First time buyer going literally insane

Croker

Hello!

I'm trying to get on to the property ladder for the first time. I'm 33, and a civil servant, and I'm single. Despite Osborne wielding the axe, I've been in a new unit for the 12 months, and they are deemed to a priority, hence my position would seem to be secure.

Obviously, I want a place of my own, and this is where my descent into madness and frustration begins :rotfl:

I have outstanding student loans (about £8000) which I will finally start to repay this year (I previously deferred as I was trying to shed other debts).

I've done well in eradicating my debts so far - I have no credit cards now, nor any overdraft whatsoever (well, £100, but I don't ever go into it, and haven't for just on a year). I do have two other loans, but I will have finished one off by April, and the other by August (all being well). My salary is about £33,000 pa.

The main problem is, of course, that I haven't built up even a slight deposit - and in fact can't do so until I've at least paid off my other loans, as I think it will be too tight month-to-month to keep paying the loans as well as a mortgage.

Now, I've looked at shared-equity schemes from the likes of Taylor Wimpey, but they are - in my opinion - a colossal rip-off. Even if I were to go for one, it would either mean remortgaging or selling up (both very risky propositions), or saving at least £200 every month to try and be ready to buy them off after 10 years - which would be just like extending my existing loans for a decade.

So, discounting any such schemes, I'm left with trying to find £15,000 - £25,000. This is what's driving me completely insane. At a bare minimum, it's going to take me about 3 years to save that kind of money. Having never moved away at all to go to university, or suchlike, I simply cannot bear another 3 years at home. I really don't want to get on the property ladder for the first time at 36 (almost 37, in fact). Don't get me wrong, the folks are great and very supportive, but living at home is very limiting and I need my own space. There are days - and I appreciate that this sounds melodramatic - that I think about just running away from it all and doing a Reggie Perrin.

To assist, the folks actually brought out their financial adviser and he too recommended against shared-equity schemes for the above reasons. He did, however, suggest that the folks could free up some of the equity in their house to give to me as a deposit (which they are willing to do). The example he gave was that of a second charge being drawn up by a solicitor, so it would be a loan of £25,000 from the equity of the folks' house (which is fully paid for), and I would then pay this back over 9 years at £276 a month.

Whilst this seems a better solution, I'm still worried that I would be stretching myself by having a second mortgage. Does anyone have any advice on how I might proceed down this route (but minimising costs to myself and risk to the folks)?

Really, the folks' attitude is one of "if we had the money, we'd give it to you". They know that when they pass away, the sale of their house will be split equally between me and my two brothers, and would easily cover any deposit I'd had. What they would like to do is kind of give me my share as a gift in advance, I guess - for example, if the house sold for £150,000 after they'd passed away, my brothers would get £62,500 each, and I'd get £25,000 (having already been given £25,000 for my deposit). I hope that makes sense!

So, before I speak to the financial adviser again (and possibly make a fool of myself), is there a way that they can release equity from the house as a sort of gift without costing themselves (or me) a large amount?

Or is there another solution that I'm not considering at all? A loan to consolidate what I have left and contribute towards my deposit? That doesn't seem like a sensible solution on the surface, but I'm no expert!

Sorry this is such a long, long post, but it's complicated (at least to me) and I'm feeling very low about it all, and I could really do with some feedback!

Thanks in advance for any assistance you can provide!

CloudCuckooLand

To be honest.

If you have failed to save anything while at home with the parents, I seriously doubt your ability to repay any mortgage, let alone two if you did manage to juggle arrangements to release some equity, or keep up with the essential maintenance to keep your property in resellable condition.

Time to look at where your money goes and trim the budget.

£33k is more than entire families live off, unless your parents take £1,000 off you in rent each month..?

Croker

CloudCuckooLand wrote: »

To be honest.

If you have failed to save anything while at home with the parents, I seriously doubt your ability to repay any mortgage, let alone two if you did manage to juggle arrangements to release some equity, or keep up with the essential maintenance to keep your property in resellable condition.

Time to look at where your money goes and trim the budget.

£33k is more than entire families live off, unless your parents take £1,000 off you in rent each month..?

Sorry, I should have made this a bit clearer, but I thought I'd explained that in the original post - I have saved money, it's just that I've used it to pay off outstanding debts that I had, e.g. credit cards etc. I have been saving on average between £500 - £1000 per month, and putting that into clearing debts.

I have been earning my present salary for about 12 months, as well - prior to that it was £10,000 less.

Hope that clears things up a bit. My apologies for not explaining that more clearly.

Have you got any further advice now you know a bit more about the situation? I have to say I found your response a bit sharp and unwelcoming, if I'm totally honest. No offence intended, but I've worked very hard to trim my budget to the extent that anywhere up to (or even over) half of my take-home pay is used to clear debt faster to put myself in a better, more fiscally responsible position for when I am a homeowner. I don't really appreciate the implication of your post, which seems to be that I've been !!!!ing away untold riches for years, which is a long way from the truth.

