Landlord looking to sell has offered me first refusal

HistoryGirl_3

I had a call from my landlord a couple of days offering me first refusal as he is looking to sell up. We're waiting for a valuation for the estate agents but based on other flats in the area I think it could be worth c.160,000. My issue is lack of deposit I don't think I can cobble together enough to get the 10% deposit I've read various guides for first time buyers etc on the site but whats the likelihood of me being able to get a bigger mortgage. I fear based on my income (I live alone) it won't be enough. I've checkd my cedit reports and they seem ok. I did try and do AIP with the bank but the first page said they're aren't taking any more above 90% LTV. Question is what are my options? Try and find a broker and see if there is anything I might qualify for or am I better off trying to find somewhere else to rent and waiting untilI get a bigger deposit together?

Any advice much appreciate

macman

How much short of the 10% are you? Bear in mind that you are saving the LL at least 1.2% of the sale value if buying privately, so he should at least discount half of that to you, so that is an instant £1K saving.
If the deposit and purchase leaves you with no capital then you should not be buying, because you will have many more expenses with a new property, even after conveyancing costs, survey etc, and you do need an emergency fund of maybe £2k for repairs.

AdrianC

Have you looked at the government-backed 95% mortgage schemes? That would mean you only need £8k equity (plus fees, etc, obvs). But you would be paying a higher rate for the borrowing.

There's no reason at all why you need to restrict yourself to the bank you have your current account with. There's no loyalty in financial services.

What do you earn? £160k with (let's say) £10k equity would be £150k borrowed.
4x income would be £37.5k, 4.5x would be £33.3k, 5x income would be £30k. The higher the multiple, the more squeeky-clean your history needs to be.

And, of course, if you're earning that much, it shouldn't be too hard to be saving reasonably well. £33k income is £2,175/mo after tax, albeit before any student loan repayments.

TBagpuss

How much do you have in savings? 
As others have said, it's worth looking at lenders other than your existing bank, and if you give some figures here for your savings, current income and any other debts or fixed outgoings then people will be better placed to comment on whether you are likely to be able to get a suitable mortgage. 
Of course you'd also need to look at the cost of mortgage and of other costs such as service or building management charges

a well as looking at the financial side, think about whether this is the flat you want to own - of course there are advantages in not having to incur the costs of moving, and the fact that you already know the building and area, but do think about looking around a bit to see what other options you may have, too.

HistoryGirl_3

I have 7600 in Help To Buy ISA 300 in flexi savings account I pay into periodically and another 500 in fixed term savings which I can access beginning of July. I have 1k in LISA but I know I can't use both when buying and I'd incur penalty if withdrawing from it but I might have to.

I've looked and there's not a lot at moment and very little I can afford for the deposit as all the 1 bed round here are upwards of 160k. I will have a look 95% scheme thanks. Are their restrictions on that? I'm in a block of flats which is part council which I assume might put off some lenders?

AdrianC

HistoryGirl_3 said:

I'm in a block of flats which is part council which I assume might put off some lenders?

Should it put you off buying...?

Remember, as a tenant, you've been sheltered from the service charges. They can be surprisingly large for many council-managed blocks, even without considering EWS issues.

Can I ask again about your income? This many not even be worth wasting time on, if your income is not high enough to afford the borrowing.

HistoryGirl_3

My salary is 28.5k as of this month so as a ballpark figure it seems I might be able to borrow upto 128k which likely won't be enough. Why I figured I'd ask and see what my options are.

Hannimal

HistoryGirl_3 said:

My salary is 28.5k as of this month so as a ballpark figure it seems I might be able to borrow upto 128k which likely won't be enough. Why I figured I'd ask and see what my options are.

Contact a mortgage advisor for advice maybe. They have access to better deals than comparison websites do 

HampshireH

HistoryGirl_3 said:

My salary is 28.5k as of this month so as a ballpark figure it seems I might be able to borrow upto 128k which likely won't be enough. Why I figured I'd ask and see what my options are.

The option to buy is really exciting but don't forget the responsibility for ongoing costs once you have wiped your bank accounts

Mortgage
Insurance

Service charges

Repairs & Maintenance
Section 20 works (leaseholder portion)

Have you looked into how much a month us your bills the first 3 would cost as they will be monthly costs. Obviously the last two will be more ad-hoc.

At the moment it doesn't sound like you can afford to buy. Don't forget you will still have your fees to pay on top of the deposit.

AdrianC

HistoryGirl_3 said:

My salary is 28.5k as of this month

So for £150k borrowing, you'd need just over 5.25x.
Even with 15% equity, 85% LtV, £136k borrowing, you'd need just over 4.75x.
For 4.5x, you'd need to have £32k in equity saved... plus fees.

I think you may need to accept you can't afford this one at the moment.

[Deleted User]

Hi HistoryGirl,
Were you considering buying before this was offered to you? I realise it's a great opportunity especially as you already know (and presumably like) where you live. However, I wonder if it's the right time for you. As HampshireH mentioned, it's not just the initial cost but ongoing costs, mortgage etc. It is essentially the biggest purchase you will make. There is the option to move and rent somewhere else while you build up a deposit so worth considering your options. Best of luck whichever way you decide to go!