25 single female- first steps on property ladder?

seabass90

Hi all, i've recently (unexpectedly) come into some inheritance money of just over £40k. I am currently living at home with my parents and was looking to move out anyway, but i'm thinking of putting at least some of my £40k towards getting my own place. My salary is 23k before tax. My main outgoings are my pension (£110), car (£80 per month), phone (£10 per month) and car insurance (£30 per month). I pay back my student loan each month and have no other debts and a good credit rating. I have some questions:

1. I'm 25 and single, in no rush to buy anywhere although it would be nice. Should I just tuck the money away into fixed rate bonds and gain some interest on it for a few years? And just rent somewhere instead? Or does it seem silly to rent when I could afford my own place?

2. If I do buy somewhere, flat or house? I currently live in the Welsh valleys & would be looking to get onto the property ladder in Cardiff where I work. There are some quite decent new build flats in the centre of Cardiff (important as i'd be looking to rent out a room), but i've heard flats are harder to sell? However if I went for a new build 2 bedroom house in the suburbs, i'm worried i'd struggle to rent out the 2nd bedroom and thus struggle to keep up with the mortgage myself. I'd also feel more isolated in the suburbs. But there's something that would make me feel a lot safer if I was in a house made of my own bricks and mortar!

3. Am I being unrealistic about being able to afford my own home due to my salary and the fact that i'm single? £40k is a lot of money but some of that £40k would need to go on fees, possibly stamp duty, furnishings and some back-up safety savings too. I'd be looking to buy somewhere between £100-£150k. Based on my salary I think the maximum I can borrow for a mortgage is £100k ish.

4. Would the Help to Buy scheme help me or hinder me? It appears to be for people with smaller deposits but I am able to put down up to 20% depending on the property price.

Any thoughts? I am totally clueless!

dimbo61

Can you get a two bed two bath flat in Cardiff for under £125,000 ?
If you pay £125,000 or under No Stamp Duty
If you get a 2 bed 2 bath flat you can either rent out the room with the en-suite or bedroom+bathroom.
You will save on travel costs if you live near work but try and get a place with allocated parking space.
Should you leave Mum and Dad and buy a place of your own ? That is a whole different question

seabass90

dimbo61 wrote: »

Can you get a two bed two bath flat in Cardiff for under £125,000 ?
If you pay £125,000 or under No Stamp Duty
If you get a 2 bed 2 bath flat you can either rent out the room with the en-suite or bedroom+bathroom.
You will save on travel costs if you live near work but try and get a place with allocated parking space.
Should you leave Mum and Dad and buy a place of your own ? That is a whole different question

Hi Dimbo thanks for getting back to me. From what I've seen on rightmove it would be relatively easy to get a 2 bed 2 bath flat in Cardiff for £125k so I suppose stamp duty is something I'm likely to avoid if I go for the flat option!

dimbo61

Put down 25% deposit to get the best deals and consider a 2/3/5 year fix for security.
You could look at offset deals and put an spare money in the offset accounts
You need to take into account all the costs of buying and furniture needed.
Bills like Coumcil Tax, gas, electric, water, phone/broadband , insurance etc

kingstreet

seabass90 wrote: »

I think the maximum I can borrow for a mortgage is £100k ish

Probably less on a flat where ground rent & service charges will be taken into account, on top of your student loan payments.

dimbo61

If it was me I would go for a small house over a flat every time.
No service charges or ground rent, sink funds for major repairs like new roof/replacement windows, garden/car park/electric gates etc.
Having your own front door, small garden and parking on the drive/garage would be great.
Not sure how far £40,000 plus 4x income would go in Cardiff.
Speak to mum and dad and have a look on rightmove.
We live in a modern house but it was 4 years old when we bought it so carpet, curtains, garden/fencing all done :-)

steeeb

Buying over renting is preferable in my opinion. That's not to say you need to move out now and do it. If things are good at home and no rush to move out then perhaps look at keeping on saving whilst you can.

Then the question is do you move out for say 6/12 months to get an idea of where you want to live and an idea of costs etc. If you can move back to your parents after this then it may be a good idea - buying can take a while so there may be overlap or you may need to move several times in a row.

I'd keep a look out, view some properties - get a feel. Stay at home and save whilst doing this. View apartments and view houses. View different areas.

Do a budget, budget for everything you will need - estimate (upper end) all bills - include service charge and ground rent if appropriate. Then see how much you have left. Calculate how much your mortgage payments will be (over 30/35 years and overpay to 25 if it gives you more flexibility). Make sure you have money left over for emergency/savings/living (or put a lower deposit down ideally in an offeset mortgage to keep for emergencies). You could likely do it without a lodger if that is preferable - researching having a lodger as mentioned above.

You'll then have your answer and feel more confident with your decision because you've worked it out and decided yourself.

TBagpuss

One issue is whether you think you are likely to stay in Cardiff - if there is a possibility you may want to move in the near future then buying is less atttractive.

I personally would always prefer a house to a flat, but as with every decision, there are pros and cons - with a house, you have more control as you don't (normally!) have a freeholder, don't have to worry about service charges etc. On the other hand, you will generally pay less for a flat so will often be able to get a better location / smaller mortgage / better facilities for the same sort of price.

I think it would be sensible for you to do some more reseach - look at house and flat prices, speak to a mortgage advisor, get an idea about what it would cost to pay a mortgage and bills on your own place and start putting that amount (less any current rent you y your parents) into a savings account each month. That way, you will be saving for moving costs etc, and also will be able to demonstrate to lenders that you can afford the mortgage, and can get a feel, for yourself, about how easy or difficult you will find it to live to that budget, which in turn will help you decide what to do.

look at sites like gumtree, and your local paper, to get an idea about what you might be able to rent out a room for in different areas and (by keeping an eye on ads over the course of a few weeks) how quickly you are likely to be able to rent out a room.

Visit areas of the suburbs where you might consider buying. Look at things like public transport routes - those are likely to impact how easy it will be to find a lodger and also may help you decide about how isolated you'd be likely to feel - if you have a good bus service into the city centre you may feel more comfortable moving out a bit, if you know you can still get into town without having to worry about driving home, for instance.

Have you looked into your mortgage capacity? £100K is slightly higher than I would have expected on a £23K salary, given you are paying a car loan and student loans as well.

how much longer do you have on the car loan? It may be worth playing around with the figures to see whether it would pay you to use some of your inheritance to pay off the loan - both in terms of savings on interest, and in giving yourself a bit more flexibility on your mortgage options (if you do, keep paying the £80 month into savings!)