Again, I'm not looking to cause offence, and I'm sure that you weren't either, but your response is pretty accusatory and judgemental.

Leon_W

Croker

Sometimes people seem a bit short on this board but I can assure you that it is just because you have to get a lot of information over in a very short period of time and there is no rudeness intended. Say your piece and move on.

Right. Your logic is madness.

You have no deposit.

You dismiss Shared Equity as " a colossal rip off " . Why ?

You are fully prepared to put your parents home at risk by foisting a mortgage upon them and you are going to pay £276 a month over 9 years but dismiss paying £200 per month over 10 years to buy out Shared Equity ? What if you do lose your job and you can't meet your parents repayments ? That is a family nightmare waiting to happen.

To my mind the Shared Equity seems much more straight forward as the only difference is that you wouldn't be sharing equity with your family which has to be a good thing. Also the developer is going to carry some of the can if house prices fall.

Make sense ?

regards

Incyder

Buying anything when single, even with a fairly good wage is almost impossible.

Concentrate your time finding a 33 yr old female civil servant with similar ambitions.
Go a courting, a little wine and dine, some flowers etc

Then pop the all important question, "will you buy a house with me"

CloudCuckooLand

I know nothing about the size of the debts you have been paying off, or have remaining, so how could I tell whether you've been paying them off like mad..? I can only base my answers on the information provided.

There are dozens of threads to comment on, I try not to waste keyboard time on "fluffyness"...sorry for any offence.


So, you have been clearing debts at a rate approaching £10k a year. Great. In 18 months you'll have the £15k you think you need. Should accelerate once all the debts and associated interest has gone.

Any issues with the debts that will dent your credit record? Get that checked.

Go get a 90% mortgage, nice place for £150k, in 18 months. Maybe 24 months, to get something a little nicer/keep a cushion behind you.

Without jeopardising the parents house. Or risking upsetting the brothers by getting "special treatment" (families and money get dead weird at times)

Because there is no way to get money out of the parents house, that leaves the bulk of it to be inherited in due course, without you or them paying the mortgage on it. Equity release schemes compound the interest and take it out upon death - you and your brothers might get nothing.

Your parents would have to go through retirement trying to pay a mortgage, as your income (in the lenders eyes) will have to be used to pay your own mortgage if you are given the released equity and buy somewhere.

How much "board & lodgings/rent" whatever you call it, do you pay the parents? If around half a proper rent, how about going and renting yourself a place, when your debts are gone. Get the space, bide your time, get used to budgeting - paying your own Council Tax, electric, etc is a learning experience. You'd still be able to save perhaps £500 a month to the deposit fund. It would take a bit longer, but the pressure would be off...?

chanie

You are in a similar position to me in terms of age and salary. I also did a similar thing with my Mum in terms of deposit.

Basically, my Mum remortgaged and gave me £20,000 towards my deposit. We (me and OH) are paying it back over 25 years - so we are paying back £100 a month, which is manageable. Obviously in the longer term we would like to pay her back, but as she pointed out, when she dies it will come back to us anyway (she did the same for my sister).

The 25 years is a long time and ultimately it will cost much more in interest, but it does make it manageable. She would have given us the money if she had it, but the equity in the house is all that she has.

I also went to Uni - I graduated in 2001 (I'm now 31) and I'm still paying back my student loan. I wouldn't bother paying off your student loan as it isn't considered a 'bad debt' like normal debts. I would just concentrate on saving up.

Croker

CloudCuckooLand wrote: »

I know nothing about the size of the debts you have been paying off, or have remaining, so how could I tell whether you've been paying them off like mad..? I can only base my answers on the information provided.

I don't want a row about this, but I've got to say one final thing on the matter - the information about me having previously spent time paying off debts (hence having saved no deposit prior to this stage) was in the fourth paragraph of the first post. I'll concede that I didn't specify exactly how much I'd paid off, or the rate at which I'd done so, but it was you who went with the incorrect assumption that I needed to trim my budget. I appreciate that you didn't mean any offence, but had you read the opener properly you could have avoided an unseemly ruck.

In spite of all that (which I'd like very much to put behind us), the rest of the information you have provided makes for good advice. I mean that genuinely, by the way, and would like us to be friends from now on!

At the moment, I'm trying to find the best way forward for myself, which means exploring all possibilities. I certainly don't want to jeopardise my parents' house (something which I've never been that comfortable with in the first place). It would seem, therefore, that equity release in any form is not a sensible move - fair enough!

