Novice FTB feeling low

Harvs98

Hi,

I've recently become interested in buying a property. I have kept my eye open for whats on offer but with no deposit, realistically I assume I am only eligible for 100%+ deals or any FTB schemes that are out there.

(1) I dont want to end up in immediate NE so will not look at anything over 100%.

(2) I assume I will be met with higher than average IRs if I go for 100% so that is last resort for me.

(3) My option at the moment is to look at any FTB schemes. I have seen and become interested in (Open Market Home Buy) https://www.housingcorp.gov.uk

This enables me to get a 25% deposit in the form of a loan which I do not need to make payments on for the 1st 5yrs but I would need to raise the other 75% of the property that I would like to buy.

I am currently looking to buy with my partner so it will be based on joint incomes - but for what we need (and thats the minimum), 75% = 190K (5x our joint income!!)

I say "we need" because we both work in Central London, our children (both under 5) attend school/nursery in London (not central) and our families are in London too.

We currently pay £524 rent where we live and the basic quotes we have done online show this will triple if we were to have a mortgage (could be more/refused as 'OMHB' is limited to only 4 lenders).

Is this really the case? I mean, even with a 25% deposit, will I be paying £1.5K+? Will I be doomed to renting forever in a place that already takes me 4hrs a day to get to work and back???

What else is there that I've missed or could look at instead? HELP!!!

brasso

Harvs, you won't want to hear this, but I'll say it anyway.

You have no hope of buying the sort of property that (I suspect) you want in central London.

You have no almost hope of buying the sort of property that (I suspect) you want in suburban London.

Dare to think the unthinkable. I don't know what you do for a living, but either think about doing it outside London, getting rid of that ludicrous 4 hour daily journey.... or think about changing your career.

Failing that, think about forgetting about buying for the moment. There will be a housing correction at some point, though we don't know when. In your situation, I would stay renting but try to move my job or my life outside central London.

I'm a Londoner by birth, and love the place, but I reached a point where I wanted some of my life back. After I moved out of the place, I spent 3 years travelling in each day (from Berkshire). Wasted huge amounts of time and money that I'd prefer to spend on my family and home.

Still live in Berkshire, but work here too now. Life is ten times better.

If you want to stay what you are doing in london, I would stay renting.

£524 rent is incredibly cheap.

Stay renting, save like mad, and look forward to the day when you get out of the place. (Let me repeat: I love London! I just think it's a nightmare for families and jobs and travelling.)

Harvs98

Thanks Brasso,

You were right, It's not what I wanted to hear but its also what I have been thinking in the back of my mind too.

However, currently changing career or moving out of London would be hard as we are a *young* couple (just under 30), near our parents, grandparents etc so there is loads of support for the kids e.g picking up them up from school, babysitting etc.

I work in IT/Market data and I wouldnt get the same pay elsewhere for what I do here (I have looked) - there is lots of scope for me to grow career wise so I want to see it through.

The 4hr commute from Hertfordshire (2hrs each way) isnt unbearable as its only two trains but living just 5-10 miles down the road in my own property would make things a lot more comfortable and give me an extra 10hrs a week at home.

I am very fortunate to pay the rent that I do, it enables me to save (a bit!) and also do some of the things that I want to do in life (debt free!!) Living in my own home would make the whole rat race worthwhile because I can see what im doing it all for.

I know central london is off the table but I dont rate it down there for living anyway. congestion charge, paying to park outside your own house, traffic jams, small places etc.

Zone 4/5 London would be ideal.

I also hear there will be a housing correction but I've been hearing this for years and with the whole country *exaggeration* wanting to move into London, I cannot see this happening anytime soon.

I love London too, so maybe im being a bit pig-headed about wanting to stay there but i would love to know what else is out there, what the future holds - especially when there are people working in supermarkets and earning less than I do owning 3 and 4 properties.

My ex-colleague, earning the same as me owns 14 properties can you believe it??? and I am struggling to own ONE.

Did you manage to look at the link I posted, what did you think?

Thanks once again.

JoeK_3

Harvs98, your desire might need to be done in stages.

Have you considered shared ownership?

This allows you to buy a % (say 50%) of the property now and buy more in the future.

JoeK

Harvs98

Thanks JoeK,

I have looked at SO but my understanding of that is I have to pay the mortgage on my X% share and then pay rent on the remaining X%, meaning I could end up paying more in the long run.

With the OMHB, I do not make any payments on the 25% loan for the 1st 5yrs, or until I sell/remortgage.

I will look at SO in more detail though as I want to cover all angles and see exactly what is available for me, even if it is in stages. Whats your view on SO, I have heard they are not favoured that much - is that true?

Thanks.

ftbworried

Hmmmm, it's a difficult one.

