Borrowing capabilities for buying in London

somethingcorporate

We lived in southend when we started our careers. We often got confused looks from people who lived in london but spent almost the same amount of time commuting but had to face the horrible house prices and awful tubes compared to reasonable house prices and nice (ish) trains.


Horses for courses!

hazyjo

MaMoneyMaMoney wrote: »

Thing is, whatever the sum, with the mortgage is going to be much higher in the end due to mortgage interests, etc. That is to say, an imaginary monthly repayment of £2400 over 30 years amounts to £864.000. That's crazy money (for me)!

Yes, because you're seeing it as today's money. Come back in 30 years at the end and it'll seem like peanuts. I first bought in 1991, so nearly that time ago. Paid £65k for a 2 bed flat in Blackheath which seemed so expensive. Same flat is now worth over £400k. You will earn more, obviously, so the mortgage will be more than affordable if you still have it. You'll prob move several more times, prob increasing on what you borrow. Each time, it will seem like a fortune. The mortgage on mine was so tiny in today's world. Was high at the time!

hazyjo

airandwater wrote: »

Commuting is relative and depends on where you live and work. Some trains from the outskirts of London get you into Victoria, Paddington or London Bridge in 20-30min. So if you work near those hubs then commuting is less tedious than it is for someone who lives in Queens Park but work in Canary Wharf.

However I perfectly understand why you want to live in London. It's good that you are researching but I wouldn't buy until after Brexit as house prices are still correcting from the epic bubble we had.

100% agree. Give me 40-odd mins on a train any day over a manky tube journey! Could never live on a tube line compared to overheads!


Let me think... stand like sardines under someone's sweaty armpit in the depths of hellfire, or sit in an airconned train watching Netflix, doing work (if you're that way inclined), reading, listening to music/radio, or doing my makeup to save time. Hmm, tough one lol.

steampowered

MaMoneyMaMoney wrote: »

Thing is, whatever the sum, with the mortgage is going to be much higher in the end due to mortgage interests, etc. That is to say, an imaginary monthly repayment of £2400 over 30 years amounts to £864.000. That's crazy money (for me)!

You are forgetting two essential points:

- Inflation. £864,000 will be worth less in 30 years time than it is today. The long term average rate of inflation is about 3 - 3.5%, which means that the value of money roughly halves every 20 years.

- Asset prices. Over the long term, you expect the value of an asset (such as your property) to increase in value due to inflation.

Nobody knows whether property prices will increase or decrease in the short term. But frankly short term price movements don't really matter if you intend to stay in the property long term.

lisyloo

Why London?

We have a nice county pile elsewhere and rent a bolt hole in London.
My partner walks 5 mins to work and being central I have many options which is great (tube, bus for £1.50, walk, cycle).
It probably costs us about £25K annually and there are some downsides but also clearly major upside i.e. no horrible commute, low commuting costs and everything in London on our doorstep socially.



This really suits us because our work isn't long term (we're 50 adn 52 hoping to retire at 55), we have family elsewhere and the costs is affordable for a high income.


May not suit you but just thought I'd mention it as an option.

AdrianC

MaMoneyMaMoney wrote: »

Thing is, whatever the sum, with the mortgage is going to be much higher in the end due to mortgage interests, etc.

Of course. If ever you find a free source of money, let me know!

That is to say, an imaginary monthly repayment of £2400 over 30 years amounts to £864.000. That's crazy money (for me)!

£2,400/mo repayment mortgage over 30 years is 5% interest. That's high.
https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator

A quick look at the MSE mortgage best-buy shows that 2.39% is available currently, which would be £1,750/mo.
https://www.moneysavingexpert.com/mortgages/best-buys/

If you think that you can afford £2,400/mo, then that amount of overpayment will radically shorten your mortgage. How radically...? It'll take just over TEN YEARS off your mortgage...
https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator
On that basis, you'd be paying a total of £564k for the £450k you borrowed over two decades. Doesn't sound unreasonable, does it...?

Even that assumes you're putting £2,400/mo in. Yet £100k income split evenly between you works out to £6,170/mo after tax, while £150k split 2:1 works out at nearly £8,600/mo after tax. You can afford to overpay even more rapidly. Paying £3k/mo in brings it down to 15yr total mortgage length and £535k. Paying £3,500/mo in brings it to 13.5yrs and £520k - in other words, borrowing that £450k is costing you less than £5,200 per year in interest. Just over 1% of the original borrowing... Bargainacious.

lisyloo

Let me think... stand like sardines under someone's sweaty armpit in the depths of hellfire, or sit in an airconned train

This really does depend on the individual commute.
Some trains are awful and some tubes are not too bad (yellow, green, pick and brown have aircon).
Tubes come every few minutes so even when they are rammed they are pretty quick whereas you might have to wait 20 mins for a train and of course there is all the strikes and signal failures when the unacceptable advice is just don't travel.
Not forgetting of course that there are virtually no train in central london.


It really does depend on the individual commute.
Personally I would struggle with the non-aircon tube that were up to 40 degrees this year and have turned down interviews because of that.


Note also that if you have a job where you can shift your hours your commute may be considerably better.
On my team it suits the business to have some people work early and some late.


My personal view is also that it's great to have option e.g. I have tube, bus, wak and cycle as that can really help when there are strikes even if you don't regularly use all the options.


We stayed in serviced appartments 4 days a week to try out various areas of London.

MaMoneyMaMoney

However I perfectly understand why you want to live in London. It's good that you are researching but I wouldn't buy until after Brexit as house prices are still correcting from the epic bubble we had.

That is the current sentiment. We'll see how it goes. That doesn't mean I won't buy if in the mean time I find something I am not willing to let go.

Yes, because you're seeing it as today's money. Come back in 30 years at the end and it'll seem like peanuts. I first bought in 1991, so nearly that time ago. Paid £65k for a 2 bed flat in Blackheath which seemed so expensive. Same flat is now worth over £400k. You will earn more, obviously, so the mortgage will be more than affordable if you still have it. You'll prob move several more times, prob increasing on what you borrow. Each time, it will seem like a fortune. The mortgage on mine was so tiny in today's world. Was high at the time!

Thanks @hazyjo. That gives some perspective!

stand like sardines under someone's sweaty armpit in the depths of hellfire, or sit in an airconned train watching Netflix, doing work (if you're that way inclined), reading, listening to music/radio, or doing my makeup to save time. Hmm, tough one lol.

That's also relative as some of you have said. London's transport system is efficient. I don't have to wait 15/20 mins if I lose a train.

Being underground it's not ideal, I agree. But trains are no exempt from being very crowded depending on where you get in. And I can do all of the above except for those who require an internet connection.

May not suit you but just thought I'd mention it as an option.

Thanks. Much appreciated!


[QUOTEO]n that basis, you'd be paying a total of £564k for the £450k you borrowed over two decades. Doesn't sound unreasonable, does it...?

Even that assumes you're putting £2,400/mo in. Yet £100k income split evenly between you works out to £6,170/mo after tax, while £150k split 2:1 works out at nearly £8,600/mo after tax. You can afford to overpay even more rapidly. Paying £3k/mo in brings it down to 15yr total mortgage length and £535k. Paying £3,500/mo in brings it to 13.5yrs and £520k - in other words, borrowing that £450k is costing you less than £5,200 per year in interest. Just over 1% of the original borrowing... Bargainacious.[/QUOTE]

Wow that's very informative. It's clear I know very little about this stuff

Thanks so much. That also helps put things in perspective.