As an aside, you asked why I thought shared-equity schemes were a colossal rip-off in an earlier post. Mainly because it's repayable at 15% of the value in 10 years' time. I take your point about seeming not to want to pay £200 a month for shared equity, but being willing to pay £276 a month for a second mortgage (with all the risks that entails against the folks' house) - again, this is down to me not explaining myself clearly. The £200 a month for shared equity is less appealing because there's no certainty it will be enough - if the value has risen sharply there could be a marked shortfall in what I have saved in relation to what is needed. The £276 repayment, however, would have seen me definitely having paid things off after 9 years.

CloudCuckooLand wrote:

Go get a 90% mortgage, nice place for £150k, in 18 months. Maybe 24 months, to get something a little nicer/keep a cushion behind you.

See, now I find that a little surprising as advice - I would have thought that a mortgage for £75,000 (with 25% deposit) would be more sensible, particularly because I'm on my own so can only depend on my salary. I'm not sure how I could make my monthly budget work on a property that cost £150,000. It would be stretching things to the limit, as best I can tell, and I'm not sure to what advantage. Could you elaborate more on this, please?

CloudCuckooLand wrote:

Without jeopardising the parents house. Or risking upsetting the brothers by getting "special treatment" (families and money get dead weird at times)

Because there is no way to get money out of the parents house, that leaves the bulk of it to be inherited in due course, without you or them paying the mortgage on it. Equity release schemes compound the interest and take it out upon death - you and your brothers might get nothing.

Your parents would have to go through retirement trying to pay a mortgage, as your income (in the lenders eyes) will have to be used to pay your own mortgage if you are given the released equity and buy somewhere.

These are all sterling points, and give me a clear way of refusing a course of action I was never entirely comfortable with. Like I say, the folks just want to give me a helping hand, but they don't the cash necessary to do so, which is the only reason equity release ever got discussed in the first place.

CloudCuckooLand wrote:

How much "board & lodgings/rent" whatever you call it, do you pay the parents? If around half a proper rent, how about going and renting yourself a place, when your debts are gone. Get the space, bide your time, get used to budgeting - paying your own Council Tax, electric, etc is a learning experience. You'd still be able to save perhaps £500 a month to the deposit fund. It would take a bit longer, but the pressure would be off...?

Renting is definitely something I've thought about. My "housekeeping" (yes, that's the term I use!) is about half the average monthly rental round my way, so you have a point there. You hear so many conflicting things, though - "oh, it's dead money, you might as well save it for a deposit", but again you make a fair point.

I have made an estimated budget for owning a property, including all expenses (council tax, water, electric, food etc etc) which is how I worked out that the "two mortgage" solution would be tight on a month to month basis. Estimating a "rental" budget shouldn't be any harder.

I'm still keen to hear any more tips/advice that anyone else has, though!

Chanie wrote:

I also went to Uni - I graduated in 2001 (I'm now 31) and I'm still paying back my student loan. I wouldn't bother paying off your student loan as it isn't considered a 'bad debt' like normal debts. I would just concentrate on saving up.

Chanie, that was incredibly good of your mum to do that! I must admit though, that I'm still not all that comfortable with the idea. I know what you mean about student loans, though. It's just that it'll be about £100 a month in my case, which is still quite a bit of my take home, particularly being on my own.

Incyder wrote:

Concentrate your time finding a 33 yr old female civil servant with similar ambitions.
Go a courting, a little wine and dine, some flowers etc

Then pop the all important question, "will you buy a house with me"

I'm trying my best! Ironically, because I've been saving so hard and paying stuff off, I have very little in the budget for wining and dining!

Leon_W

I come back to one point Croker.

You state that if the value of the Shared equity property had risen dramatically that what you had saved in the interim wouldn't pay off the 15%. My answer to that would be so what ! You would still be in a better position than you are now having built up equity yourself ! Face it. You have nothing at the moment so something is better than nothing.

Look. There is only one option for you at this point in time, unless you win the lottery, and that is Shared Equity. Either shared with a developer or shared with your parents, it's all the same.

Burridge60

Beware.

You will be asked to provide a letter from your parents for most lenders which states that the "Gift" (loan in your case) is exactly that a gift. That they do not expect repayment either in regular payments or a lump sum. In some cases they must state if they will be securing their "gift" by way of a charge on your property. At this point many lenders will have exited stage left.

If this is to be a loan it will be built into their affordability calculations as an expense from your net income before you meet your living costs and the rest is what is left to pay your mortgage.

Bank of M and D is fast becoming the Lender of last resort for lost of young people without a deposit who want to get on the housing ladder the slippery thing that it is!

To be fair to other posters if you had got a loan and a mortgage from a lender instead of going to mum and dad they would still be telling you not to do it.

ViolaLass

Without going into details, have you identified /why/ you built up so much debt even with a good salary (even before the £33k) and living at home? That knowledge will be beneficial to you.