
    getmore4less
    Could you stretch to the type of place you really want but make a sacrifice like get a lodger for a year.

    Might get you were you want to be quicker.
    • boliston
    • By boliston 15th Oct 16, 5:51 PM
    • 1,740 Posts
    • 1,292 Thanks
    boliston
    The starter home would be worse than where I am currently living and about £150 more per month on the mortgage. That's why I've been avoiding this idea so far - although I'm paying more than 30% of my net salary on rent (and another 7% on bills), my current home is perfect except that it's small. It's also worth about £200 more in rent per month than I'm paying because I got lucky. A starter home would be about 4x further from work time-wise (cycling instead of walking), in a less nice neighbourhood, and would probably require some work which would eat into any overpayments I'd want to make on the mortgage.

    So back to the calculator it is! I've called upon a friend who studied maths at university to help me on this one...
    Originally posted by bobobski
    From the sound of it you are better off staying put - much as i like cycling I'd prefer to walk to work than cycle and location trumps size any day of the week as you can make more efficient use of space but you cannot change a neighbourhood. However moving closer to work would not be so good if the work place is not such a nice place to live - my workplace is out on a suburban business park near the ring road and the nearby houses are nasty barratt style hell holes!
    • Thrugelmir
    • By Thrugelmir 15th Oct 16, 6:16 PM
    • 51,285 Posts
    • 43,090 Thanks
    Thrugelmir
    The benefit is in your title. It's a "home". Your own little castle where you can escape from the world. Decorate as you wish. Change the layout, the bathroom , the kitchen to suit your own requirements. Now matters more than the future. Anything could happen over the next few years that changes your plans.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • kilby_007
    • By kilby_007 15th Oct 16, 6:20 PM
    • 445 Posts
    • 237 Thanks
    kilby_007
    Round where I live you could buy a 3 bed for around £325k around 5 years ago. Now these properties sell for £500k+ and some 1 bed flats cost more than £325k now.


    So basically if its going to take 5 years to be in a position to buy somewhere for that price, you may find you can still only afford a starter home anyway.
    Originally posted by Planet Switzerland


    A 50% increase in price over 5 years, when salaries have been increasing by <3% per year. Do you think that trend is to continue at the same pace?
    • Contessa
    • By Contessa 15th Oct 16, 6:44 PM
    • 900 Posts
    • 1,304 Thanks
    Contessa
    Would you consider buying your starter home and renting a room to a lodger?

    It's not something everyone would want to do but it would help redress the extra cost of paying a mortgage.
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