Firstly, you say that the reason you work in London is because you wouldn't get the same money elsewhere. Well, if £190k is 5x joint salary then I assume you are on £19k each. That's certainly not 'London money', you could easily earn that in most areas of the country (and in many different industries).

The bottom line is you HAVE to think outside of London. God only knows why London house prices are the way they are, contrary to popular belief there is not that much of a difference in wages between London and other areas anymore (unless you are an investment banker;-)) but the difference in house prices are just silly.

For example, I don't know exactly what you do but there are basic database analyst jobs in places like Bedfordshire/Cambridgeshire (not too far from London to visit relatives but MUCH cheaper houses - and a nicer pace of life in my opinion)

http://www.jobsite.co.uk/cgi-bin/vacdetails.pl?selection=921950908&src=search

This is for the same amount you are earning in London. I don't know what kind of house you are looking for, but a non-too-shabby 3 bedroomed house will set you back £150k, for example....
http://www.rightmove.co.uk/viewdetails-6580317.rsp?pa_n=10&tr_t=buy

£150k at 6% over 25 years ~= £1k a month.

I know £1k a month is a lot ( I should know, my mortgage is £1k a month too) but you have to realise that in todays world £524 is a VERY small amount of rent to pay- you'll struggle to find ANY houses in the country where you can get a repayment mortgage for that amount per month.

I know it seems hard, I was frustrated before I bought my house. You have an idea in your head of what you want in a house- then you go out there and see that they just DONT EXIST for the amount of money that you have. You have to adjust your expectations. It comes down to priorities, if your priority is to own your own home, then other things such as where you live/work, or other outgoings will have to come next.

I hope you find a way.

JoeK_3

Harvs98 wrote: »

Thanks JoeK,

I have looked at SO but my understanding of that is I have to pay the mortgage on my X% share and then pay rent on the remaining X%, meaning I could end up paying more in the long run.

With the OMHB, I do not make any payments on the 25% loan for the 1st 5yrs, or until I sell/remortgage.

I will look at SO in more detail though as I want to cover all angles and see exactly what is available for me, even if it is in stages. Whats your view on SO, I have heard they are not favoured that much - is that true?

Thanks.

Shared ownership is often the only way forward for many first time buyers and yes it's true that you pay the mortgage and a rent but the rent is vastly reduced to compensate for the mortgage.

What about this for an example:

Property value £190,000
50% ownership = £ 95,000
Interest only @ 6% = £475 per month
Rent @ £400 per month

Total = £875 per month

Does that make sense?

JoeK

firesidemaid

it is true - in at least northants which is less than an hour (45/50 mins) by train to london, prices are still low and lovely 3 bed family homes can be had for 120k.

the other thing would be to look at your incomings and outgoings and see where you can make cuts so you can save for a deposit.

i can see you have done plenty of thinking and researching. i would say start by putting an extra £300 a month away as savings, so you can see what it like to have to pay that bigger mortgage - in 2 years you'd have over £7000!

Harvs98

Thanks FTB,

Of the joint income, I earn the bulk of it because my partner works term time only. The job im in now, I love it and the next step is an investment bank too ;-)

I can 'eventually' see I may possibly hopefully one day afford to live where I want to but wouldnt I be continually be priced out if I keep on waiting? For example, where my parents are the properties were under 150k 10yrs ago and some are worth more than double now.

It looks as if I will have to keep on renting though, or think outside of London like everybody says.

Harvs98

Shared ownership is often the only way forward for many first time buyers and yes it's true that you pay the mortgage and a rent but the rent is vastly reduced to compensate for the mortgage.

What about this for an example:

Property value £190,000
50% ownership = £ 95,000
Interest only @ 6% = £475 per month
Rent @ £400 per month

Total = £875 per month

Does that make sense?

JoeK

Hi JoeK,

That does make sense. But if I were able to get a mortgage on the remaining 95K and own 100% of the property, would my payments still be £875 per month or would they increase?

Harvs98

it is true - in at least northants which is less than an hour (45/50 mins) by train to london, prices are still low and lovely 3 bed family homes can be had for 120k.

the other thing would be to look at your incomings and outgoings and see where you can make cuts so you can save for a deposit.

i can see you have done plenty of thinking and researching. i would say start by putting an extra £300 a month away as savings, so you can see what it like to have to pay that bigger mortgage - in 2 years you'd have over £7000!

I have started saving these last few months now and I have been looking at the incoming/outgoings thanks to MSE.

I dont have the plasma TVs, exotic holidays, credit card lifestyle. 0 debts in fact (apart from SLC student loan). And im always reviewing my bills to see if I can switch to cheaper elsewhere.

I'll try and save more to see what it would be like as if i actually had that for a mortgage, at least that way - if there are any mistakes, i'll still have a roof over my head!!

Thanks.