Is buying a house in my current situation possible?

Bedz

Hello there moneysavers! I am just posting to see if you can help me please. Pretty pretty please. (Also sorry if this is in the wrong section)

I'm 19, currently still living at home. I've come to the decision I NEED to move out, and I would much prefer to buy rather than rent as I feel it's just money down the drain as it were, but I'm not sure if this is possible in my current situation.

I'm currently looking for a studio apartment close to work, which generally are on the market at around £90,000~.

My finances are detailed below:

Annual Income (Gross): £15,000


Monthly Income (Gross): £1,250


Weekly Income (Gross): £288


Tax: 22%
National Insurance: 11%


Annual Income (Net): £10,040


Monthly Income (Net): £837.50


Weekly Income (Net): £192.96


Monthly Living Expenses: £158/month

Maximum Monthly Repayments I can afford: £650~

Current Savings: £3,000 in an ISA

Debts: None (If I can't afford something, I don't buy it!)

I have started doing some research on different types of mortgage and I believe a fixed rate mortgage which allows overpayments would be the most suitable, however I am definitely open to advice.

I haven't started to contact any mortgage brokers yet due to fear of being laughed out the door, so I just wanted to test the water.

I also have a salary review very soon and my boss is a fair man. If I can show him why I need the increase and how much, he will do his best to make it happen. Also do banks take into account the nature of your profession? I ask this because I work at a consultancy firm with great job prospects and I am soon to be a trustee of a charity associated with the business.

If you think I'm daft, or if you think there is someone I should seek help from etc, please do not hesitate to let me know as I'm open to all advice.

I thank you for even bothering to read this as I'm in a bit of a rut with this and it's good to get it all out.

Doozergirl

You won't get abig enough mortgage to buy the flat. The most you can borrow would be in the region of 5x salary = £75,000 and that would be with an immaculate credit history and a very generous (some would say irresponsible) lender.

Even if you could get enough for your current circumstances, Interest only at 6% you'd be looking at mortgage repayments of circa £450 per month, plus the repayment element of the mortgage, council tax circa £100 per month, plus bills, plus food, you're looking at having no disposable income at all.

Keep saving, work hard, get a couple of increases under your belt and within a couple of years you will be a far healthier situation.

Studio flats are rubbish anyway

going2die_rich

Is it possible? - probably.

Should you? - NO!

Their will be some bank out their willing to lend you 6 times your salary (maybe even more), but considering most believe even borrowing 4 times your salary is being over streteched, I don't think 6 times your salary is a wise move.

You are young and if I was you, I'd stick to saving by living at home and build a big deposit and give it a few years.

You are in an ideal situation at the minute for the fact that their are some that predict the housing market bubble will burst sooner or later, so you can afford to and should speculate this fact, by staying where you are and continue to save and increase your salary.

Don't buy now at what is looking like the peak of house prices, you should wait and see if it starts declining or just levels off, either way I think you are best to wait as the growth thats occured in the last 10 years isn't likely to repeat itself anytime soon, so you are no worse off either way, just less likely to end up in debt by waiting.

beingjdc

I imagine you could *just about* find a bank that would lend you that if you looked hard enough, though the interest rate wouldn't be good, as once you'd paid lawyers and so on your savings would be wiped out, so you'd be looking at 100%. "Young Professionals" mortgages tend to offer more but are generally limited to graduates.

However I'm a bit concerned at your maths up there. 837-650 is 187, so you're allowing yourself that much to live on for a month. You can probably assume about £40 a month for council tax, £20 a month for electricity, £10 a month for water, and £25 a month for home insurance (or, if you have a flat, there may be a service charge instead). Then I guess you want a phone line, let's say a tenner a month, and the same for a TV license.

So that leaves you just under £20 a week to eat, go out, get the bus / insure your car. It might be feasible if you're very MS, but you would need to consider what happens if, say, your boiler breaks (and indeed whether your savings are enough to 'kit out' a flat - I underestimated this when I bought)

Anyway don't take too much notice of me, I'm jaded by the experience of owning a flat, and happily back to renting for the foreseeable! I don't see it as money down the drain, I pay my landlord far less than I would pay a bank.

Lavendyr

Hello

Firstly, I would challenge your assumption that renting is just money down the drain. The truth is, depending on your area, you may find that you can rent for around 50% of what you would be paying for a mortgage monthly on the same standard of property. As such, if you do rent as cheaply as you can, and save all the money that you can in that time towards a deposit, you will reduce the amount that you have to borrow for a mortgage, and may in doing so end up wasting far less money than if you were to take a higher mortgage out now. Not to mention that the housing market is quite unstable right now.

Think about it this way: you have little to no deposit saved up, and the money you do have would go onto solicitors fees, the survey, etc, meaning you would need to take a 100% mortgage and would be left with no reserve savings.

