Embarrassed FTB seeks advice

DoubleOhScrimp

Hello, my first post :beer:



Background:
Saved cash: £40k
Salary: £46k
Age: Late 30s
Debt: None
Net monthly income: £2800; Current monthly spend: £1500
Credit score: (Literally) perfect
Employment stability: Pretty much as good as it gets in this day and age. I have very sought after qualifications.


I currently rent (£580 pm) and do a long commute to my newish job (10 months) costing me £200 pm in fuel! My lease expires in March 2013.


After many years of overspending and generally being a financial twit, I recently had something of a financial epiphany and now look to get my financial life sorted out.


Top of the list seems to be buying a house and then later getting into BTL (more on that later). In terms of buying I could go from one extreme: £120k one bedroom bungalow in a little village near Cambridge, to a £350k new build two bedroom house in the “hot” south of Cambridge in Trumpington. Financial considerations aside, my ideal home would be a 2-3 bedroom house with garden and garage in a village 10 mins drive from Cambridge for ~£230k (which are available at that price).


Ideally I would also like to do a £150k BTL but that seems to inevitably require considerably more cash. I can save £15k a year currently and even more at a pinch.


Currently, my (very) provisional plan is to buy a £200-230k house with a 10% deposit in March 2013 keeping the rest of the cash in reserve. Then save for another 2 years to get another £30k to drop the mortgage to 75% LTV. Then save another 2 years to get a BTL deposit ready for a ~£150k BTL.


Some questions:

• Does anyone think I should continue renting for another 2 years to get the 25% home deposit up front? I cant see how that makes sense given the £200 fuel spend.

• Are there are quicker ways to get the BTL going that I am missing?

The FirstBuy scheme seems like a once off opportunity to cut my home deposit to only 5%. Using the “saved” ~£10k towards a BTL deposit. The scheme initially looks attractive ... you only start repaying the 20% developer/government loan after 5 years. However, its Achilles heel seems to be the fact that you have to buy new. I’m amazed at the premiums charged for new builds. In fact I just don’t see the attraction in new builds ... am I missing something? Is there some sensible way to take advantage of FirstBuy in my plans? Hmmm ... I just read that FirstBuy ends in March 2013 anyway?! I wonder if it would be sensible to wait to April 6 2013 to see if any new schemes are forthcoming in the budget or stamp duty for FTBs is scrapped again ...


As to why I’m embarrassed ... I’m amazed at the saving and spending discipline of many people on these forums. People are buying homes in their early 20s! If I had showed that level of dedication I would have 10x the net worth I have now :eek:

anselld

You would not be eligible for first buy anyway as the first rule is that you must be financially unable to buy on your own in the open market.

You are right that new build carry a premium. This may not be a problem if you are planning to stay long term.

My only other comment on your plan is don't try to optimise the purchase timing too much. You would be better looking over a longer period and waiting for the property you really like at the right price. Can you move onto a periodic tenancy (1 month notice) after your fixed term expires? Don't be tempted to give notice on your rental until contracts are exchanged on your purchase.

DoubleOhScrimp

anselld wrote: »

You would not be eligible for first buy anyway as the first rule is that you must be financially unable to buy on your own in the open market.

Ahhh ... that simplifies things!

anselld wrote: »

You are right that new build carry a premium. This may not be a problem if you are planning to stay long term.

Long term is the current plan. I guess as long as the build quality is good and the neighbors are reasonable then its viable. What is the new build premium typically? 10% ... 20%?

anselld wrote: »

My only other comment on your plan is don't try to optimise the purchase timing too much. You would be better looking over a longer period and waiting for the property you really like at the right price. Can you move onto a periodic tenancy (1 month notice) after your fixed term expires?

I'm in month 1 of a 12 month AST but can leave with one months notice after 6 months :rotfl:

martinsurrey

anselld wrote: »

You would not be eligible for first buy anyway as the first rule is that you must be financially unable to buy on your own in the open market.

You are right that new build carry a premium. This may not be a problem if you are planning to stay long term.

My only other comment on your plan is don't try to optimise the purchase timing too much. You would be better looking over a longer period and waiting for the property you really like at the right price. Can you move onto a periodic tenancy (1 month notice) after your fixed term expires? Don't be tempted to give notice on your rental until contracts are exchanged on your purchase.

