Soon to be first-time-buyer: buy cheap or spend a little? Your view?

Nine_Lives

Basically my gf & i live with my mum & have done for some years in order to get a sound deposit together.
We both earn a similar amount each month. To be honest i probably dragged my heels for a while because living at home was really enjoyable, but i always wanted to have a sound deposit together before moving out (back in 2005 we'd have had about £5k from me & £2k of debt from the gf). Since my dad died last year, living at home just isn't the same & we are looking at moving out next year 2013. TBH, even if my dad was still with us, it would be time for us to move on, as i turned 29 this year & my gf turned 30.

I now currently have about £33k & my gf has just over £10k. I have done all/any research (i.e. my gf hasn't) including all the number crunching & i decided/suggested that moving with a 40% deposit of £48k on a £125k house would be the aim with the projected repayment duration being 20 years .... as i do NOT want to be paying for my house into retirement. I want repayments low & a basic calculator on the Nationwide site said £480 per month, which is a nice figure.


My gf sees where i'm coming from, but has suggested that with a deposit bigger than what most first time buyers have, we should look at a "better" house (i.e. increase our budget).

Around here (post code: LA1 if you care to look) £100k would get you a terraced house, which i don't want. I'd like a semi detatched. There aren't a vast amount for £125k, but there are some if you look (& they're not run down either). There was a 3 bedroom semi with driveway & garage for £130k (so only 5k over budget).


I was speaking to someone at work who's just bought his first house & he's pushing 40. He agreed with my gf ... that we should raise the budget.
He actually went further to say that we should move out now, and not wait until next year as prices are going to sky-rocket.



So as outsiders to our situation, what is your view? I like the thought of low repayments & paying the house off sooner, but i can see where my gf is coming from. It's a difficult one to weigh up. As i'm new to this, maybe there's something i've not even factored in?

cattie

Well if you listen to what people say about house prices, they certainly are not going to sky rocket next year!

Who knows where property prices are heading in the next few years? Some areas will see some price rises, others will lose even more value than they have over the past few years, but we will be a long time getting back to the boom years of property prices, so don't let anybody frighten you into buying before you are quite ready.

Personally, I agree with your girlfriend, aim a bit higher and the house is going to suit you for far longer & will be more cost effective. Only if you buy something that will 'do for now', you will end up paying out a good few thousand pounds in ea and solicitors fees when you want to move on up to something better and need to sell your terraced house and buy a bigger place.
Moving house is a very expensive business.

Think of buying a house as not just buying bricks and mortar, but a long term home and you won't go far wrong.

Mortgage rates are low at the moment and they won't stay that way forever, so this is something else to take into account.

DizzyGherkin

It depends on your situation really. Sounds like you've done a great job saving up a good sized deposit.

The important thing you both need to consider is what you can afford every month, and also what your plans are over say the next 5-10 years - I don't mean everything, but do you eventually want kids, will you want to go up another step of the ladder etc etc - these are things that will add to your monthly bills.

You've both got plenty of time until your retirement ages, so there are a couple options for you that I can see:

You could increase your budget and look to pay off in 25 years instead - you'll still be way in before retirement age.

If you choose a longer period, your monthly repayments would come down, however you could make overpayments to help reduce the term (if you can afford to do so).

Or finally - stick with your current budget - you can always move up the ladder in later years. Your first move is more getting on the ladder than for it to be somewhere you'll be in for many many years.

When I was reading your post about house prices I nearly fell over! I'm in the outskirts of London, and for £125k you'd struggle to get a studio flat! My wife and I have just sold our shared-ownership flat and are now looking to move into a semi-detacked, however we are struggling to find anything half decent for less than £250K - as you can imagine - our mortgage term will look more like 35 years!

All the best though for your house hunt! Let us all know how you get on.

marathonic

I'm in the same boat at the moment - expensive property or cheap property (although I'm purchasing alone).

The way I'm looking at it, a low-cost lifetime tracker appears to be the best option for the forseeable future.

With Brittania, the rates are 2.59% at a 60% LTV and 3.19% at a 75% LTV.

If you assume a £50k (40%) deposit for a £125k house, your repayments over 20 years would be £404.34.

If you assume a £50k (25%) deposit on a £200k house, your repayments over 25 years would be £488.75.

However, they reckon moving costs at least £5,000 when you consider estate agents fees, solicitors fees, moving/replacing furniture, etc.

That means that you'd save less than £85 per month with the cheaper house but, if you move after 5 years, your £5,100 savings in mortgage payments would be ate up by the moving costs.

Worse again, property prices could be higher making your upsize cost more. Of course, property prices could drop too but, as noone knows what will happen, I ignore this in my calculations.

