1st Time Buyer, too buy or not too buy?!

Ditzy27

Hi,

This is my first time posting, I’m really hoping any kind, knowledgeable souls can give me some advice.

I am in my mid, well o.k. heading into late twenties! And I am going to be starting a three year Doctorate at Southampton uni in September.

Having wasted a lot of my and my parents’ money on rent throughout my twenties, firstly at uni and then in London, I would like to put down roots for the next five years and buy a 1 bed flat in Bournemouth.

However, as you may have already guessed it is not me who has the money, it's the ever wonderful, supportive and loving folks. My mum regrets not buying a student property earlier in the decade when I was at uni so she also feels it would prudent to buy this time round and she would like to buy the flat for me, in her name, and I would pay the mortgage in the form of rent.

However, I'm unsure as to whether my parents could get a buy to let mortgage as they are oldish! Dad is retired, 70 yrs old, mum is 60 yrs old and working full time. We thought this might work, as we don’t think a bank would let me have a mortgage. As I am only going to be in receipt of a yearly bursary for each of the three years of the Doctorate, equivalent to £18,000pa. Afterwards I will be qualified psychologist, starting at approximately £30-£35k, so I will be able take on the mortgage then.

Do banks let older people such as my parents take out by to let mortgages?

Also to stump up the deposit they would have to take equity out of their house, the family home is now, after the down turn, worth about £350,000. Is this sensible? Is this common practice? Not sure if this info is useful, we are looking buy a flat at about £110,000-£115,000.

Lastly, is it worth buying a property now? I'm not sure what the property markets are set to do over the next year or two. Should we wait until 2012 and hope that there is another drop in property prices?

Lastly, I really am fed up renting rooms in shared houses, I could afford to rent a little one bed, but I would prefer put my money towards a mortgage, but not at the cost of jeopardising my parents financial security.

To sum up any suggestions, advice regarding the following would be much appreciated: would a bank would give my parents a buy to let mortgage; is wise for them to take equity out of their own home; lastly is it a good time to buy or should we wait?

Hope somebody can shed some light on my queries.

Thanks

AnnaV

Ditzy27 wrote: »

Hi,

This is my first time posting, I’m really hoping any kind, knowledgeable souls can give me some advice.

I am in my mid, well o.k. heading into late twenties! And I am going to be starting a three year Doctorate at Southampton uni in September.

Having wasted a lot of my and my parents’ money on rent throughout my twenties, firstly at uni and then in London, I would like to put down roots for the next five years and buy a 1 bed flat in Bournemouth. How is it wasting money? It put a roof over your head, didn't it?

However, as you may have already guessed it is not me who has the money, it's the ever wonderful, supportive and loving folks. My mum regrets not buying a student property earlier in the decade when I was at uni so she also feels it would prudent to buy this time round and she would like to buy the flat for me, in her name, and I would pay the mortgage in the form of rent. Bet she'd be regretting it more if she bought 3 years ago...

However, I'm unsure as to whether my parents could get a buy to let mortgage as they are oldish! Dad is retired, 70 yrs old, mum is 60 yrs old and working full time. We thought this might work, as we don’t think a bank would let me have a mortgage. As I am only going to be in receipt of a yearly bursary for each of the three years of the Doctorate, equivalent to £18,000pa. Have they paid off the mortgage on their own home? If so they could poss take out a mortgage on that house and use it to buy the flat. That's what my mum did - but it was 8 years ago

Afterwards I will be qualified psychologist, starting at approximately £30-£35k, so I will be able take on the mortgage then. What happens if you don't get a job? Your parents will still be liable for the money - could they afford to make the payments without your help? Or would they risk their own home?

Do banks let older people such as my parents take out by to let mortgages? Depends on circumstances but I'm guessing a 25 year mortgage would be unlikely!

Also to stump up the deposit they would have to take equity out of their house, the family home is now, after the down turn, worth about £350,000. Is this sensible? Is this common practice? Not sure if this info is useful, we are looking buy a flat at about £110,000-£115,000.

Lastly, is it worth buying a property now? I'm not sure what the property markets are set to do over the next year or two. Should we wait until 2012 and hope that there is another drop in property prices? Ah.... no one has a crystal ball unfortunately

Lastly, I really am fed up renting rooms in shared houses, I could afford to rent a little one bed, but I would prefer put my money towards a mortgage, but not at the cost of jeopardising my parents financial security. Then think VERY carefully about the above. Does the uni not provide an post-grad accommodation?

To sum up any suggestions, advice regarding the following would be much appreciated: would a bank would give my parents a buy to let mortgage; is wise for them to take equity out of their own home; lastly is it a good time to buy or should we wait?

Hope somebody can shed some light on my queries.

Thanks

Hope some of the above helps - might sound harsh but it's a serious thing and I can see you are already concerned about your parents' future.

Danni-R

Hello,

I'm also a FTB and when I spoke to NatWest about getting a mortgage with my dad they said that they dont do guarantors (sp) *but* if you're doing a degree like medicine etc where you training for a profession then they will alow parents to act as guarantors as you would be seen to be a safe bet mortgage wise.

Hope that helps.

Ditzy27

Hi,

Thanks for the info and advice.

Danni, I didn't know about the guarantor thing. That is very interesting and certainly something to look into, considering my professional qualifications and future.

Anna, thanks for the honest advice. I think your right that we would have to look at shorter mortgages. Yes my parents have paid off their mortgage.

I wouldn't want to go into post grad accommodation as it would be more house sharing. I have too much stuff for one room and a growing love of cleaning and keeping things clean, which is not conducive to student house sharing!

Thanks for the advice, much appreciated.

sarahevie

When I started my doctorate in 2006 aged 22 (I'm currently in my 4th year but will be doing a 5th the way it's going) I lived in a flat share with 5 others and then bought with my OH in 2007.

