Looking to buy a first place in London -Can you negotiate away from salary multiples?

LondonRenter_2

Hi everyone,

I've been living in London for 4 years through Uni, I've graduated, got a decent job thats going somewhere and I'm sick of putting my money in someone elses pocket! So I want to get a place bought ASAP, the only problem is, I need to get a mortgage company to agree with me!

Long story short, I want to buy a 4 bedroom place in or around Ealing/Acton or Clapham/Putney/Roehampton kind of area in the £325k region. I earn £25k - so this is 13 times my salary..... Bam, dream on, not happening!

However, if I can show affordability, can mortgage companies be negotiated with? I've explained things in detail to my parents and they are willing to front me £50k as a deposit (A gesture I am of course astoundingly grateful for!) on the basis I pay it back at a minimum of £250 a month (I'll get more into this later)

This leaves me looking for a mortgage of £275k with roughly a 15% deposit. Using the various mortgage calculator sites to get a rough guide for £275k @ 5% over 35 years this gives me a monthly payment of £1,387.89 on a repayment basis, plus the £250 min that my parents would want, this gives a total of £1637.89 a month.

Now, I currently live with 3 other people in the West London area and have done for a number of years, our current rent is £2600 per month + all of the bills on top. We have evidence of us paying roughly this amount (Contracts, bank statements etc) going back at least 3 years with not a single payment being missed or late. I have spoken to them about going in on a joint mortgage but they are not willing/able to go in for it (Currently doing Ph.D. etc) However, none object to me being their landlord (Hence the need for a 4 bedroom place)

Doing back of fag-packet figures they will together pay me up to £1750 a month and still be making a saving on what the rent currently is each month. This covers the mortgage before I even lift a finger, however, my share of the rent currently is just under £700 and once bills are paid I have still been saving £300 each month and have been doing so since I started my job with no problems. My intention would be, as the rent from the others will cover the mortgage, to use this £1000 each month to make accelerated payments on what I owe (Starting with my parents).

Even so, I'm still liable for a mortgage which is greater than my entire monthly income, this is where I want to know if the fact I plan on having others living with me and paying has any effect on what they are willing to lend? And if I can show that I have plans for various scenarios will help me?

I can provide evidence of personally being able to strum up £1000 each month and could stretch to more if I needed to (This is the reasoning I've agreed to only do a minimum of £250 with parents in case it hits the fan), therefore would only need to have one of the 3 other rooms rented out at any one time to cover the remainder. The other situation would be if interest rates started to rise, I've seen mortgages fixed at 5% for at least 3 years so this is less of an issue as I'd have time to react but even so, the interest rate could rise to 11% before the total cost of the mortgage would be the same as what we have been paying in rent for the last 2 years!

Further to this, my parents have again said they are willing to act as guarantors as they have been for me when renting in the past (On their usual condition that they will take my skin if anyone actually ever comes to them for money). And the money that I'd be paying back in the form of accelerated repayments to them would be held back by them for the first 5-6 months to build up a pot that could be used to cover the mortgage entirely for a few months should there be a real emergency and I had no money coming in from anywhere.

This has turned a lot more rambling than I meant it to (all these thoughts have been going round in my head for a while now) but if I went asking for a mortgage with all of the above info would I have a chance? Or would I still be laughed out because at the end of the day, I'm still asking for 11x my salary?

dimbo61

You are not looking for a buy to let mortgage but a commerical loan to become a landlord.
Lenders like to people who have a business plan and not First time buyer, They like you to own your own property with lots of equity which they can take a second charge on ( Mum& Dads house) and earn £25-35K a year.
You may now need planning permission for change of use from residential use to C4 student/professional HMO.
You then need to refurbish house to HMO standard ie EPC, Gas safety certificate, rewire, fire doors/escapes ETC
It all costs

Kynthia

Some mortgage companies do take the income from having a lodger into account. However I can't see any mortgage companies lending you 13 times your salary!!! That would be irresponsible lending in anyone's opinion.
The only chance is for you to jointly own with your parents, but that would still depend on their income and outgoings. Alternatively you could find a cheaper place and still have one or two lodgers.

Running_Horse

You don't appear to have factored in any kind of repairs that HMO landlords inevitably face. What happens to your calculations when interest rates rise? And they will. To be honest, it all sounds slightly insane, not to mention a major risk to your parents financial safety. I would accept their kind offer of a deposit (which will be taken into account by the lender), and continue saving for my own place.

dacouch

How will you find a 4 bedroom place in Clapham or Putney etc for £325k ?

System

Are you taking into account tax on any rental income?

jc808

dacouch wrote: »

How will you find a 4 bedroom place in Clapham or Putney etc for £325k ?

youd be lucky to get a small flat or a garage!!!!

your plans totally unworkable

maninthestreet

Rightmove only lists 2 properties in 'Clapham, South West London' for £325,000 or less, but they are flats, not houses.