Looking to the future- wannabe first time buyer!

emilyka

Good Afternoon,

Buying a home has always been something that I deem to be a must in my life ambitions. I would love to buy a flat by myself, to have somewhere to make my own however I'm aware how expensive it is!

I was wondering if anyone would be able to give me a little direction in how much I should be saving. I know it is the more the better and the highest deposit the lower the interest rates would be but I would like to have an amount to work towards as an inspiration and incentive! I also would like to own my own place as soon as possible:o

I currently have a small amount of debt however should clear my credit card debt this month and my loan finishes in October. After I have cleared my credit card I will be saving for a property and once I have cleared the loan the amount I can save will increase. I earn £25500 P/A and once both debts are paid I will be able to save £800 ish per month. Outgoings excluding rent/ council tax and energy bills is less than £100.

Unfortunately property in my area (East Surrey) is quite expensive, with the cheapest studio flat costing £150k and a 1 bedroom starting from £170k. I would like a 1 bedroom flat, but how much would I need to save and to earn to make this possible on my salary?

Many thanks

roseland69

I reckon you'd need a £70,000 deposit at least given your salary x 4 = 100K and 1 bed flats are £170K.

Henry_P_Chester

roseland69 wrote: »

I reckon you'd need a £70,000 deposit at least given your salary x 4 = 100K and 1 bed flats are £170K.

I'd say that's about right.

But don't get disheartened. Save as much as possible clear your debts as you go and after that it's just save save save. The housing market looks like it will probably be flat at best (IMO it will fall) over the next few years so don't worry too much about prices getting away from
you. Are you alone or do you have a partner? Buying as a single person is near enough impossible at the moment without generous parents.

I've been saving for a house for nearly 6 years now. Luckily I have a partner and she has been saving an awful lot too. No help from
parents but we have about a 40% deposit at the moment.

Property ownership is not as easy as it used to but it's not impossible it just takes time and you have to start somewhere (how old are you?) it's going to be a while before you can buy in your local area.

emilyka

roseland69 wrote: »

I reckon you'd need a £70,000 deposit at least given your salary x 4 = 100K and 1 bed flats are £170K.

Thank you, to be honest, that was pretty much what I was expecting but was desperately hoping that wasnt the case! :mad:

Unless I get a windfall sometime soon it'll be 7 years saving or moving to a cheaper location. I'm happy to do the 7 years saving but would love it if anyone has any other ideas?

Could it be beneficial to buy a property in a cheaper location (when I have a deposit for 30% of the cheaper property- thinking somewhere like Nottingham say £50K property), rent it out, and pay the mortgage on that property with rental income and build up equity in the property whilst continuing to save?

Just trying to rationalise as it is a subject I don't know much about!

Thanks

Henry_P_Chester

Buying a house to let would be a risk. Even more so at the moment with the gloomy economic outlook. You could find yourself in 7 years with little or no equity. Also being a landlord takes work. You are responsible for all maintaining the property and you'd have to pay the mortgage even in void periods of no rental income.

If your willing to take a gamble go for it. Personally I'd just concentrate saving.

roseland69

emilyka wrote: »

Thank you, to be honest, that was pretty much what I was expecting but was desperately hoping that wasnt the case! :mad:

Unless I get a windfall sometime soon it'll be 7 years saving or moving to a cheaper location. I'm happy to do the 7 years saving but would love it if anyone has any other ideas?

Could it be beneficial to buy a property in a cheaper location (when I have a deposit for 30% of the cheaper property- thinking somewhere like Nottingham say £50K property), rent it out, and pay the mortgage on that property with rental income and build up equity in the property whilst continuing to save?

Just trying to rationalise as it is a subject I don't know much about!

Thanks

You can only "build up equity" when house prices rise. Now is not the time to be counting that particular chicken.

Edit to add: Henry ^^^ is right. Save for now and hold off from committing yourself to any plans like you outline. I know people did it before and made money buying to let. But that was BEFORE the credit bubble burst. Those days have gone.

sonastin

roseland69 wrote: »

You can only "build up equity" when house prices rise. Now is not the time to be counting that particular chicken.

You can also "build up equity" with a repayment mortgage, but the capital repayment is VERY slow to begin with. If you have tenant's rent to pay the mortgage, you can start to build up equity in the property in addition to your other savings, but letting comes with all the pitfalls already mentioned - affording it when its empty, maintenance, etc etc. And if this property isn't in an area you want to live in, you've got the costs involved in selling it before you can realise that capital - estate agents fees, solicitors fees, etc. That alone will probably wipe out any equity you can build up in that place unless there is a significant surge in the market.

In the current market, I'd concentrate on saving as much as you possibly can, as fast as you possibly can. And keep an open mind about places where you might be able to find somewhere cheaper to buy.

emilyka

Henry_P_Chester wrote: »

I'd say that's about right.

