Need motivation or encouragement or advice

Mortgage2015

I know I have another year of saving to go before starting the mortgage process but would like to know that I'm doing the right thing.

Hi, I'm 22 and over the past 2.5 years I've managed to save 27.5k for a deposit. My parents have been supportive, I'm living at home and just paying £125 rent with the purpose of saving for a deposit.

I'm starting a new job paying 19k (before tax) in July and hope to save at least 1k a month to have a total of 43k by August 2016 I'll also be using the help to buy ISA.

My grandfather has agreed to give me 20k so that would give me a 60k deposit for a house.

I have this all done on a spreadsheet with more exact figures for each month but I'm pretty confident I will have 60k deposit + fees by August.

Now the problem is that I've become disinheartened by my low income and mortgage possibilities. Houses in my area seem to be going up and up and I'm afraid I'm going to miss out. Small terraced houses I was looking at this time last year for £160,000 are now being advertised for £175,000 (although selling for slightly less) and even if I did find a house for £160,000 is that not a possibility because of my low income?

1. This is what I was aiming for, and saving towards a 100k mortgage in my name with 60k deposit although if the house price was more eg 170k my grandad would be able to give more but I don't want to ask for two much Id prefer to have a mortgage.

2. Then I started to consider buying to let in my name as I would be happy living with my parents for another few years to get on the property ladder, but I will be 23 (I've searched a lot of BTL lenders criteria and a lot state 25 minimum age) and without another house so I don't know if any lenders would accept that.

3. My final thought was to ask my grandfather to buy the house as a 10 year BTL mortgage (he's 61) and for me to rent off him with the view that when the mortgage is completed he transfer ownership, could that work?

Are any of these possible? Obviously the first option I would prefer to get a mortgage in my sole name and will happily keep saving towards that goal but is that wishful thinking?

I should add in possibilities 4 and 5.

4. Buy a house next year in cash where my grandfather lives (he recently bought one for 30k but has budgeted more for doing it up) and let my grandad manage that alone with his. Advantage of buying in cash but rent would not cover half of what I would have to pay if I moved out of parents.

5. Try and find a cheaper house in the south east and commute to work, would have to factor in buying a car. Disadvantage most friends don't have a car either.

Foxy-Stoat_3

Why not buy your first property that you can afford. Typical calculator is 4.5 times annual salary. You have done well with the deposit.

Your 61 year old grandfather will unlikey be able to secure a regulated buy to let mortgage, but no harm in asking a broker to see if its possible, if he has £40,000 cash deposit plus fees....When the 10 year BTL mortgage is complete he would need to sell it or pay the capital off (£120,000).

ACG

You will be on £19k but saving £1k a month? I dont think your net pay will be much more than that will it? Dont become a recluse just to buy a house - you will regret it when you get older. Once you have your house you will find you have a lot less disposable income to do things with.

Im not sure the figures stack up - you would be looking at 4.5x income, 5 at a push. Theoretically that does get you to £160k but it is pushing everything to the maximum.

You need to ensure you have money for stamp duty, solicitors, valuations etc.

You can get a BTL if you wish im sure - but it wont be one for every lender. Also bare in mind BTLs are not quite as straight forward as homes under the hammer/Sarah Beeney would have you believe... tenants can be nightmares.

Mortgage2015

Foxy-Stoat wrote: »

Why not buy your first property that you can afford. Typical calculator is 4.5 times annual salary. You have done well with the deposit.

Your 61 year old grandfather will unlikey be able to secure a regulated buy to let mortgage, but no harm in asking a broker to see if its possible, if he has £40,000 cash deposit plus fees....When the 10 year BTL mortgage is complete he would need to sell it or pay the capital off (£120,000).

Houses are really expensive in the area I live, 160k was the cheapest house I could find. Apartments in the exact area I want are much the same as they are newer and have more bedrooms than the old terraces but there are 1 bed apartments slightly further away going for 120k, what put me off them is the commute and the fact a friend of mine wants to be a lodger.

I know it might sound daft but I'm confident I can pay the mortgage off in ten years so my granddad wouldn't have to sell, its just a question of how easy it would be to transfer names and I guess tax implications on the rent money.

Mortgage2015

ACG wrote: »

You will be on £19k but saving £1k a month? I dont think your net pay will be much more than that will it? Dont become a recluse just to buy a house - you will regret it when you get older. Once you have your house you will find you have a lot less disposable income to do things with.

I'll have £1348 a month excluding any overtime. £1223 a month after rent, not a lot but £200 is what I've been living off for the past year so it will be a bonus! I don't have a lot of expenses, mum buys food, I work 5 days a week and play tennis or football with friends at the weekend. I've saved £27.5k so far and just don't like seeing that in my accounts, I'd rather it in bricks and mortar :rotfl:

ACG wrote: »

Im not sure the figures stack up - you would be looking at 4.5x income, 5 at a push. Theoretically that does get you to £160k but it is pushing everything to the maximum

Yes in my early days of saving I thought it was still possible to get those kind of multipliers but obviously not now. Is disappointing as my grandad just bought a BTL where he lives in cash and I could have asked him for more but anyway, that is a fourth idea I suppose to buy a house where he lives in cash next year but the rental returns would only be about £250 I think he said and I'd be far too far away to manage it he would have to which would leave me feeling out of the loop. He likes being a landlord though he did say he preferred his commercial property tennants that doesn't stop him managing his and more and more of other peoples residential properties lol

ACG wrote: »

You need to ensure you have money for stamp duty, solicitors, valuations etc.

