First Time Buyer - Advice Required!!

davidjohndean

I wonder if anyone can help...

I am 22 and really want to put the first foot on the property ladder. Now only will this serve as an investment but will also prove to myself of my independance.

I currently earn £1,500 per month (take home) and live at home with my parents. I currently have no major outgoings (just the car/insurance) I have £5,000 saved up. Where I live a decent little 1 bedroomed Flat will cost a minimum of £100,000.

What shall I do? Save slightly longer? Think about getting a morgage? if so what type!!??

Obviously there are other costs involved such as fees, surveys etc how much does all this cost??

I am really confused and every time I try and get my head around the subject of morgages, I end up being even more confused!!

Any help will be greatly recieved!!

Thanks :j

tomstickland

Save as much as possible - ideally £15K so you can put a 10% deposit down and have a few K to cover expenses.
The more deposit you save the better. You make interest on the money whilst you save it, so you end with a smaller loan with interest on it when you buy the house. Plus, house prices are high, they might go down in the next year or so. Obviouslly, that's subject to much argument, but I, personally, don't see them going up.

Stephen_Webber

I was in this position last year so I really feel for you. There are some options open to you (most of which I really wouldn't recommend), including taking a mortgage out over a longer period of time or taking an interest only mortgage. The former will allow you to borrow more over a longer period of time and the latter will reduce your monthly payments but you will effectively be renting from the mortgage lender as you will never own the house outright. Neither option is particularly pleasent (although they will help reduce your monthly payments) and I wouldn't really advocate either. The only other option is to sit tight and save more and hope that house prices do not increase substantially.

I took out my mortgage over 34 years and borrowed about 4.3x my salary. I really wouldn't advocate doing this though, as this is a long time to be in debt. I'm fortunate that I am now moving to a better paid job in the New Year where I can reduce the mortgage down to 3.5x my salary, once I have cleared all the debts I incurred furnishing my house. One thing I cannot stress strongly enough is not to stretch yourself too far. Try and avoid paying out much more than about a quarter of your income on mortgage repayments, as otherwise you risk starting to struggle. I pay out about a third with mine at the moment and it really can be a struggle to pay off my debts and live each month, by the time I pay the bills.

Best thing to do is go and see an independant mortgage advisor.

Hope some of this helps.

Stephen

frugglewump

I'm a FTB as well, the people on this forum are very helpful. Based on a mere month of reading here I can say the following:

Assuming 5k as your 5% deposit on a 100k flat. A standard capital repayment mortgage for this over 25 years would cost you maybe as much as £580 per month. I couldn't say what is the best mortgage type for you. What did you think of Martin's mortgage article?

You would also need buildings insurance, I think lenders insist on it although it doesn't have to be theirs. You can get quotes for this online - I like the AA, others have recommended Halifax - there's a good comparison site through Martin's insurance article.

You do have to find money for the other costs though:
No stamp duty under 120k
Conveyancing fees - £600 perhaps less
Surveyors fees - around £300-400 for homebuyer, more if it needs a structural survey
So probably another 1k needed for these fees.

I think this adds up to - you need a bit more money for a good deal

tomstickland

I'm in the same position now. I've saved around £8K towards a deposit, but I'm not going to contemplate buying until I've saved at least twice that and I have to finally acknowledge that prices aren't going to fall.

I'm also going to only borrow 3 x salary maximum.

dander

Hello there

As someone who's going through the whole buying a property process at the moment, I would just add, don't forget to factor in all the costs associated with buying a property. If you're looking in the £100k region, you'll escape stamp duty, but there's still legal fees, mortgage set up fees, surveys ... it's frightening how fast the money adds up - not to mention paying for a few bits of furniture to go into the place once you've got it!

Definitely save a while longer, with your take-home and no debts you should be fine to get on the housing ladder once you've got the deposit together.

:rudolf:
Dander

Rave

Have a read here:

http://www.housepricecrash.co.uk/

and here:

http://www.firsttimebuyerhelp.co.uk/

If you still want to buy after reading those, good luck to you:)

zag2me

Do it you cant put a price on independence, Best thing I ever did was to move out of my parents into my own place. You will need a bigger deposit, I would aim for 10% but only use half of this on the deposit and the rest on fees and furniture. If I could get a flat for 100k I would bite their hands off.

Rave

zag2me wrote:

Do it you cant put a price on independence

Yeah you can- a few hundred quid a month to rent. If the rent on the type of place you want to buy is less than the interest on the mortgage you'd need, you'd be a fool to buy IMO. I've rented for the last two years with zero hassle.

It's rare at the moment to find a place that you couldn't rent for less than the interest on the mortgage necessary to buy it- so why pay extra to 'rent' the money from the bank when you could just rent the place direct?

I say again- I (and many others) will eat my hat if house prices increase faster than the rate of inflation over the next 3-4 years. You've everything to lose by buying and little to gain.

kazzy

except that at the end of the day he will own his house and have a valuable asset and if you rent you never will.
Not saying either is right or wrong-it just depends on your individual opinion

zag2me

Rave wrote:

Yeah you can- a few hundred quid a month to rent. If the rent on the type of place you want to buy is less than the interest on the mortgage you'd need, you'd be a fool to buy IMO. I've rented for the last two years with zero hassle.

It's rare at the moment to find a place that you couldn't rent for less than the interest on the mortgage necessary to buy it- so why pay extra to 'rent' the money from the bank when you could just rent the place direct?

I say again- I (and many others) will eat my hat if house prices increase faster than the rate of inflation over the next 3-4 years. You've everything to lose by buying and little to gain.

Maybe I was a little too quick to judge with my statement, but it was only because I just got off msn with a friend who has been happily renting for 2 years, and is getting kicked out of his house with minimum notice as the landlord is selling up. He is so pi**ed off right now, and is trying to find another place but this time to buy. Now it seems to him like he has wasted the last 2 years. Maybe not a logical conclusion but thats how he feels.