Bad time to buy for a FTB?

Rohaq

So I've come to the realisation that I may have enough money for a deposit on a place. As someone who's been out of university for 2 years, and has been renting for about 8 years, this is pretty big for me.

I've been looking at the local (Cambridge) housing market, and it looks like I could get a mortgage on a pretty basic 1 bed apartment under the new 5% scheme, but I could also wait a little while and I'd have enough for 5% on a 2 bed place, then maybe rent the room out - not difficult, as I work somewhere where we regularly get new people looking for places to live. I also hear that 2 beds are easier to sell in the future, should I ever need to.

I have two main concerns at the moment though:

1. Additional costs of actually buying; I have no idea if there are legal fees involved, or what they might be.
2. I hear that supposedly house prices are at an all time high at the moment, and it may not be a good time to buy. Of course, I'd also rather be paying a monthly mortgage towards something I would actually own, rather than throwing rent into somebody else's pocket, but what are people's opinions about this at the moment? Would I be better off waiting a while, or are prices unlikely to drop in the near future?

Opinions and advice welcomed!

clive_e

For me, as someone who used to rent out rooms in his house until I met my fianc!e, I'd opt for the two bed every time. That's solo long as you are happy to live with a stranger?

All the income (subject to hmrc limits) would be tax free! It's an obvious choice and two bedders would be easier to sell as it suits a wider range of the market

FTB_Doll

We are hopefully buying our first home and solicitors fees are £780 not including the £500 survey either as it's old house so want a decent one I'd set aside £1500 to cover that maybe more then we have removal costs of £200. Good luck xx

andybenw

Having had lodgers for the last 7 years their help in paying my mortgage has been brilliant. So good in fact that that mortgage free house is now rented out room by room as an HMO. Buy the two bed. Even better would be a three bed house with seperate dining room. You could let out two rooms and pretty much still have the equivalent of a two bed flat to yourself. Remember to pay extra tax above rent a room scheme. Also 2 lodgers max or you are an HMO.

Road_Hog

Rohaq wrote: »

I have two main concerns at the moment though:

1. Additional costs of actually buying; I have no idea if there are legal fees involved, or what they might be.
2. Opinions and advice welcomed!

From memory, you can rent out a room for up to £4,250 pa tax free. Buying fees are approx. solictor £700, homebuyer survey £500 and stamp duty 1% of purchase price on £120K+ (but under £250K).

ognum

Rohaq wrote: »

So I've come to the realisation that I may have enough money for a deposit on a place. As someone who's been out of university for 2 years, and has been renting for about 8 years, this is pretty big for me.

I've been looking at the local (Cambridge) housing market, and it looks like I could get a mortgage on a pretty basic 1 bed apartment under the new 5% scheme, but I could also wait a little while and I'd have enough for 5% on a 2 bed place, then maybe rent the room out - not difficult, as I work somewhere where we regularly get new people looking for places to live. I also hear that 2 beds are easier to sell in the future, should I ever need to.

I have two main concerns at the moment though:

1. Additional costs of actually buying; I have no idea if there are legal fees involved, or what they might be.
2. I hear that supposedly house prices are at an all time high at the moment, and it may not be a good time to buy. Of course, I'd also rather be paying a monthly mortgage towards something I would actually own, rather than throwing rent into somebody else's pocket, but what are people's opinions about this at the moment? Would I be better off waiting a while, or are prices unlikely to drop in the near future?

Opinions and advice welcomed!

Cambridge is a market I know very well. It is a really difficult market for first time buyers, prices are high and there are lots of buy to let investors who are cash buyers. It is a city with many people on well over average earnings and lots of businesses moving to the area.

Prices in Cambridge levelled off for a while and are now on the rise. I keep a good eye on the number of houses on the market. A few years ago there were always around 400 properties for sale at any one time but if you check Rightmove now there are about 250. Many properties sell fast, many go to sealed bids. the ones that hang around are in less desirable locations.

A first time buyer is fighting hard against the BTLers. Going into one of the villages will get you a better property. I would always buy at least two bedrooms that way if your circumstances change, a partner moves in or you need to let a room you can. Sadly there are just 4 two bedroom flats left available in the new build by the station and they all are over 400k!!!!!

Be careful of the slightly older blocks many are coming to the end of their mortgageable leases. Where in Cambridge do you want to live?

Rohaq

Thanks all! I knew there would be fees that I'd be missing. As someone totally new at this, I must admit to feeling a little lost.

Also, that's interesting on the income tax - If it goes over £4250, do I pay tax on anything I earn over that, or do I get taxed on the whole enchilada if I exceed that limit?

@ognum: I'm looking for a place in or near Cherry Hinton; it's a stonesthrow from where I work, and still not too far from town.

AndyGuil

ognum wrote: »

Be careful of the slightly older blocks many are coming to the end of their mortgageable leases. Where in Cambridge do you want to live?

Not always a bad thing. It can be used to bash down the price and it will put off some BTL'ers. If you can save the money to extend it in 2 years time then it is an option to look at these. As long as it has at least 70 years left then a mortgage is fine. There is a good calculator on here for the cost of the lease extension. http://www.moneysavingexpert.com/mortgages/extend-your-lease

ognum

This is true but some FTBer do not have the funds available to extend the lease, many BTLers do!

Kynthia

I was taught to only buy somewhere that you'd be happy live in for at least five years and that you could let if you had to. You don't want to be stuck somewhere you're unhappy with if you should ever be unable to sell and you don't want to pay buying and selling fees too often. Therefore a two bed would last you longer, but only if it's an area you could put up with for years, and check the lease to ensure it doesn't prohibit letting.

AndyGuil

ognum wrote: »

This is true but some FTBer do not have the funds available to extend the lease, many BTLers do!

Perhaps not at first, but once the 2 year window has passed a FTB'er may be in this position. It does depend heavily on the individual. I see it as an opportunity to get a discount on a property and effectively pay off part of the mortgage upfront, this is realised when the lease is extended and the value increases.