Getting a mortgage at a young(ish) age?

Sir_Loin

This is a long one.
I'm well aware there's 10% of members who pay the 50% tax bracket, but this is unforntunately aimed at the normal folk nearer minimum wage
Me and my OH are both currently 21 and thinking about mortgages, we've been together for 3 years and have no reason (as of yet) and no plan on splitting in the future.
I work 24h a week, going up to full time in the next few weeks, and she works full time anyway.
We've both been terrible with money in the past but recently started saving and seen a totally different side to being skint at the end of the month (in a good way).
I've found a Barclays account, which is who we're both with anyway, and they currently support the government's help to buy scheme, which gives you 3k when you save 12k in an ISA and it's at 2.25%
We can both open one at the same times and both get the bonus, however, the maximum deposit is £1200 in the first month and £200 a month thereafter. So if we both save for 3 years, that's £~8600. So together, with the bonus of course, after 3 years we'd have £21,000 give or take a few quid.
Now, we've seen a few properties near where we live, which is where we're staying, and decided we want either a smallish house or cottage or something along those lines, as long as it's not a flat/studio.
We're well aware of finances once moved in for furniture/food/bills etc and already worked all that out.
For a 55k cottage with a 20k deposit, does £320 a month sound accurate?
That's for 10 years with an initial 2.1% for 3 years.
Basically, what I'm after is some advice, of someone who's got a mortgage young, someone in the same position financially etc.
Thanks!

HappyMJ

A £55k cottage? Is it worth it? I would buy a house based on your eventual family size i.e potentially 2 children then get a 3 bedroom house. It's very expensive selling and buying so do it as little as possible.

Look for a property near to schools, shops and public transport if you want it to maintain it's value.

What would you be able to rent that same cottage for?

What are the maintenance costs of that cottage?

How much to insure the cottage?

A full rent/buy calculation is quite difficult. The mortgage isn't your only cost. You could easily spend that much again on the property each month. It probably wouldn't be worth it.

I would also look at how energy efficient the property is. Ongoing gas/electricity costs can be dramatically cut by buying a property that is well insulated. You could spend thousands on energy efficiency measures that may not add much value to the property.

Sir_Loin

It's fairly small, so only works out around £200 a month for gas/electric/water.
Then there's £100 council tax, phone bills, tv, broadband etc. I know there's a lot more to owning a home than the price of the mortgage/rent.
And to rent that house is £375 a month. Total rip off imo.
We are both 99% mind set on not having children, me because I'm too selfish (controversial I know) and my OH because she was told at a younger age, it's very unlikely.
We were looking for something small, so we can just get our foot through the door, and work our way up, rather than jump straight up to something big that we don't need.
It's not a cottage as you're thinking of, its been totally modernized and already has extra insulation, triple glazing etc.
That was just an example anyway, they very rarely come up on the market, so we'd most likely be looking at a 2 up 2 down somewhere in the NW.

agrinnall

Sir_Loin wrote: »

This is a long one.
I'm well aware there's 10% of members who pay the 50% tax bracket, but this is unforntunately aimed at the normal folk nearer minimum wage

Given that the highest rate of income tax in the UK is 45% for those earning over £150,000, and I very much doubt if anywhere near 10% of the members on here are anywhere near that, I think you're worrying too much about who you are aiming at.

https://www.gov.uk/income-tax-rates/current-rates-and-allowances

Sir_Loin

Having a laugh my friend, having a laugh. :money:

agrinnall

Sir_Loin wrote: »

Having a laugh my friend, having a laugh. :money:

I realise that, but when everything in the part that I quoted was wrong it's not really that hilarious. I wouldn't seek an alternative career as a stand up if I were you.

MrJB

I agree with others. With a 20k deposit I'd be looking at buying something slightly larger than a 55k property. I imagine in a few years your earnings will increase as your skills evolve.

In any event, if that's what you've got in mind, well plainly it's more than doable, even on minimum wage which I guess equates to around 14k/year or thereabouts?! In any event, based on current trends, that 55k cottage may cost 70-75k in 3 years time. I also think it's impossible to speculate on interest rates in 3 years time. We've been lucky to have the base rate so low for so long, but I'd be surprised if it's still at .5% in 3 years time.

skint_chick

I would check out the guide to Help to Buy ISAs on this site - the Barclays one isn't a best buy so you could get more in interest. You can also save more in regular savings accounts if you can spare it - you would want to have a deposit and also money to cover solicitor fees, redecoration, emergency fund and furniture. It's a good time to check your credit reports and make sure there are no issues there too. I would go for a slightly bigger property, not just because a family might happen, but also because you might want a home office/games room/spare room for friends and family. There's only 2 of us and we have three bedrooms - one is spare room and doubles as yoga space, holiday stuff storage (suitcases/camping equipment) and OH's gaming room. The other spare bedroom is a home office/craft and sewing room. We didn't want our hobbies taking over the living room/dining room so it works well for us and only costs a few pounds more a month to insure/heat and was only a few thousand more than a 2 bed.

[Deleted User]

My advice would be to park the idea for now, but get your ISA's set up and start saving away as much as possible (whilst still enjoying a life - you are only 21 after all!) then look at it again in a few years time when you have your deposit saved up. Its a bit pointless looking at all the figures now when so much could change in the next 3 years. Houses prices are unlikely to be what they are now in 3 years time, same with interest rates.

You seem to have a good attitude towards your future which is not something you always see in young people. If you keep that positive mindset and stay focused on what you want then you will get there.

AlexMac

MrJB wrote: »

I agree with others. With a 20k deposit I'd be looking at buying something slightly larger than a 55k property. I imagine in a few years your earnings will increase.....well plainly it's more than doable...I also think it's impossible to speculate on interest rates in 3 years time. We've been lucky to have the base rate so low for so long, but I'd be surprised if it's still at .5% in 3 years time.

I absolutely agree with JB's opener... but feel a little more optimistic about BoE interest base rates. Short of a global or national political catastrophe I don't reckon they'll rise above a few% in the next ten-15 years, so that points to mortgages around 5-6%, and certainly not the eye-watering 15% I experienced in the 1980s (when homes were in any case, much cheaper compared to average wages).

So if you're planned and well-organised (as you obviously are) and even vaguely inclined to buy, I'd say go for it, saving as hard and fast as you can. And yes- stretch yourself to the best/dearest place you can afford, or one with potential; ideally the cheapest property in the dearest area. Don't build your dream around any one place which happens to be available now.

I was a really spendthrifty wastrel in my youth, but the best thing I ever did was to buy a house (admittedly a wreck in a then crummy, but now bijoux area) in my late twenties in 1975. It's near- derelict state forced me to learn useful major DIY skills, and now, many years later, and with House price inflation, we have traded up to the point that despite average salaries during our working life, we're sitting on a very desirable, mortgage-free asset.

And as 69 is the new thirty, we can take the holidays we missed out on then- lots of them- albeit cheap ones (just back from the mountains of Andalucia; off to Skye next month, and the Picos de Europa in May, when there will still be snow in the high gullies).

Go for it- good luck!

Sir_Loin

Thank you for your responses! Very informative and helpful.
I think the best idea is to save up and shove as much as possible, as quick as possible into a savings account.
Thanks for all the help!