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

Nine_Lives

A lot of the houses around the £125k budget are terraced houses in an area that we don't want to stay in (called Skerton) & they're often 2 bedroom houses with no drive or garage.

Although as i say, if you shop about a bit, then there are others available. For example - 3 bedroom semi with off street parking: http://www.rightmove.co.uk/property-for-sale/property-37536194.html for £130k in a better area.



What is this talk of "offset mortgage"? I've heard of it but don't really know what it is or entails.

Overpaying of mortgage is simple to understand as it does what it says on the tin & all that .... but is it as easy as it sounds? Are there often measures in place to stop you overpaying? Or is this rare?

motherofstudents

Most mortgage providers will let you overpay a certain amount, typically 10% of the amount borrowed per year. Look on the ultimate mortgage calculator on this site to see how much you can save by overpaying. You can pay off the mortgage years earlier and save thousands in interest.

The offset mortgage works on a similar principle but you have an account where all your money is taken into account i.e. your savings, salary etc and the amount is used to 'offset' the interest on your mortgage. As far as I know, the only problem is the availability. I'd suggest you try a broker like London and Country who will look at the whole market and don't charge.

marathonic

I've had a look at the postcode in your area via the online government website and, like where I'm buying, some of the postcodes qualify as a disadvantaged area which means that there is no stamp duty up to £150,000 as opposed to the normal £125,000.

The Postcode Search for Qualifying Areas is here:
http://www.hmrc.gov.uk/so/dar/dar-search.htm

The actual list is here (I believe the postcode search is more accurate):
http://www.hmrc.gov.uk/so/dar/england.pdf

If looking at these areas, I'd view properties up to £165,000. An offer of £150,000 on any of these is only 9% off asking prices which a lot of people agree houses are going for these days.

When a property is close to the stamp duty threshold, it's more likely that a £150,000 offer will be accepted - especially when it's from someone with a significant deposit.

You know your area better than me so would be in a better position to assess the suitability of a property like the following (which should easily be obtainable at 150k and, therefore, stamp-duty free):

http://www.rightmove.co.uk/property-for-sale/property-22908474.html

Nine_Lives

Thanks very much for that. Very helpful.

One thing i was wondering about was knowing how much spare cash you will have at the end of the week/month. To do this you'll need to know what your bills will be & this got me wondering...

Without actually "doing it", we don't know what our weekly/monthly food shop will be. We don't know what our electricity/gas etc bills will be, so on and so forth.

All we know is that our monthly income will be approx £2k (it'll actually be marginally over, but to play safe...). From this £2k needs to come everything ... yet we wont know what that everything is. Obviously we'll have moved out & signed papers etc before we even find that out, so how do you gauge your monthly cost so that you know what you can then afford?

marathonic

That's a difficult one to judge but have a look here:

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9017004/Mortgages-at-their-most-affordable-for-14-years.html

This would appear to suggest that, unless you've some unusual expenses, anything around 27% (or £540) should be affordable.

Plugging a £150k purchase price with a £45k deposit into the Nationwide site, if that's who you are going with, a 5-year fix will cost £547 per month. A tracker or shorter term fix would be cheaper but if it's control of your budget you are looking for, a 5-year fix is a good option.

dimbo61

Well when you view a property I am sure you can find out the council tax banding A,B,C,D,E and if you can afford F no worries so you know the council tax each month.
Work on £100 a month for gas/electric on dual fuel deal paid by DD
£30 for phone/broadband.
£40 a month for SKY ( if you HAVE to have it)
Buildings + contents say £30 a month ( comparison websites)
Life insurance for you both £25 a month.
Water rates £35 a month if on a meter.
Liked the house you picked as it LOOKS! like it needs little doing to it IE modern bathroom and kitchen. good sized rooms and garden + conservatory
Not bad for a first house but offer £125K for a quick sale and no stamp duty.
I love Offset mortgages and I am with YBS
We have build up savings in the offset and overpaid as well ( old geezer) I want to be MF asap.
You have saved well now is the time to make the leap if you LOVE your G/F and want to settle down ?
Good Luck

gentoo

Hi,

I had to sign up and reply as I found it remarkable that you're in almost the same situation as myself.

My girlfriend and I are just a few years younger, have roughly the same wages and deposit. I can earn a little more with O/T but I try not to take that into account as it's not certain all the time. We too still both live at home (however separately, which is a pain!) and I too am the thinker (read: worrier?) of the pair.

We have been looking at houses max 125k and luckily in our town that can get you a decent 3 bed semi in a decent area although I have thought about buying a cheaper smaller house enabling us to have lower payments and pay the mortgage off quicker whilst still getting onto 'the ladder'. However buying a larger more expensive house once will probably be a better move than having to buy twice in the long run.

