How do people afford expensive houses

Gigervamp

mumps wrote: »

I've told her not to worry as when we kick the bucket she will be OK.

She could well be in her 60s when that happens!

saverbuyer

ukcarper wrote: »

If house prices increased 5% a year a £250k house will be worth about £408k after 10 year, while a £350k house will be worth £570k. If the £250k house was bought with a 80% mortgage and 3% 25 year mortgage the buyer would have £270k of equity, meaning they would need to borrow £300k to buy bigger house.

If they had a 4x mortgage to buy £250k house they would be earning £50k so would have need a 6X mortgage on £350 house with same £50k deposit. If their wages increased 2% a year after 10 years they would be earning £60k a 5x mortgage. So with some career progression it's quite possible.

5 x times joint mortgage = No sleep for me at night.

Hoploz

Definitely being born at the right time helps. My parents benefited from enormous house price inflation and my mum has now been able to downsize with some cash in the bank.

My in laws bought their house in mid 1970s for low 4 figures, can't remember exactly, and it's now worth £600-700k.

My brother bought in 1988 and got totally screwed in the recession with negative equity and interest rates to make your eyes water, eg 13%, at the same time needing to move on from the 1 bed flat he bought as they decided having children was a good idea. He never bought another house as it damaged him so much and he has rented ever since. I worry how he will manage when he can't work any more as he has nothing behind him. I'm 10 years younger (42) and have benefited from house price inflation to some extent, particularly with my first flat.

It's been more up and down in the last 10-15 years so buying and selling at the right time has been a greater factor. I have managed to buy at the top of the market (2007 and 2014) but I see other houses locally which have been bought and sold in between for huge profits.

I am in a 7 figure house now. We have done it by going up the ladder, renovating and extending, also by using a great mortgage adviser for many years. We have remortgaged every few years, always staying with the lowest rates and overpaying. We had pretty much paid off our last house in 7 years before we moved again. We have our own company which has meant we can use the profits and obtain mortgages with the company money rather than just a salary. We do have a pretty huge mortgage on the house, but we have company assets and own other properties, also life insurance etc which will cover everything if and when necessary. Our plan is to enjoy our house and land while the kids are young, then when they grow up and we can no longer manage the garden we will down size by half and pocket a few hundred £k to live off.

It's important to plan for the future. We don't go on holidays, we wear supermarket clothes and we have company cars. But we do have a holiday home and a bl00dy nice house in a great Surrey village. And we have our future paid for up front (sort of!)

wymondham

not having an iPhone?

ukcarper

saverbuyer wrote: »

5 x times joint mortgage = No sleep for me at night.

Depends what you are earning, but my point is that it's a lower multiple than the original 6x and thier wages could increase more than 2% a year especially if they had promotion or got a better job.

[Deleted User]

Quizzical_Squirrel wrote: »

I think that in most all cases, it's down to luck.

Luck to have been born at the right time or to benefit from similarly fortunate relatives.
Luck to have bought in the right place at the right time just before the population explosion and rise in property ownership.

What is life, if it is not just a game of chance?

Born in the right year, born in the right country, to the right parents. Born the right gender, the right genes, the right personality...

https://www.youtube.com/watch?v=U8Kum8OUTuk

Pixie5740

You never know, in 20 to 30 years time people might think £400k for a house is nothing. Young people then will be bemoaning schemes like HTB and saying how much easier we had it in the Twenty Tens.

cloo

Family money/inheritance, mainly. We own a house that would qualify as expensive and it's basically through two inheritances of mine that we've managed it. Helped by that my first purchase was in an area that was cheap at the time and was no longer by the time I sold. My husband and I have a good income between us but without the money from my side we would probably had to have moved out of London - lenders would 'only' give us about 2.4 times our salary last year, so it was only having two properties to sell that allowed us to buy a family home.

Knicknack

Banks are willing to lend at higher income multiples than before, plus people are spending more of thier income as a percentage on housing costs. But lending is key, if you can borrow it people seem to do it now matter how much.

GDB2222

The real answer to this is that house prices have grown far faster than earnings. That means it is genuinely far harder for someone to buy a house now than it was say 40 years ago.

At that time, mortgages were controlled, and the maximum was around 3 times earnings. Hence houses generally cost around 3 times earnings. Now, there are no (or at least very different) controls on mortgages, and houses cost much more.

For example, the Nationwide reports that for FTBs in London, the average property they bought in 1995 cost 2.6 times earnings. Now, it is 10.1 times.

http://www.nationwide.co.uk/~/media/MainSite/documents/about/house-price-index/downloads/ftb-hper.xls

Sure, interest rates are lower, but in real terms there is 4 times as much capital to repay on the mortgage.

Personally, I blame the government for relaxing mortgage controls too much. They claim they do this to help buyers, but in practice it doesn't help, as it just makes houses more expensive.