Pitfalls of Diligent Saving

Hawley_Gryphon

Wow, there were a lot of messages to catch up on!

Seems to be that people who can afford to get onto the housing ladder then just go nuts and start buying up property and renting it out until there's no houses left for anyone else who wants to be a homeowner too. The country seems to be groaning under the strain of all of the landlords we've got. I'd be quite happy with just the one home to be honest.

Thank you for your comments to my original post. Current situation is that I'm still plodding along with working as much as I can (given the lockdown circumstances and diminished hours) and saving as much as I can. I'm happy to say that since I last posted my LISA is up to £20k and I'm keeping an eye out for any property in the area that I might be able to afford yet. A flat perhaps?
So far I've only seen caravans within the price range, and I've checked and apparently the LISA can't be used to buy a caravan. Bit unfair, but there you go. Will keep at it. I saw a flat for sale for about £35,000 around five or six years ago but I didn't have the savings ready back then. I'm hoping it comes up again after my child leaves junior school as we may need to relocate a little further out of town.

The property prices around here are unrealistically high because of all of the universities in the area. So many people are buying up family homes and then turning them into multi-occ' student properties so there's no where for actual residents of the town to move to. It's really depressing.

MovingForwards

It was the same where I was renting, Airbnb, student digs, rentals or prices I could never save a enough to get the difference between the mortgage and purchase price. On my income I never stood a chance so I looked further out, got a home which is perfect for my needs and cost a fraction of the price for a similar property.

grumiofoundation

Hawley_Gryphon said:

Wow, there were a lot of messages to catch up on!

Seems to be that people who can afford to get onto the housing ladder then just go nuts and start buying up property and renting it out until there's no houses left for anyone else who wants to be a homeowner too. The country seems to be groaning under the strain of all of the landlords we've got. I'd be quite happy with just the one home to be honest.

Thank you for your comments to my original post. Current situation is that I'm still plodding along with working as much as I can (given the lockdown circumstances and diminished hours) and saving as much as I can. I'm happy to say that since I last posted my LISA is up to £20k and I'm keeping an eye out for any property in the area that I might be able to afford yet. A flat perhaps?
So far I've only seen caravans within the price range, and I've checked and apparently the LISA can't be used to buy a caravan. Bit unfair, but there you go. Will keep at it. I saw a flat for sale for about £35,000 around five or six years ago but I didn't have the savings ready back then. I'm hoping it comes up again after my child leaves junior school as we may need to relocate a little further out of town.

The property prices around here are unrealistically high because of all of the universities in the area. So many people are buying up family homes and then turning them into multi-occ' student properties so there's no where for actual residents of the town to move to. It's really depressing.

As I posted on your other thread, Presumably you are buying with a mortgage (to be able to use LISA) which makes your budget (35k ish?) seem very low with a 20k deposit? 

Hawley_Gryphon

grumiofoundation said:

As I posted on your other thread, Presumably you are buying with a mortgage (to be able to use LISA) which makes your budget (35k ish?) seem very low with a 20k deposit? 

Oh, you need to have a mortgage to be able to use a LISA? Do they insist upon it? Seems a bit thick adding that as an additional caveat, but there you go. I was assuming however that I would need to get some small mortgage in order to make up the difference between the £20,000 LISA and the re-emergence of the property for ~£35,000 I'm holding out for. I don't want to be saddled with a mortgage for goodness knows how long, so if my deposit is at least upwards of 40% of the asking price then I shouldn't need to get a big one.

Slithery

Hawley_Gryphon said:

I was assuming however that I would need to get some small mortgage in order to make up the difference between the £20,000 LISA and the re-emergence of the property for ~£35,000 I'm holding out for.

Mortgages that small aren't available. I think that the minimum is £25k as anything less falls under the Consumer Credit Act.

Hawley_Gryphon

Slithery said:

Hawley_Gryphon said:

I was assuming however that I would need to get some small mortgage in order to make up the difference between the £20,000 LISA and the re-emergence of the property for ~£35,000 I'm holding out for.

Mortgages that small aren't available. I think that the minimum is £25k as anything less falls under the Consumer Credit Act.

Really?! That's the first I've heard of that, and I'm afraid I haven't looked into the consumer credit act at all.
I spoke to a mortgage advisor at a local estate agents before the 2020 lockdown and all of that and he did a mortgage calculation number-crunching type of thing with me and he told me that by his calculations I'd qualify to get a mortgage of between £8,000 - £10,000. He didn't mention a thing about there being a minimum value or about the consumer credit act.

grumiofoundation

Hawley_Gryphon said:

grumiofoundation said:

As I posted on your other thread, Presumably you are buying with a mortgage (to be able to use LISA) which makes your budget (35k ish?) seem very low with a 20k deposit? 

Oh, you need to have a mortgage to be able to use a LISA? Do they insist upon it? Seems a bit thick adding that as an additional caveat, but there you go. I was assuming however that I would need to get some small mortgage in order to make up the difference between the £20,000 LISA and the re-emergence of the property for ~£35,000 I'm holding out for. I don't want to be saddled with a mortgage for goodness knows how long, so if my deposit is at least upwards of 40% of the asking price then I shouldn't need to get a big one.