If we buy at around the 125k mark (although hopefully less) I've been thinking about only putting down £25k as a deposit achieving 80% LTV and after paying fees keeping the rest in a savings account in case the worst should happen i.e. redundancy. I've read a little on things like PPI and for what they cost and how long they can take to kick in this seems like a better option. Plus I'm a sufferer of anxiety and as such I always fear the worst, this can both help and hinder me at times.

We too struggled with thinking of living costs and I imagine it will be a shock going from paying just board + lodge, a mobile bill and running a small car to paying a mortgage and council tax and everything else. We asked our parents what they paid and worked from those numbers. I realise a home for 2 should be cheaper but best to overestimate in my opinion.

As it stands we are not in a mad rush to buy although I am aware interest rates are low at the moment and won't last forever. So I check rightmove every day for new listings and this will enable me to act quickly if something arises and also helps with learning the rough prices/values of properties in my area. Nethouseprices.com is another help as you can see what houses have sold for. In the meantime we keep saving as much as possible.

Sorry if I rambled but was excited to see someone else in the same boat (hope you don't mind me saying so) and hope everything goes well in your househunting.

AMO

Hi,

I bought my house a while back and have a decent close to base rate mortgage. I thought to take the easy way out and live in it until it was paid off - that's usually a guy's way of thinking.

A girl's way of thinking is to get the right 'family home'. And there is nothnig wrong with that. In fact its a good wake up call as you ideally want your mortgage paid off before you retire.

In general, the best advice I can give you is to get the nicest house in the best area you want to live (you want to be in a nice area - schools etc) and you don't want there to be too much risk on your house by being in a rubbish area.

You then want to see how far your finances can reach given a 25% deposit (don't push it by going down to a 20% deposit unless there is ample argument for doing so).

House prices are likely to stay flat over the next 2 years and then start to rise slowly. In general, prices are unlikely to go down simply because of supply and demand. There is a lot of demand from buy-to-let landlords gobbling everything up.

However, a larger house, whilst harder to pay off will provide a better investment. Worst case scenario is that you trade down when you come to retirement but you get to live in a nice house all that time and you'll have equity that grows at a larger rate.

But ultimately you only live once and all that time living in a nice house makes the world of difference. Just make sure you buffer away a bit more money for those hard times that may present themselves.

As for houses, be very careful of houses that sit along the stamp duty borders. I have seen a lot of houses in the last 3 years and everyone thinks the same. The good value houses that just drop their price below the threshold tend to have been snapped up quite fast.

Most left tend to be rubbish / poor value so you need to negotiate a bit more off. Looking £10K-£20K or more beyond that and you can find much better decorated houses that are better value even if you are forking out for more stamp duty. Keep that in mind when searching.

AMO

gentoo wrote: »

Hi,

I had to sign up and reply as I found it remarkable that you're in almost the same situation as myself.

We have been looking at houses max 125k and luckily in our town that can get you a decent 3 bed semi in a decent area although I have thought about buying a cheaper smaller house enabling us to have lower payments and pay the mortgage off quicker whilst still getting onto 'the ladder'. However buying a larger more expensive house once will probably be a better move than having to buy twice in the long run.

No offence, but I don't think you're in the same boat as the other chap. He seems older wanting a shorter length mortgage and has a higher deposit.

Also, whilst in the past getting on the ladder means you can move up, many will find that moving up from one rung to the next can be difficult.

We also don't know the area you live in (are houses cheap or expensive) as that affects what you buy.

I think its important to get a check list of what you guys look for in a house (e.g. second large bedroom, study, downstairs toilet, a garage to put stuff into) etc.

Then try and get a house with your top must-haves ticked off. If you can't tick them off with a lower budget, consider going higher. In your case, I think that if you're considering 80%LTV, you're at your max, whereas the other chap can reach £180K or so and negotiate down a tad.

In general, the cost of moving these days is high, not to mention stressful expecially if you are in a chain (as opposed to first time buyers) so you want to reduce the number of moves as much as possible.

sirmosh

robatwork wrote: »

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......

In theory it is, but in terms of value, desirability and people's willingness to buy one, no it isn't.

The most important thing is that you get a house you're happy with, I'm of the school of thought that you should spend the least you need to in order to get a property you'll enjoy living in. The more disposable income you have the less stress you'll have in your life.

Weigh up what you really need in a house and just make sure that's covered, for example if you want a driveway make sure you get one, parking on the road and not having your own space can be a nightmare in some areas and so on.