Potential first time buyer - what to do?

F_T_Buyer

drinky wrote:

What do people generally think these days is a reasonable % of take home pay to be paying in mortgage payments. My daughter wants to buy a place at the moment but she is looking at interest only mortgage with monthly payments of about 50% of her after tax income. She isn't on a great wage - about average earnings. This feels too much to me for her to cope with on her own, especially as she has a young baby to bring up, car to run, etc. We both filled in Martins budgeting tool but with very different view on inputs and of course subsequent answers.

50% take home pay goes on interest alone? And she is having a baby? That is pure madness! how would she repay the capital debt? What if rates rise (which look likely), a 50bp rise (5% base rate) would take the percentage to roughly 61%.

As you are talking only about the interest part, I would say around 20% for a FTB (maybe 25% with good career prospects). A smaller amount initially would go on capital debt repayments taking the total percentage to 40 to 45%.

drinky_2

F_T_Buyer

Of course her plan (as advised by financial advisor) is not to pay back the capital back anytime soon and hope that house prices continue to rise so eventually in 20?? have enough capital to pay off the mortgage.

BTW she has had the baby last year and Uncle Gordon is fortunately pretty much covering her nursery fees so she can at least work full time.
I'm quite worried but having trouble persuading her that she will struggle on these numbers.

FaTB

Jeez, rather her than me !!!!!!

Remind me again how she's planning to repay the capital ?

Sell the place she lives in, when its gone up in value. ?????????

Or have I got the wrong end of the stick ?

nelly_2

FaTB wrote:

The above is no doubt true, but its not necessarily a good thing.

Lending has been far too lax for a long time now.

Many people have taken on far to much debt in recent years, and will regret it for many years to come, and the banks don't care because if you can't manage for whatever reason, they just take your house !!

Your house........... and the deposit tied up in it too.

talksalot81

My point about the loss if I dont get onto the market if because house prices are increasing more rapidly than my savings. I have the maximum amount in an ISA, I have multiple high interest savings accounts (which as a student without income, at least taxable income, are tax free) but house prices still are rising more rapidly than my savings. So if prices rise by 20% in 3 years (which doesnt seem an unreasonably high figure around here) and I am grossing less than 4% interest on my savings, I have lost out by 7/8%.

To be honest, the only reason fro getting on the ladder is financial. If I could simply have my savings increase comparably to the housing market, I would very happily just do that. But it just isnt the case at the moment

lynzpower

i dont know belfast at all, but a quick nose on rightmove shows that theres quite a lot under the 100k mark

marginalnut

I think your best bet would be to ring a mortgage advisor, one who charges no fee, and see what they can find, often they will find you a great mortgage deal, and you have no obligation to take it, so phone a few just to get an idea. Then you will really know what you can afford.

I am a FTB also, just got my house on friday - lots of work to do! But anyway to my point, i'm 21 and decided that to save money i would live in a slightly "deprived" area whilst i am young and can outrun anyone i may need to...only joking its not that bad, you would be surprised as to who lives in what you may consider a deprived area, I have found that two of my neighbours are young couples who are FTB's, and it appears the area that i thought was overrun with trouble is just filled with young couples of my generation and it looks like we're the ones who are going to be causing trouble - loud parties, etc.

Good luck with your hunt, and i would advise getting on the ladder asap, i'm loving every moment of it.

xJ

king_mongo2k

Hi talksalot81, Im in a similar boat in belfast here mate (lived here all my life), abet with a much lower grad salary (what do you hope to work in?!?!).

There are good houses and bad ones in terms of investment. You can use the same structured reasoning as you are obviously clued up in terms of savings. Make sure to do the research as i'm finding it very hard to get a resonable house/apartment in a decent area. The problem is that there is too many people looking and not enough selling. The ones that are, are in decididly dodgy areas (and to the english viewers: i mean really dodgy as in loyalist/republican ghettos that a person of oppisite religion dare not enter/would run the risk of being be burnt out of house).
Belfast is a very complex market in those terms, plus the fact that 'ramping' here has got to completley astronomical levels (i have a mate who is an EA and confesses to this), with HPI reported the highest in the uk at the moment. Bubble anyone?mmmm Makes it very tough decision for FTBs. buy now or miss the 'boat' or wait for a cool off? Property: just like every other asset class in the world, can go up and down in value (take what an amature EA will tell you with a pinch of salt)

Any of the golddust gem properties out there are grabbed very quickly/under the carpet by developers/btls. (i know, my mate is one).

New builds seem to be what a lot are going for: I would say look out for them (new lagan development/titanic quarter) - at least you can get a look in and have some confidence that it will be new/good build quality/have similar buyers as you entering the development = hopefully increasing in value quickly. (e.g. some of the new Malone apts at windsor are being flipped already- and they are still diggin the founds!)
Think for yourself (dont listen to EA bs), if it sounds to good to be true-it normally is. Likewise, if it sounds too dear-it definitley is.
Dont stretch to far, its only bricks and mortar.

lynzpower

There is a world of difference between investing in property and buying somewhere to live.

I did think about the political situation when I was nosing on rightmove. I guess we are lucky in that respect the cheaper/ deprived areas here seem not to be anywhere near as bad ( although every city has its horror areas) so I do pity you guys in that respect.

From what I heard about belfast it does seem to be ramped up to hell, and at some point, some deflation must be due?

zippygeorgeandben

ARe you sure you can only get 110k??

I rang my local bank and based on a salary of 20,000 I can get roughly 140-160K borrowing.
Also, you say about being a student?? Once you graduate from a university, aren't you entitled to 100% of the amount you can borrow? I know my bank allows this.
I hope this helps you...
Ben