First Buy is the semi old scheme, the newest one is New buy, its the same thing really but doesnt have the same restrictions on it (almost none).



I still wouldnt recommend it!

Mr_Moo_2

DoubleOhScrimp wrote: »

I'm in month 1 of a 12 month AST but can leave with one months notice after 6 months :rotfl:

You've got a break clause but you'll have to time any house purchase carefully and smartly to work around that. You'd be in an easier position once you roll over into a periodic contract...

kkgree1

I know the area well having lived in the villages around Cambridge all of my life (34 years).

Personally I would avoid the "hot" south of Cambs like Trumpington Meadows. You will have a short commute from there but many of the other villages have similar commutes and you get a lot more house for your money! (places like Barton, Coton, Girton, Histon/Impington, Milton)

Very best of luck with your search.

ruggedtoast

Trumpington?

Is this for real?

princeofpounds

• Does anyone think I should continue renting for another 2 years to get the 25% home deposit up front? I cant see how that makes sense given the £200 fuel spend.

• Are there are quicker ways to get the BTL going that I am missing?

Question 2 is very easy to answer. Forget about it until you have your own home. If you don't fully understand the financial concept of leverage - do you? - then you have no business going near BTL, especially when you really only have a deposit for one property.

BTL over the last 20 years has been a game where any mug able to take out a mortgage has made money. It's not necessarily going to produce the same results over the next 20 years, unless you think that a once-in-a-generation property boom will repeat.

As for question 1, 25% vs 20% is not going to make a big difference to the cost of your mortgage. Typically, although not universally, you see better pricing at 20, 30, 40% levels. 20% is a lot better than 10%, 30% is somewhat better than 20%, 40% is slightly better than 40%. Beyond 40% you don't normally get much improvement. Some lenders do give credit for 5% increments.

Having said that, no need to rush, so you might find you reach 25% before you come across the right place.

You need to future-proof any house you buy. I don't know your personal situation, but you need to account for potential future relationships/changes in family situation. It's rarely worth buying (gambling on property prices aside) if you are going to be somewhere for less than 5 years.

Make use of stamp duty boundaries - you can typically do quite a bit better buying something for 250k than 230k for example, as more properties that would be priced at 260-270 might be prepared to take a 250k bid.

Fire_Fox

To purchase you need: at least 10% deposit, money for survey/ legals/ mortgage application/ one purchase to fall through, three months mortgage payments set aside in case you fall ill or injured and cannot work, costs of moving and generally doing the place up. If you have all this, go ahead now and save yourself the time and cost of commuting. Purchase at least a two bedroom so that you can move a partner in at a later stage or easily have overnight guests. Aim to buy somewhere you can stay for ten years, you waste many thousands trading up between legals and estate agents plus the market is only stable longer term.

BTL: don't try to run before you can walk. The last thing you need is two mortgages, two places to repair and maintain when you are inexperienced. Remember tenants can trash the place or simply not pay rent and you have to go through the courts to evict them. There are reams of legislation to comply with as a landlord, get it wrong and you can end up in court. Also don't forget rental income is taxable and classed as income if you ever need to claim means tested benefits (illness, injury). Are you willing to take on a lodger for a tax free income? That will get your mortgage paid off faster.

South Cambs is pricey and some areas are very snobby, you get more for your money north of the city and more of a mix of people. Also check out the traffic at commuting times in term time before you decide, ten minutes won't get you into Cambridge at rush hour from most villages.

DoubleOhScrimp

Mr_Moo wrote: »

You've got a break clause but you'll have to time any house purchase carefully and smartly to work around that. You'd be in an easier position once you roll over into a periodic contract...

I dont see how being on a month to month periodic is different to having a one month break clause after 6 months? Am I missing something?

DoubleOhScrimp

kkgree1 wrote: »

Personally I would avoid the "hot" south of Cambs like Trumpington Meadows. You will have a short commute from there but many of the other villages have similar commutes and you get a lot more house for your money! (places like Barton, Coton, Girton, Histon/Impington, Milton)

Agreed. Those trumpington new builds are a laugh. Pay 50% more for 30% less

I have those villages ringed on RM :T