Basically, my advice would be to view properties both at £125k AND at £150k. When you know what you can get for your money, you should only then make the decision.

Kynthia

Buy a home you'll be happy in for as long as possible. It should suit your needs for now and the next decade if possible, be in a good location and be something you love. If possible you could think about a property you could add value to, such as room to extend, loft to convert, or something that needs modernisation but these should be secondary concerns as it's primarily your home.

Yes it should be affordable, you don't want the repayments to be so high that you risk losing the house if one of you isn't working for a while. However you don't want to be so cautious or risk adverse that you buy a home you aren't happy with.

dimbo61

You and your G/F need to write down a list of things you want from a new home.
No point in buying a one bed flat or small 2 bed house if you plan? or end up with 2 kids in 3 years time.
I would buy the best property in the best area you can afford with a 25% deposit to get the best long term deal.
I would look at a 5 year fix ( rates have increased recently BUT still low compared to normal rates ) consider offset mortgage and save into the offset account rather than overpay for a few years.
Look at what you need ! parking for 2 cars, downstairs toilet/sink, ensuite to master bedroom, garage ! 3 bedrooms for the 2/3 kids, garden, LOCATION , local schools and shops , transport links.
Old or new property ? are you good at DIY ?
My perfect house might be something you hate ;-)

Nine_Lives

Thanks a lot guys.

As for letting the chap at work worry me - that wasn't really my sticky point. I'd done a bit of reading & what he said didn't really tie in with what i'd read up, so i took it with a pinch of salt tbh.

On the topic of DIY - no, i'm terrible lol. No doubt i'll learn bits & bats, but right now i'm awful, which is disappointing as my dad could turn his hand to anything & i'd like to have half the skill. A lot of the stuff at our home is hand-made by him. He'd knock up some cabinets or shelving. Electronic issues were no problem either. Same with plumbing. As for me - no chance.

As for what i personally want - i don't rush my decisions. I'm known to think, think & then over-think. I'd like a minimum of 2 bedrooms, ideally 3. Off street parking is a must, be it driveway or garage, i'm not choosy on that part. I don't want a terraced house at all. We moved to this house (which is detatched) when i was 2, so all i've ever known is no neighbours. I know i'm not going to get a detatched house on my budget, but a semi is what i would like.
As for the kids, we've discussed & from being anti-kids, my gf has since come round to the idea of one child. The concern there is the cost of a child (i get about 18k per year with overtime & no sign of a payrise since 2007 & she gets 16.2k).

As well as a total rule out of a terraced house, i would also like to totally rule out moving here, there & everywhere. The house we select we want to stay in for a considerable amount of time. I know a decade has been mentioned, but we're looking longer than that.

Anyway, i need to hit the sack as i'm up early in the morning. Thanks for the feedback guys.

robatwork

Just a thought. Don't rule out "terraced" houses when you search on rightmove or agents. An end of terrace is the same as a semi......

motherofstudents

I'm sorry to hear about your dad.

I would definitely go for the best house you can afford. If you are intending to stay longer than 10 years and with a large deposit, you would kick yourself if a couple of years down the line, you realised you wanted to move again to somewhere better.

I would suggest you find out how much you can borrow and work out your monthly budget so that you know you can afford to keep up the payments. A few thousand pounds extra will not be that much on a mortgage. Don't write off getting a mortgage over 25 or 30 years because if you can make overpayments you will pay it off much earlier.

View some houses and see exactly what you are going to get for your money and remember you can probably get quite a bit off the asking price. Make a list of things you must have and things you would like. People very rarely find their perfect house, there is usually some compromise so don't expect to tick every box.

It may be a good idea if you find the perfect area to look for a house with the potential to extend, sideways, to the back or into the loft so that if you really love the house, you will be able to stay and improve, rather than outgrowing it and having to move again.

dktreesea

I take it this needs a lot of work? http://www.rightmove.co.uk/property-for-sale/property-37898231.html
I couldn't get over the size of the land!

Some of the prices though:
http://www.rightmove.co.uk/property-for-sale/property-37663778.html
Only £79,950??!! I would live there like a shot if I lived in your area, assuming it is in a good part of Lancaster.

Handsome homes in Lancaster. It looks a great place to live. Good luck with your house hunting.

Strapped

dktreesea wrote: »

I take it this needs a lot of work? http://www.rightmove.co.uk/property-for-sale/property-37898231.html
I couldn't get over the size of the land!

Some of the prices though:
http://www.rightmove.co.uk/property-for-sale/property-37663778.html
Only £79,950??!! I would live there like a shot if I lived in your area, assuming it is in a good part of Lancaster.

Handsome homes in Lancaster. It looks a great place to live. Good luck with your house hunting.

Second one is for 50% share.