Buying in London first time, is it possible?

Miss_chelle

Hi All,

I need some advice. Currently, I live in a flat share in east London which costs me about £545pcm all inc. I do love it, and my housemates, but I am 29 and would like my own place. I do have a boyfriend, but it is early days and marriage or family very unlikely with him (you cannot have it all as I have worked out). I do have £10,000 saved and a full time job that pays me around £45,000 a year. I have paid off all my debts (minus my student loan) and my only real expense after my rent is a small car (£20 per year road tax), which is mine outright this month (yay!) but costs on upkeep and insurance.

My parents out of the blue offered me £2,000 as a loan. This would have to be paid back in full with interest (£500) as they are not good with money and this is part of their retirement 'plan' but not for 5 years. Again not getting into that.

This does mean I could have £12,000 right now that I could put down on a deposit, but the kicker is - I would like to stay in London. It's where I work and where I see myself living for the foreseeable future. The ideal would be a 2 bed place where I could rent a room out.

I have a good credit history (paid back my loans, had and paid back credit over a number of years etc) but looking on rightmove et al doesn't seem really very realistic to find a 2 bed for £125,000 in zone 3 or further.

Am I being really unrealistic? It would also destroy my 6 month buffer if I was to lose my job or health... As that would end my savings.

Or should I just accept home ownership in London is also very unlikely to be in my future too, and look elsewhere?

Many thanks,

Miss C

Lizling

Your salary's enough to buy something in London, since you say your other outgoings are quite low. You might well be able to borrow 4x salary. But £12k minus roughly 2k stamp duty and roughly £3k in other fees only leaves £7k for a desposit. Even on a 5% deposit mortgage, that'll limit you to a property worth £140k i.e. unlikely to be enough. That's before putting aside any money for furniture, decoration or contingencies.

Unless you're only recently out of university, I'm a little worried that you've only managed to save £10k while paying such a low rent (for London). Your mortgage would probably be around £300-£400 more, plus you'd need to save for repairs. Have you been able to put aside that kind of amount every month without trouble?

Miss_chelle

Hi Lizling,

Thank you so much for the figures, I may have over looked more than a few costs in my initial calculations that's for sure. To give you some more detailed background, I didn't go to uni until I was 23 so I have only been a graduate for about 3 years and had about £4,000 worth of debt to pay with student overdraft and credit cards (mainly used to subsidise free internships which paid off in the end luckily). I un/fortunately (depending on how you see it) did other less grown up things like travel when I left school. I worked as a night shift care assistant (in another basic flat share) to fund myself before I realised what I wanted to do and was good at. My current salary has only been since December, before it was £35,000 and at graduation £29,000. I cannot honestly claim I saved at all then. It was only when I noticed 30 creeping up on me last year I knuckled down.

I've only been living in this flat share too (to deliberately maximize) savings since February, before that it was £700ish. However, when I put my mind to it, I did find it easy to save what i have and am continuing to save...

Phew lots of detail for you sorry!

curedham

45k is slightly above London average salary, but your saving is not. If I were you, I'd save as much as possible, reduce my outgoing as much as possible and wait until you have about 25k and that will be enough for deposit and other fees plus some buffer.

Annisele

You might have issues persuading lenders to accept your parents' £2k as part of your deposit. If it was an outright gift it'd be fine - but a loan can cause difficulties. Those difficulties might be worked around if your parents were prepared to sign something to say your lender should be repaid before them, but for a (relatively) small sum it's possible the extra legal costs would outweigh the benefit of having the money.

If you can't use your parents' £2k, then your deposit is down to £5k - which is really too small for London.

Given your income and your expenses, if you saved solidly for a year or two you'd likely be in a much better position. I don't think home ownership in London is unrealistic for you in the fairly near future, but unfortunately I think it is unrealistic right now.

(As an aside, if your parents are lending you £2k to be paid back as £2.5k in five years, the interest rate is pretty crippling - I make that 15% or so. It's not a good deal for you!).

Miss_chelle

While I am 100% sure my parents would love to gift me that, the reality is somewhat harsher for them. I think you are all right just keep saving then see, a very good sense check for me.

Thank you all

mr_rush

Need to save atleast £30K. Look at moneysavingexpert tips - make your own lunch don't smoke etc. hopefully pay will continue to go up.

rufus86

Miss_chelle wrote: »

Hi All,

I need some advice. Currently, I live in a flat share in east London which costs me about £545pcm all inc. I do love it, and my housemates, but I am 29 and would like my own place. I do have a boyfriend, but it is early days and marriage or family very unlikely with him (you cannot have it all as I have worked out). I do have £10,000 saved and a full time job that pays me around £45,000 a year. I have paid off all my debts (minus my student loan) and my only real expense after my rent is a small car (£20 per year road tax), which is mine outright this month (yay!) but costs on upkeep and insurance.

My parents out of the blue offered me £2,000 as a loan. This would have to be paid back in full with interest (£500) as they are not good with money and this is part of their retirement 'plan' but not for 5 years. Again not getting into that.

This does mean I could have £12,000 right now that I could put down on a deposit, but the kicker is - I would like to stay in London. It's where I work and where I see myself living for the foreseeable future. The ideal would be a 2 bed place where I could rent a room out.

I have a good credit history (paid back my loans, had and paid back credit over a number of years etc) but looking on rightmove et al doesn't seem really very realistic to find a 2 bed for £125,000 in zone 3 or further.

Am I being really unrealistic? It would also destroy my 6 month buffer if I was to lose my job or health... As that would end my savings.

Or should I just accept home ownership in London is also very unlikely to be in my future too, and look elsewhere?

Many thanks,

Miss C

I'd say salary-wise, you're in a great position! I'm 28, earning 23k including bonus and have a 35k deposit. I'm looking at 1 beds for 140,000...at the moment that means venturing to zone 4 and beyond or opting for 'risky' areas such as stratford

If i were you, put together as much deposit as you can. Even with my crap salary, banks seem to like me as I've got a 25% deposit based on what I can afford with a mortgage AIP.

Good luck!!

[Deleted User]

I'm in a very similar situation to you in terms of rent, savings, salary etc. but getting a few grand more help from my parents. I'm buying a 2 bed in zone 3 for around £145k. You're not too far off, if you just save for a couple more years (maybe less... I'm saving £600-£700 a month with a smaller salary than yours, by just living like a cheapskate). You're lucky to be in a situation where your houseshare is working out well for you - mine have been mostly pretty bad for years now and I can't wait any longer!