Using the very basic mortgage calculator at

http://www.moneymadeclear.fsa.gov.uk/mortgagecalc

if you borrow 90k over 25 years at 7% interest, on an interest-only mortgage you would be paying £526 per month, and on a repayment mortgage (highly recommendable over interest-only) you would need to pay £636 per month. This leaves you with little to no flexibility on your current income, i.e. if you fall ill and can't work, if you lose your job, if anything unforeseen were to happen, you would be very very tight. Again, not to mention that interest rates may well continue to go up in the next few years, and the squeeze on you could become far too much, leaving you facing repossession.

And it's not even guaranteed that you would be able to borrow 90k on your salary. I tried the Alliance & Leicester mortgage calculator based on the info you've given and it suggested that A&L would lend only £56k in the first place. You could obviously try other places, but it could be very difficult to borrow 90k on your salary.

So my advice would be for you to rent, or house-share if you possibly can (thereby saving even more), and to save as much as you can - in the first instance as an emergency fund in case any of the above were to happen - and in the second instance towards a deposit.

PasturesNew

No. You can't afford it.

A basic breakdown of costs would show something like:

£837 takehome with a mortgage of £90k at 7% of £525 (risky interest only) leaves you £312

BILLS
Council Tax - £80
Water - £15
Elec/Gas - £25
Phone/Broadband - £20
House buildings/contents insurance - £20
TV License - £12

Total BASIC Bills: £172

£312-172 - £140

So overall about £700/month. And bills are going up all the time by greater than the rate of inflation.

There will also be a service charge to pay on the studio flat of possibly £20-30/month.

£32/week left in your hand for:
Service charge
Food, household items, repairs, decoration, unexpected bills/breakdowns.
Travel to/from work
Other Travel
Birthdays, Xmas
Holidays
Clothes
The Unexpected

Houseshare at first. Say, £300/month. Try putting £400 away in savings (the extra you'd be paying out with your mortgage + bills). Then see just how tight that budget would have been and enjoy yourself knowing you didn't make a big expensive mistake.

19 is too young to tie yourself down.
I believe house prices will become comparatively much cheaper in the next 5-6 years, during which time you'll have saved and be earning more.

Good luck

Bedz

Thank you all for your advice, it's really helped me see I was being a bit (very) naive and that I obviously hadn't taken into account lots of things such as council tax, utility bills etc.

I'm going to wait it out and concentrate on saving and getting a healthy deposit. I'm also going to use this time to set a budget for myself to see how much I can realistically afford for repayments. Hopefully I'll be in a better position in 2-3 years time and the market might have calmed down a little.

Also I'm going to use the expenses calculator on this site to create a detailed picture of my current situation to put under my bosses nose to get a few thousand added to my salary hopefully.

Thanks again guys, I truly appreciate you taking time out of your Sunday afternoons to give me some of your collective wisdom. :beer:

ixwood

I'd concentrate on a significantly higher salary, or new job.

Agree with everyone else about the feasability.

PasturesNew

Bedz wrote: »

I'm going to use the expenses calculator on this site to create a detailed picture of my current situation to put under my bosses nose to get a few thousand added to my salary hopefully.

You don't get a salary increase by showing your boss how you spend your money.
You get a salary increase by showing him how/where you made HIM more money.
Think about how you have brought extra benefit to the company since you joined them. How have you made them more money. How have you saved them money. Work out the maths....

THAT is the way to get a rise.

Doozergirl

PasturesNew wrote: »

You don't get a salary increase by showing your boss how you spend your money.
You get a salary increase by showing him how/where you made HIM more money.
Think about how you have brought extra benefit to the company since you joined them. How have you made them more money. How have you saved them money. Work out the maths....

THAT is the way to get a rise.

Exactly! I took that advice a long time ago from our company's marketing manager. She taught me how to market myself. I wrote a huge list of everything I had done, proactively, under my own steam from my start date and I got a pay rise immediately. I obviously didn't ask for enough! :wall:

if you want to make proper money, you need to work for yourself Work out how business operates and start looking at how you can work that to your own advantage.

alant1000

thats superb advice above, and bear in mind the average first time buyer in the UK is 34, a lot of those are probably buying with a partner as well.

I am 28 and earn around 46k per year, but even with that in my part of the country (Surrey) i just about managed to pick up a 1 bed fairly small apartment, i have only just been able to afford this. I rented for a while aged 19 then back out again at about 25, and it made me realise and appreciate the costs of other bills and expenses. The rest of the time i lived with parents. Whilst renting is money down the drain, many people do it, its reality, and it gave me good experience of being independent and learning to be responsible. If your parents are not eager to kick you out, then obviously you are saving at home, but if you are paying rent at home, maybe flat sharing with a few freinds or finding a flat share advertised would be a great way to learn what life is like on the other side. Renting is not the big no-no that people make out, if independence is your objective.