First Time Buyer Dilemma

Lazaros123

Hi all,

Long-time lurker, but this is my first post! I'd be very grateful of some advice please

We currently live rent free in a bed flat owned by family so we're able to save around circa £5,000 pcm.

We can continue living in the flat for years & are not being rushed out (they are keen for us to use it as an opportunity save, although they do plan on renting it out eventually when they retire...).

We are torn between:

1) BTL: Buying a property soon with a mortgage and renting it out with a view to us moving into it eventually and making it our first home in a few years time. The tenants would cover the mortgage payments initially and we'd be able to overpay the mortgage while being able to save for any renovations for when we eventually move in (and save up for childcare etc for the future). Perhaps we're being naive?

OR

2) FTB: Continuing to save for longer (maybe 2-4 more years?) and moving into the house ourselves (at this rate we can save circa £60,000 a year - assuming we're both in full employment and no major disasters happen...) while keeping an eye on what happens to property prices because of Brexit etc and increasing our equity. In two years for instance, if all goes well, we could have around £250,000 saved which would be a sizeable deposit to put down on a potentially larger London house (assuming our incomes also go up) we might be able to look at properties priced at £600k which would give us more choice depending on the property market. Although if property prices continue to increase we might not be much better off?

A typical FTB flat wouldn't suit our needs at this age and we hope we can get a 2-3 bed house so that it gives us room to grow as a family. Circa £500-600k doesnt go far in London & we're realistic that we'll have to look at some grubby areas in our budget.

We'd be very grateful for any advice.

Many thanks!

Red-Squirrel_2

If you!!!8217;re both in your mid thirties and you want children (especially plural) do that now. You have somewhere to live that is secure, you have good jobs and good savings, and your fertility is the only thing that is time sensitive.

Also, don!!!8217;t overthink, that!!!8217;s general advice as well as housebuying advice!

kinger101

I'm shocked you've even suggested No. 1 to be honest. You want you parents to provide you with free accommodation while you rent out another property.

The fact is you can easily afford a £700K property now, and there a plenty of those in London with at least 2 bedrooms. With an 85% LTV mortgage, you need £105K deposit, plus 4.1x your joint salaries. By the time you've found somewhere and completed, 80% LTV would be possible too.

Lazaros123

Thanks @RedSquirrel - we’re trying!

Lazaros123

Thanks @Kinger101 but my parents suggested option 1! Their flat is in a nice area with good transport links so is very convenient for us while we work v long hours. They’re keen for us to save and take on less debt.

LandyAndy

kinger101 wrote: »

I'm shocked you've even suggested No. 1 to be honest. You want you parents to provide you with free accommodation while you rent out another property.
.

Sometimes you just wonder what goes through some people's heads

kinger101

Lazaros123 wrote: »

Thanks @Kinger101 but my parents suggested option 1! Their flat is in a nice area with good transport links so is very convenient for us while we work v long hours. They’re keen for us to save and take on less debt.

Fair enough......just make sure it's not you standing in the way of their retirement.

Lazaros123

@kinger101 thanks - we’re definitely not (and wouldn’t)!

GoingOn30

Option 3.
Buy a house, get a lodger until your baby comes along (you'd still earn plenty with a mon-fri let) in order to make overpayments and secure yourselves financially.

InterestedParty2018

You are in an extremely fortunate position.
You have said your parents have suggested option 1, and it is not influencing their retirement. I would therefore say option 1 is most certainly the best option.

Purchase now.

Circumstances change (children/redundancies/relocation's/Brexit), and with your foot on the ladder you are always at an advantage. You never know, you may even be in a position to purchase a 2nd property which could be an investment to you both for your future family.

I had the opportunity to purchase my first property in my early twenties (£100k in london), I was too risk averse and worried about over committing myself (in hindsight, it was not stretching at all and entirely achievable!)

Fast-forward to now - I would have been mortgage free and owning a property just shy of £1milllion. (mortgage free if I chose not to re-mortgage to raise more funds for further property.)

Property ownership is a long term and broadly stable investment.

hazyjo

As said, you're both very fortunate

Option 2 for me. I would definitely buy (not BTL - you may not even get a BTL mortgage without having owned anything previously, although your saving and earning record goes in your favour. Depends if it's a blanket rule or not).

I would keep a VERY close eye on the London market if you're thinking of waiting years. It's generally fairly static (although rising in some, dropping in others), but it can go up rapidly when going up. I bought a 3 bed house in E4 (North Chingford) for £274k and sold at £515k four years later. It had actually reached that figure after around 3 years and was fairly static for the last year.

There's risk averse, and there's over cautious. You have very large salaries and will likely have large bonuses and large pay rises. What seems like a lot today will seem FAR less in say three years plus.

You talk about childcare, so presume you/your missus will be back at work. I would seriously think about someone living in rather than nurseries, etc if working long hours (a nanny, au pair, or whatever they're called these days). Unless one of you can somehow make their hours more regular or part time even.

It really depends how central you want to be. I would be trying to skip a step or two if I were you. Usually in London, you'd expect to buy a flat, then maybe a house, and maybe even then a move further out. If you want a family, I would be opting for step 2 or even 3 (as many of our lawyers here do once they go on to start a family). Area and schools will be far more important to you once you have kids. You don't want to be buying/bringing them up in a grubby area when you can buy a decent house in the 'burbs with longer travel. Different if you had millions but as you say £500-700k ain't going far in decent parts of central/commutable London!

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