FTB - What is realistic?

DMUK

Hi all,

Just a toe-dipper here

Getting on the housing market is a semi-priority for me and my partner right now, as a logical next step.

A bit of background, I graduated in mid 2003, and took a job immediately and left in September 2006. Salary went from £14k at start to £24k at end due to various promotions. Left the job to start another, full time in the city this time, at £30k (net £1,750 after tax). I have about £1k in credit card debt (about to be on 0% card and paid off over 9 months) + a graduate loan (I took £2,500) and am halfway through the 5 year repayment period (£62/m), plus a student loan through SLC. In addition to my employment, I am also self employed as I run a small business in my spare time (partnership), which earnt me £1200 last tax year, and is set to increase next year (it is a hobby which earns money, so am self employed more to be legitimate tax wise).

My partner lives with me and has been self employed for about 4 months, and earns considerably more than I do, which is only set to increase, however I am aware that this is obviously not a perfect scenario due to the small time she has been doing this.

We are looking to purchase in the outer London areas. SW17 etc.

Any comments on what we would be looking at, or whether we should wait ect? Treat us as if we have no knowledge about self certification (a phrase I have seen mentioned in relation to self employment a few times). We would be able to generate between £5 and £10k deposit. More if it was really necessary.

Do we need to show a full SOA for affordability purposes?

Many thanks!

herbiesjp

What purchase prices are you looking at?

Whilst self cert is definitely an option for self employed people, who cannot verify their income for various reasons, there are other options which should be looked at first.

DMUK

Thanks for the response.

Looking at the market, excluding getting lucky with an auction or finding a decent non developed fixer upper (which thanks to the spate of "make millions by painting a radiator" TV shows, seem few and far between) we would hope for something in the £220k mark developed. However we would be disappointed unless we bought something with work needing doing, and lots of potential for circa £180k.

But we are totally open to advice at the moment, including whether the above is remotely credible. I can be debt free fairly quickly (and that is the plan), so I am hoping to leverage from the relatively large amount of disposable income.

Currently we pay £997 PCM rent between us.

kebl0826

Hello mate,

Have you considered shared ownership? I'm part-buying a flat in East Croydon and should be moving in in mid-January.

Like you, I graduated a few years ago (2001) and on about the same money as you (take home ~£1800pm).

Originally I didn't think much about shared ownership until I started looking seriously at some of the overpriced rubbish there is in London! All that is out there at the moment is the dregs that no one else wants! Every good flat that came up I would ring the estate agents only to be told: "Sorry, that is under offer to a cash purchaser". Estate agents would advertise them anyway just to get people to ring up.

I had given up hope looking at endless, scummy, £125k+ studio flats until I saw an advert for a 1 bedroom 1st floor shared ownership new-build in my area. The flat is worth £150,000 and I'm buying 60% of it (£90,000). The remaining proportion I will have to pay rent on to the tune of £180pm. [Someone in your position could afford to buy a greater share, in which case the rent drops. After one year you have the option to buy the rest of the flat.]

The flat is in a brand new, small block, has a high standard of workmanship, parking space and in a great location (10 mins to station). To find something like it privately would have set me back £170,000. Indeed, there is a Fairview Homes development a mile away who want £176,000 for an even smaller flat! Daylight robbery!

Most shared ownership schemes are aimed at key workers only however, often deals fall through in which case they may end up offering them to non-key workers. To be considered for shared ownershp you need to sign up online at Housing Options (https://www.housingoptions.co.uk). Some schemes also have restrictions that you must live or work in the local area, but these can be relaxed.

I looked at 4 other shared ownership developments and definately found the pick of the bunch (others were ground floor flats near busy roads).

In summary, the advantages of shared ownership:

- Avoids scumbag estate agents as you buy direct from the not-for-profit housing association/builder.
- You don't pay over inflated prices (schemes regulated by government)
- Little or no deposit required (I'm putting down 5%)
- Properties better than what you would get on open market
- Some include free white-goods
- No hidden costs (eg maintenance to property)
- Virtually no chance of the deal falling through (so no money wasted in legal fees).