My income was taken into consideration although only at 2x. This was with Halifax, at the time woolwich also took stipends into account for mortgages.

We looked at getting my dad as a guarantor he was 50 at the time and bradford and bingley would let a joint mortgage with him as long as the term ended before he was 90. (Didn't go down this route in the end.)

Just my experience but the mortgage market is completely different now.

i would also advise life cirumstances alter and need to be pre empted. In my second year of my phd I decided to have a baby, then 20 months after that we welcomed a second baby. :j

I didn't get mat pay, we now owe 7x my partners salary and it's tough with me not 'working' /'earning.' We were sensible and worked out we could afford this and we can but it is tight.

I know you think that you will be earning £30K but what if your not, what if you decide to do something completely different? Needs further consideration me thinks:)

AnnaV

Ditzy27 wrote: »

I have too much stuff for one room and a growing love of cleaning and keeping things clean

Amazing, do you want to do my place? :T


Not sure how far you have looked into it but I know some unis do have self-contained flats for post-grads rather than halls-type accommodation.

Perhaps your parents could take out a mortgage on their house for an amount that they could afford to repay for the time being, gift it to you and you could use it as a deposit? The higher deposit you have, the more likely you would be to get a mortgage. You could then offer to give them the same amount back when you are earning.

The other thing to consider if that after you have added up estate agents fees/mortgage arrangement fees/surveys and the very real chance that the flat may lose value, unless you are planning on staying in the area afterwards it may not work out cheaper to buy.

Perhaps renting a reasonable one bed flat may be the way to go - gives you freedom to up and leave more easily when you do graduate and get your job :T

Running_Horse

Why not just wait until you are in a position to support yourself?

Its not as if anyone is predicting a price boom in the next five years.

Tell your parents you are very grateful for their support, but to spend their money on themselves in retirement.

Ditzy27

Hi all,

After reading other threads and all your advice I'm seriously re-thinking my options. I couldn't bare to jeopardise my parents future, they came from poor backgrounds in east London, which may be a trendy place now, but from their stories and experience I can attest that it was hard life for the working classes. They worked incredibly hard to make a good life for themselves and to be financially stable.

Other threads have highlighted the Russian roulette my generation could be playing with our parent’s finances and retirement if they act as security for us, and misfortune falls or the housing markets take a nasty nosedive. Also its hit home for me that the market is drastically different now; properties are not nice little earners like they use to be. If we bought a flat we might luck out and property prices might hold or there is the very real prospect that property prices fall as many are predicting. Also, for the first three years I may only be paying off the interest, therefore just giving my money to the banker instead of a land lord, but still not paying off the capital and there not benefiting me.

I think I will either rent a little flat or a nice room in flat with only one other. Therefore saving money each month towards a mortgage. Also once I qualify, get a job and earn more, if I continued to live within my previous lower income limits for a couple of years I could save up a nice amount for a deposit. Also if I needed my parents help as most of my generation do, it would be a much more manageable amount that would not need to be drawn from the equity in their home.

I know this may be perceived to be bad taste! But, my parents have said that they would pass on a chunk of the money from both my grandmother estates (their 90+!) to help me out.

So overall I think I should hold tight, save up, ride out the current economic downturn, hope house prices fall a wee bit over the next three years as many on this forum are suggesting.

My last thing would be to say to any other young people in my generation facing a similar dilemma: Property is not the cash cow it use to be until recently, therefore buying a property and paying a mortgage is not to be taken lightly, accepting our parents kind offers of help is definitely NOT to be taken without careful consideration. Unless of course your one of the lucky few whose parents are absolutely loaded and don't stand to loose anything much if things go belly up, other than their 3rd holiday home, or one or two cars from their vintage collection!!!
Health warning: Hope no one takes offence from the previous comment, only trying to add humour!

AnnaV

Ditzy27 wrote: »

Unless of course your one of the lucky few whose parents are absolutely loaded and don't stand to loose anything much if things go belly up, other than their 3rd holiday home, or one or two cars from their vintage collection!!!

I was sitting behind two middle aged men on the train the other day and one was complaining that things had got so bad he was going to have to sell a couple of crates of his burgundy '82 (or whatever) to pay the school fees this year! How dreadful

sarahevie

I agree with the very real prospect of losing money I think ours has probably dropped 20K in the last 3 years, if we were to price it competitively to get a sale.

Financially we could have rented our house for £25o less than the mortgage, along with the £14K savings we have accumulated before my funding stopped we'd have had an extra 20K deposit or 30% deposit in house value terms.

Our mortgage if we bought today would therefore be around £100,000 rather than the £120,000 it currently is. This is based on house prices dropping, and the additional deposit saved as renting is cheaper than our mortgage

Ditzy27

Lol Anna,
I know what you mean. When I was living in London, I became friends with this guy whose family had a few pots of gold, he quite nice and humble. But once he took me to this preview exhibition of Damian Hurst’s work at a private museum just off Bond Street, held by Coutts for their account holders. The place was full of aristocrats, overheard many amusing anecdotes. Such as how awful the banking crisis was as so many people who had lost savings (as in aristo's & old money) were having to sell family heirlooms and paintings to make ends meet, and what a shame it was that plebs with new money were buying up the artwork ad were just too devoid of culture to truly appreciate the art!!!

I nearly coughed up my champagne over their balding heads! The rest of the night I felt it as my duty to eat any and every passing canap! to ensure these deprived people did not have to suffer the indignity of debasing themselves in having to eat mini hamburger and Yorkshire pudding canap!s!

Oh well, I shall carry on saving or go back to my east end roots and consider a career that involves a balaclaver, banks and exile in a hot sunny climate singing cockney tunes!
Thanks for the great advice.