But don't get disheartened. Save as much as possible clear your debts as you go and after that it's just save save save. The housing market looks like it will probably be flat at best (IMO it will fall) over the next few years so don't worry too much about prices getting away from
you. Are you alone or do you have a partner? Buying as a single person is near enough impossible at the moment without generous parents.

I've been saving for a house for nearly 6 years now. Luckily I have a partner and she has been saving an awful lot too. No help from
parents but we have about a 40% deposit at the moment.

Property ownership is not as easy as it used to but it's not impossible it just takes time and you have to start somewhere (how old are you?) it's going to be a while before you can buy in your local area.

Thank you- this is really useful. I am fairly young (22) and currently live with my partner in his flat, it may sound really horrible and not particulary loving but I would like to save up by myself as you never know what will happen in the future! Also, as he has his place that he has owned for 10 years and doesnt want to move out of I wouldnt suppose I have much choice anyway :rotfl:

I have very generous parents but not financially I have been financially independant from them since I moved out when I was 16 and don't think it's fair to lean on them financially when if they help me they'd have to help us all (one of five children!)

It would be good if prices didnt get away from me because it would be so disheartening! At the end of the day I dont see renting as wasting money because of interest rates etc but i would love to have my own place

Well done on saving all that money, it must feel good to know that you have the money in the bank making some interest!



With reference to 'building up equity' I would only be looking at a repayment mortgage as I have heard of alot of peoples nightmares in not being able to save alongside a repayment only and coming out with nothing but I am also aware that due to the repayment itself being a very small percentage compared to interest in the first years (well until around half way through term!)

I know now isnt the best time to buy but I'm so impatient hehee. Well, that and the fact that regardless of where I buy I wont be buying for at least another 2/3 years due to deposits.

nollag2006

roseland69 wrote: »

.... I know people did it before and made money buying to let. But that was BEFORE the credit bubble burst. Those days have gone.

They certainly have not. I got back into BTL in Q1 2009, and have already seen a 15% in the value of the flats.

No one knows whether house prices will continue to rise, or if or when they will fall back.

To the OP, talk to a decent broker about your mortgage multiples, and don't be put off by doomongers on here.

An excellent guide here:
http://www.moneysavingexpert.com/mortgages/best-mortgages-cashback

Oh, and good luck! You won't look back.

:T

roseland69

I'm not a doommonger, but a realist. This young lady seems to have her head screwed on pretty well and I think she will be better doing what she says and saving for a few years first (she has to anyway to get any deposit whether it be for a BTL or a place of her own to live in). That time will serve a great purpose I feel. She will have a deposit so something to go to banks with AND the market will I think have sorted itself out a bit more so she will have more idea where the land lies. I honestly don't think now is the right time for someone in her position to be stretching herself.

I don't have an agenda or a reason to push one way or another. I just say what I see. Lenders are far more cautious than they once were becuase they did stupid things like give out 125% mortgages or lents massive multiples that people didn't have a hope in hell of actually paying back. So people got their place, but at what cost to them personally? The absolute best option for the OP is to save and be prudent with her cash and start thinking about investing it in BTL's (or a place for herself) when she is in a position to do so.

Henry_P_Chester

emilyka wrote: »

Thank you- this is really useful. I am fairly young (22) and currently live with my partner in his flat, it may sound really horrible and not particulary loving but I would like to save up by myself as you never know what will happen in the future! Also, as he has his place that he has owned for 10 years and doesnt want to move out of I wouldnt suppose I have much choice anyway :rotfl:

I have very generous parents but not financially I have been financially independant from them since I moved out when I was 16 and don't think it's fair to lean on them financially when if they help me they'd have to help us all (one of five children!)

It would be good if prices didnt get away from me because it would be so disheartening! At the end of the day I dont see renting as wasting money because of interest rates etc but i would love to have my own place

Well done on saving all that money, it must feel good to know that you have the money in the bank making some interest!



With reference to 'building up equity' I would only be looking at a repayment mortgage as I have heard of alot of peoples nightmares in not being able to save alongside a repayment only and coming out with nothing.

I know now isnt the best time to buy but I'm so impatient hehee. Well, that and the fact that regardless of where I buy I wont be buying for at least another 2/3 years due to deposits.

the average age of first time buyers at the moment is 37!! So your along way off that. I'm 27 I started saving seriously around about 21/22 so your in about the same position I was. Your right not wanting or expecting money from your parents but it is difficult without it.
With regards the money in the bank it's a worry more than anything! Luckily the majority of our savings are in ISAs and we move them around to get the best rates but still with inflation so high it means our buying power is actually reducing very slightly. (if we weren't adding to it)

I looked a 95% mortgages in 2006 but decided it was too much of a mortgage to take on I want as little as possible. Thank god I didn't as now I would be in some serious negative equity!

You never know in a few more years you might decide to buy as couple it certainly makes things easier with two incomes!