Regards
M

herbiesjp

DMUK wrote:

Thanks for the response.

Looking at the market, excluding getting lucky with an auction or finding a decent non developed fixer upper (which thanks to the spate of "make millions by painting a radiator" TV shows, seem few and far between) we would hope for something in the £220k mark developed. However we would be disappointed unless we bought something with work needing doing, and lots of potential for circa £180k.

But we are totally open to advice at the moment, including whether the above is remotely credible. I can be debt free fairly quickly (and that is the plan), so I am hoping to leverage from the relatively large amount of disposable income.

Currently we pay £997 PCM rent between us.

You could fine some lenders will offer you 5 times your income as you are a graduate - they will make deductiona however, if you have debts still being paid.

HTH

DMUK

kebl0826 wrote:

...

I had not consider this, but it sounds quite interesting, thanks. The only caveat here is that this would typically only be for new builds, and I much prefer resale period properties.

herbiesjp wrote:

You could fine some lenders will offer you 5 times your income as you are a graduate - they will make deductiona however, if you have debts still being paid.
HTH

Thanks. My income, or our combined income?

kebl0826

DMUK wrote:

I had not consider this, but it sounds quite interesting, thanks. The only caveat here is that this would typically only be for new builds, and I much prefer resale period properties.

True, though oddly enough, 2 of the 5 places I looked at were converted period buildings. One was a converted warehouse and the other was 3 victorian houses converted into 1 and 2 bed flats.

DMUK

kebl0826 wrote:

True, though oddly enough, 2 of the 5 places I looked at were converted period buildings. One was a converted warehouse and the other was 3 victorian houses converted into 1 and 2 bed flats.

That sounds fantastic, thanks!

So what is the benefit here to the sellers. Is the reason they do this to encourage purchases, or to enjoy the benefits of a monthly income?

When you say you can buy the rest after a year, is that ongoing or a one-off offer. Presumably affordability or eligability for a great mortgage could arise and enable you to remortgage at this point? I'm off to read that link as most of my questions will probably be answered there!

kebl0826

DMUK wrote:

That sounds fantastic, thanks!

So what is the benefit here to the sellers. Is the reason they do this to encourage purchases, or to enjoy the benefits of a monthly income?

When you say you can buy the rest after a year, is that ongoing or a one-off offer. Presumably affordability or eligability for a great mortgage could arise and enable you to remortgage at this point? I'm off to read that link as most of my questions will probably be answered there!

The 'sellers' are the Housing Associations. These are regulated by the government and are 'not-for-profit' organisations. They are principally there to help key workers get a foot on the ladder.

The particular development of period houses I saw were obviously purchased by the HA (possibly derelict) and converted. The only reason I was put off was because not all of them had off street parking. Also, they weren't quite in the area I wanted.

The purchasing rules vary dpending on the HA, but for the flat I'm buying I can take an initial share anywhere between 35-75% (subject to affordability). I think the rule for staircasing (in my case) is that you can do it a maximum of 3 times, eg after the 3rd time you must own 100%. Also, I think you have to buy a minimum 5% value of the property each time.

So in short, you are right, after 1 year you could get another mortgage to buy out the remaining share in the property, in which case it would be 100% yours.

However, 1 final point. If you could buy a similar property outright then the HA would probably refuse you (eg if you had a big deposit)

DMUK

Thanks for the info. Unfortunately I am not a key-worker so the chances of this are slim although the idea is nice

kebl0826

DMUK wrote:

Thanks for the info. Unfortunately I am not a key-worker so the chances of this are slim although the idea is nice

I'm not a key worker but am buying a place in a key worker only deveolpment. Quite often key workers can't even afford these schemes so they have open them up to non-key workers otherwise they would lie empty for months, if not years!