Please Give Advice: First Time Buyer

moneysavingnewbie_4

My Girlfriend & I are about to buy our first house, and we'd like some opinions as to whether we are spending a reasonable amount. We have been renting since leaving uni, so have no house to sell.

The (perfect) house we are looking at is £185k, and we just about have a 10% deposit. (although stamp duty/solicitors fees/survey/lenders fee probably come to another £4k, which we are working on)

We both have decent jobs considering our age, I earn £27k while my partner earns £25k. I pay £150/month pension, she has yet to start a pension. We are both graduates (3-years since leaving uni), and so both have student loans of about £15k each, equating to about £110/month each. This gives us take-home pay of £1450 / month each. My partner also has a post-graduate loan for an extra year (LPC course)which has £4500 remaining @ £80 / month.

I have estimated house costs (what we will have to put into joint account) as:
Mortgage...........£1,000.00
Gas.......................£50.00
Electricity...............£50.00
Water....................£30.00
Council Tax...........£120.00
Telephone..............£10.00
Internet.................£20.00
TV License.............£15.00
Insurance...............£30.00
Food....................£240.00
Total.................£1565.00

We don't lead extravagant lives, our outgoings are:
............................. Her.............Me
Gym........................£28.50.........£28.50
Contact Lenses.........£15.00.........£0.00
Car.........................£75.00.........£150.00
Health.....................£10.00.........£10.00
Hair.........................£10.00.........£10.00
Graduate Loan..........£85.00..........£0.00
Going Out................£50.00.........£50.00
Mobile Phone............£15.00.........£15.00
Total / Month..........£288.50........£263.50

If this is correct, we both have outgoings of £1,050, leaving us with £400/month each, although my partner needs to put some into a pension (we will look into this after getting the house sorted, there are no employers contributions from her employer so we aren't wasting too much, but she will probably try to put £150/month in)

So the question is, do my figures look realistic, and can anyone offer any advice i.e. are we looking at a house too expensive or is the cost about right?

moneysavingnewbie_4

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[Deleted User]

Is there anything there for fuel or lunches?

me and my gf are in roughly the same situation, similar salaries and mortgage.. we've ended up with roughly 500 a month each, although its hard budgetting as not all bills are monthly and we've only been here 2 months now.

How are you going to pay for holidays? How are you going to furnish this house? You ever planning on buying people birthday presents?

Our household / building insurance only cost 200 for the year after 80 pounds cashback (quidco) from Zurich. We're getting a water meter installed, but if we were on rates it would cost 210 a year

capstain411

Thats is a very good compilation of costs by the OP. But i would be bit skeptical on the pattern of expenses. In my experience, expenses are never uniform, in worst case scenario I would always try to keep a 500-1000 pound cushion amount. OP has charted out the basic foreseen expenses, but there will be lots of unforeseen one's too like building maintenance and the odd gas boiler blow outs etc.

Gas and electricity 50 pounds each every month. God gracious!!! have u bought a stately mansion . I should guess your yearly energy bills will be lot cheaper than that.

And as rightly pointed by ringo, you will have to think about furnishing and holidays and yes......I might be stretching my imagination, but me being in a similar position to yours would also like to set some money aside for marriage.

Lastly can you really manage your "going outs" in 50 pounds every month. If you do you will have to share the secret with me.

moneysavingnewbie_4

RE Energy bills: the flat I live in now has electricity only and heating is storage heaters, via economy 10, which currently costs £65/month. The type of meter means I can't change to a cheaper energy supplier, so they are free to rip me off as much as they want. 20p / unit! I guessed when I move into a house, it will be bigger than my flat and so I upped the bills a bit, there will also be a standing charge for gas supply, so I rounded the bills off to £50/each.

The house I was looking at fell through, so I’m back to square one again. Living in our rented flat costs about £600/month less than a house would cost, so saving up is easier. This should give me time to save up some of the extra we need for stamp duty / legal fees / lending charge / survey.

I do some overtime, which usually accounts for a couple of thousand per year, and is not factored into my original estimates. This, along with over-estimating most of the bills, means I should be ok for holidays etc. I also have a small float in a separate bank account for emergencies.

If we did get into unforeseen circumstances and were really struggling, I could sell my car for maybe £2.5k and we could manage with one car. There are also options for asking Student Loans Company for a break, and taking a break on pension contributions (these last two options are not a good idea I know, but they could be useful in an emergency and give an extra £400/month, and it would be better than losing a house)

RE going out: we usually eat out about twice per month, but our main hobby is watching films, probably two per month at cinema, and perhaps 10 per month at home (rented with nectar points and using vouchers etc). We very rarely go 'out' drinking/clubbing.

Quote: "I might be stretching my imagination, but me being in a similar position to yours would also like to set some money aside for marriage."

Are you crazy? We’ve only being going out 6.5 years.

Seriously though, this is not on the cards in the foreseeable future. If it were, career progression pay rises would have to take care of financing it.

RE fuel, lunch. The figures quoted are supposed to include fuel. A house out of town would increase my fuel use, but I am intending to counter this by cycling to work more. Lunches will be sandwiches made at home the night before, as they have been for 3 years.

mixu

A quick answer as I haven't had time to work out all the numbers!

We bought a flat about a year ago for about £25k more — don't think our fees were much over £3k as we managed to get a free survey from the mortgage lenders and mortgage fees were negligable.

Our mortgage is just over a grand and bills work out at about £280 (gas, elec, council tax, water, telephone, internet, insurance, TV license)...

£10,000 +/- on the mortgage only works out at about £50 a month difference so you might as well get the house you want!

If you can save on the fees it'll cover furniture costs which continue to add up...

lypsey

You can clearly afford it , however consider this

1) house prices are very high and will start to come down
2) Inflation is out of control
3) Interest rates will keep rising (due to inflation)
4) Unemployment is at a 7 year high
5) The country has 1.3 trillion debt
6) MOST IMPORTANTLY the ratio for mortgage to earning runs most of the time at 3.5 times earning . It is currently nearly 7 times. It WILL come back to its moving average. That means house price will come down
http://www.in2perspective.com/nr/stats/house-price-to-earnings-ratio.jsp
Hope that helps

[Deleted User]

Their ratio is 3.56x joint salary - hardly 7 times

Things will be tight, but there's already margin for reduction in your costs (over estimate of gas/electric/water and 240 for food could all be reduced_

Go for it, getting your first home is an amazing feeling. It's cost me more than i thought it would (so far 7k for fees/stamp duty/furnishing/kitchen utilities/tv/bed/decorating) but its worth it.

If you've got a reasonable jobs, you'll be on more money soon and things will be rosey

lypsey

Ringo
I said in the first line that they could afford it , BUT the market is running at a multiple of nearly 7 times and that is critcal because as you can see from the chart since 1955 there has never been such a large multiple

IT WILL RETURN TO THE AVERAGE ie lower house prices

pusscat

Only point I would add is that have you thought through how you would cope if you hear the patter of tiny feet and one of you has to give up work/go part time/pay nursery fees?

You may not be planning on a family yet, but accidents do happen.....

You both have careers so pay rises etc should make things easier as the years go by....in theory go for it, you both appear to have your heads screwed on and you are going in with your eyes pretty open!

In practice, if it was me and my money, (benefit of 10+ years extra in the age department!) I would wait another 6-12 months, save a bigger cushion or clear off as many debts as you can and be a bit more confident in which way the housing market is going to move!
However, when I was you age I would probably not have waited - so good luck in whatever you do :-)
HTH

Puss