First Time Buyer, High Earners, No deposit

Chojinalpha

Hi All,
This is my first post for a while. I have looked around on these boards and can’t really find anyone in a similar situation to me. That is; wanting to buy a house with my girlfriend in London.

Come facts: Our combined income is over £105,000; we have no debts of any kind; we have just about £25,000 in deposit (can borrow 10k from Mum and Dad) so around £35,000 potentially; currently living in Richmond in London in a rented property at £1500pcm.

The problem as I am sure many experience is that we would love to buy a property a little further out in surrey or Middlesex. The price for even a semi decent house is £350K in this area. The mortgage advisors I have spoken with have said we can borrow up to 400K with our earning potential. Sounds fine, we have however only a meager deposit of 25K. This already limits us to houses of 250K which do not exist. (They do but are horrible)

I cannot reconcile living in a 250K property this side of London as they are not very nice. One of the important things about working hard and earning money is to come HOME to somewhere you love that makes it worth while. This doesn’t seem possible for the wide area we have looked in.

I am left by my broker then 2 choices:

• Buy a 250K property, borrow a bit of money and avoid stamp duty.
• Buy a 350K property and borrow money from my bank to make the deposit, other and stamp duty fees. It was suggest that we needed 60K and would have to borrow around 15K in personal loans each to reach this. Borrowing additional money although it sounds ludicrous (broker says) is actually not going to affect the amount of money we will be offered for a mortgage and help us in the long run.

MY PROBLEM: This seems like madness. To live somewhere decent we would have to borrow on personal loans and take out a mortgage. Our brick living costs would go from £1500 a month to £2000 a month.

We are also expecting a baby in 2012. :T


My QUESTION: Should we just wait and save more? I am worried that prices of houses will go back up. We already missed the boat on 100% mortgages pre crash. We would have been attractive to lenders as we have excellent credit ratings, no debts and are good earners. Now we can’t get anywhere thanks to the deposits and high prices. I feel lost and despondent that we have done as we were told, and tried to save, but now are nowhere. Feel like we missed the boat.

Surely prices cant go up again in another year? Mortgage deals will surely get better? The next budget will help us on stamp duty?

Feel so lost and confused and let down by banks, government, advisors.

In gratitude to you all for any thoughts.

G

GMS

There is a 100% mortgage launched today which requires a family member to allow a charge on their property for 25% of the value of the purchase.

If you have a family member willing to do this then it could help your situation potentially, with the funds you have being used for fees etc and to begin to reduce the borrowing.

Speak to a broker to see if it suits you.

Catatonia

If you earn that much I reckon you could save up the extra £25k you need in about 6 months.

Thrugelmir

Rent a cheaper property for a while to build your savings. Or cut back on the lifestyle instead. On your combined incomes £25k saved isn't very much. As your net income is in excess of £5k at a minimum possibly far higher a month. With only £1.5k outgoing on rent. That's a lot of cash spent elsewhere.

What's the plan when the baby is born? Length of maternity leave.

C8LNJ

Simple, live off one wage for the next 6 months & save around 30k to put towards your deposit/fee's. Your not going to be living the high life anyway with a baby due. Nothings going to change market wise in that time, possibly a bit in your favour due to the winter slowing things down.

A much better idea than borrowing for a deposit, thats madness surely!?

_Andy_

Borrowing using personal loans won't work - no loan provider lends for that purpose and no mortgage lender will accept personal loans as a suitable source of deposit.
Keep saving.

GavB79

You need to look at your outgoings. No debt and £1500 rent, where is the other £3.5-4k a month going? Saving should not be a problem

getmore4less

Net income £5.5k-£6k

Whats the income going to be after baby comes?

What are your current travel costs and where do you go?
What will they be if you move?

How much are you currently saving a month?
(You probably need to target close to £3kpm for a years plan)

I think you need to look longer term, a year plan should get you where you want to be, proper deposit, costs and some spare savings, time to find a good place in the right area.

You could look at moving renting to check the area/travel out before commiting to purchase.

What about going further out(whats the max commute?), also why that side of London there are other areas(bucks/herts) where you can get decent places for £250k(4 bed detached 1hr train).


Also do you really want to include the old Middlesex, that is west/nw greater london now, so just round clockwise from Richmond rather than further out.

smartiedriver_2

It's very simple - save more. From what you have said you have substantial savings potential each month until the baby comes.

Chojinalpha

Hi OP here,
You are all in fact totally right. I think since we only decided recently to buy we haven’t gone through the requisite amount of time of pious saving which you are correct in saying should be at least a year. To be fair my partner and I put away £1000 each a month but it could and should be more. Rent and bills is £2000 pcm and saving £2000pcm means we fritter a further 2K on lifestyle.

I am up for clean living I was just unsure if a further year of saving would see a bigger than normal hike in house prices. If I can be relatively confident things won’t change much in the market then I can bump up the saving to £1500 and try and live a bit more reasonably.

Bottom line we haven’t gone through the requisite austerity period ourselves to make us strong house buying contenders. Mortgages may sort themselves out a bit with competition from lenders in 12 months too.

Sit tight, shape up.

Just a shame I still have to burn money on rent too.

Thanks for the input so far.

PS Had a scan today, all looks good phew!

Chojinalpha

Just another bit on outgoings. I work from home and she is on the M4 corridor, both own our car outright too. So far havent done a baby budget, she gets 24 weeks full pay maternity too and 4 months after at 50%

We I guess are luckier than most.