You can get a BTL if you wish im sure - but it wont be one for every lender. Also bare in mind BTLs are not quite as straight forward as homes under the hammer/Sarah Beeney would have you believe... tenants can be nightmares.

Have all those fees ready!

I think the worst thing about a BTL mortgage would be not being able to live in it I'd feel weird having others in my first home. Parents house is also getting crowded with 6 of us in a small 3 bed now!

MallyGirl

Mortgage2015 wrote: »

My grandfather has agreed to give me 20k so that would give me a 60k deposit for a house.

This is what I was aiming for, and saving towards a 100k mortgage in my name with 60, deposit although if the house price was more eg 170k my grandad would be able to lend more but I don't want to ask for two much Id prefer to have a mortgage.

You aren't generally allowed to borrow for a deposit - or you have to factor in repayments which affects your affordability calculations, Is your Grandfather giving the £20k or lending?


Pushing yourself to 4.5 or 5x salary is a scary thought to me - but then I remember paying 14% interest on my first mortgage where 3x was the absolute max you could borrow on the high street. With a low income you have no slack to take up if the rates rise.


You are doing an amazing job saving for the deposit but, if I was you, I would be waiting longer till you earn a bit more, or looking at cheaper housing with a commute.

[Deleted User]

Mortgage2015 wrote: »

I'll have £1348 a month excluding any overtime. £1223 a month after rent, not a lot but £200 is what I've been living off for the past year so it will be a bonus!

Have you factored in £120+ a month for council tax, plus water bills, electricity and gas, tv license, buildings and contents insurance...?

enjoyyourshoes

House prices go as well as down.


You could be patient and wait for the decline


Area come in and out of favour


You could identify a local area out of favour that has the right credentials for it to come into favour in the forthcoming years


Not all houses are equal


Search out for houses below market price (bank repossessions) ex council, poor neighbours house quality, poor decorative/condition etc


Your extended family certainly are very helpful and supportive, staying with Mr & Mrs M & D will provide a great opportunity for you to research the property market and mortgage market, use this website to identify pros and cons of each mortgage type, so when you find the house that meets your bill then you can proceed with confidence.

Mortgage2015

billbennett wrote: »

Have you factored in £120+ a month for council tax, plus water bills, electricity and gas, tv license, buildings and contents insurance...?

Hi this is only while I'm saving, at the minute i only pay £125 rent to my parents and therefore I should be able to save £1000 a month with £223 spending money and of course I'll have the interest from TSB/Lloyds/Halifax which varies but is about £70+ a month at the minute. I did go on holiday this year using switching bonuses and I know I won't be able to do anything like that next year to keep searches off my file.

In my job I will be due an increase in wage but not until at least 3 years (so two years after starting mortgage). I know I shouldn't factor in a lodger but that would help cover bills but even without I think I could manage. I have a friend who wants to rent the other room off me after he moves out of halls. He's a student so I'd get 25% discount (pretty sure on that).

Water is the only thing I'm not sure on! I rented for a while but it was included in the rent, electricity came to about £45 for me a friend but I'm really nervous so in my budget I've set that amount higher. Insurance I've budgeted about about £300, is that a reasonable figure? I've heard others brag on here about getting insurance cheaply but my parents told me they pay £250 so I went with that. Tv licence I won't need as I don't watch live tv only netflix which is my aunts account.

Mortgage2015

MallyGirl wrote: »

You aren't generally allowed to borrow for a deposit - or you have to factor in repayments which affects your affordability calculations, Is your Grandfather giving the £20k or lending?

Sorry I meant give. Well at first I thought I'd have to pay back eventually because my step-gran is younger (52) and I thought it would be right in 15-20 years to pay her back even if my granddad wasn't around and I thought that was going to be the understanding but she's the one who approached me and said it was going to be a gift not to be paid back, she shocked me but obviously I am very grateful.

Mortgage2015

MallyGirl wrote: »

Pushing yourself to 4.5 or 5x salary is a scary thought to me - but then I remember paying 14% interest on my first mortgage where 3x was the absolute max you could borrow on the high street. With a low income you have no slack to take up if the rates rise.


You are doing an amazing job saving for the deposit but, if I was you, I would be waiting longer till you earn a bit more, or looking at cheaper housing with a commute.

enjoyyourshoes wrote: »

House prices go as well as down.

You could be patient and wait for the decline

Area come in and out of favour

I think my problem is that I read too much. I follow zoopla and see the house prices going up and read news reports talking about how mortgage interest rates are so low and I think man this is a great time to have a mortgage, I don't want to miss out. Also my brother has a fight with his girlfriend moves back in and 6 of us in a tiny house makes me think man I wish I had a mortgage right now :rotfl:

If my grandad is too old for a BTL then I guess waiting is the only thing I can do.