Yes it is one of conditions for making penalty free withdrawal from LISA. 

https://www.gov.uk/lifetime-isa

Have you looked into how much mortgage you could get? And how much this would cost you? And how long a term you would need to take out. 

For example for a 20k deposit to be a 40% deposit you are limited to 50k properties, if you were willing/able to take out a 80k mortgage you can jump up to 100k (80%LTV). 

If you are insistent on getting the smallest mortgage possible (not sure what lower limit is) you are obviously massively limiting what you can buy.

AdrianC

Hawley_Gryphon said:

grumiofoundation said:
As I posted on your other thread, Presumably you are buying with a mortgage (to be able to use LISA) which makes your budget (35k ish?) seem very low with a 20k deposit? 

Oh, you need to have a mortgage to be able to use a LISA? Do they insist upon it?

https://www.gov.uk/lifetime-isa
Notice the last of these four bullet points.
"Buying your first home

You can use your savings to help you buy your first home if all the following apply:

• the property costs £450,000 or less
• you buy the property at least 12 months after you make your first payment into the Lifetime ISA
• you use a conveyancer or solicitor to act for you in the purchase - the ISA provider will pay the funds directly to them
• you’re buying with a mortgage"

The theory is that if you are in a position to buy a house outright, with no need to borrow, you do not need the taxpayers assistance to get on the ladder. This is not an unsound theory...

Hawley_Gryphon

AdrianC said:

Hawley_Gryphon said:

grumiofoundation said:
As I posted on your other thread, Presumably you are buying with a mortgage (to be able to use LISA) which makes your budget (35k ish?) seem very low with a 20k deposit? 

Oh, you need to have a mortgage to be able to use a LISA? Do they insist upon it?

https://www.gov.uk/lifetime-isa
Notice the last of these four bullet points.
"Buying your first home

You can use your savings to help you buy your first home if all the following apply:

• the property costs £450,000 or less
• you buy the property at least 12 months after you make your first payment into the Lifetime ISA
• you use a conveyancer or solicitor to act for you in the purchase - the ISA provider will pay the funds directly to them
• you’re buying with a mortgage"

The theory is that if you are in a position to buy a house outright, with no need to borrow, you do not need the taxpayers assistance to get on the ladder. This is not an unsound theory...

Hum, it's an interesting theory but the LISA is, I thought, supposed to help encourage the under 40's to save for a pension so that the government don't have to provide as much in the future. They're lured in by the desire to save for a home and then just keep up the habit afterwards because they got used to saving. At least, that's what I always thought the LISA was all about. It didn't seem to matter how much or how little money you have, the annual limit on the LISA is £4,000 anyway and the maximum number of years you can pay into a LISA is 32 (assuming you start at 18 and pay in the max until you're 50). That's £128,000 you could (potentially) save up to put towards a house. Ooh, plus you'd get an extra £32,000 from the government too, so that's £160,000 which would be enough to buy somewhere to live without a mortgage! Providing you don't mind waiting for 32 years to be able to do it...

Sorry - went off on a tangent there. It's all hypotheticals of course. I'm not going to be able to save up the maximum, but not for want of trying. LISAs didn't exist when I was 18 so I was starting at a disadvantage. Lol

Hawley_Gryphon

grumiofoundation said:

Hawley_Gryphon said:

grumiofoundation said:

As I posted on your other thread, Presumably you are buying with a mortgage (to be able to use LISA) which makes your budget (35k ish?) seem very low with a 20k deposit? 

Oh, you need to have a mortgage to be able to use a LISA? Do they insist upon it? Seems a bit thick adding that as an additional caveat, but there you go. I was assuming however that I would need to get some small mortgage in order to make up the difference between the £20,000 LISA and the re-emergence of the property for ~£35,000 I'm holding out for. I don't want to be saddled with a mortgage for goodness knows how long, so if my deposit is at least upwards of 40% of the asking price then I shouldn't need to get a big one.

Yes it is one of conditions for making penalty free withdrawal from LISA. 

https://www.gov.uk/lifetime-isa

Have you looked into how much mortgage you could get? And how much this would cost you? And how long a term you would need to take out. 

For example for a 20k deposit to be a 40% deposit you are limited to 50k properties, if you were willing/able to take out a 80k mortgage you can jump up to 100k (80%LTV). 

If you are insistent on getting the smallest mortgage possible (not sure what lower limit is) you are obviously massively limiting what you can buy.

I just went onto the Barclay's bank mortgage calculator and this is the result it popped out:

Based on what you’ve told us, you can afford a property that’s
£62,359.95 – £69,696.41
with a deposit of £3,118.00 – £10,454.46 and a mortgage of £59,241.95 – £59,241.95.
These figures are indicative only and not a commitment to lend.

That's better than the results I got from that mortgage advice fellow at the estate agents. He said I'd be looking at getting a mortgage around 8 to 10 thousand apparently. Plus, this calculator doesn't take into account how much deposit you've got already so that should bring it down a bit too I'm sure.