First time buyers - opinions needed

mouche

My husband and I would like to be first time buyers early in 2008. We have saved a deposit of £12500 and have another £5000 put aside for stamp duty/ legal fees/surveys and whatever else will be needed apart from the mortgage. Apart from this we have no savings though my parents might be able to lend us a bit in an emergency.

Our combined income is £63,000 and we have no loans, credit card debts etc. Clean credit reports.

2- bed flats in the area we would like to buy in (Greater London) range from £200,000 to £250,000. Towards the top end of that range there are a few houses as well. Ideally we would like to buy a house but we will be ok with a flat as well.

We have spoken to one financial advisor and he says we can get a mortgage of £250,000 without any difficulty. Monthly repayments on a fixed rate will be £1500, which we can afford fairly easily now but may not be able to in a couple of years when I take a career break to start a family. Based on this he's suggested we take a 2 or 3 year fixed rate deal and then find a new one based on what we can afford at that time.

Apart from your general thoughts of this situation, I'd appreciate it if more experienced people could answer the following questions. We have only been in the UK for 2 years so we don't know too many people who have bought property to ask for advice.

1) If I take a fixed rate mortgage for say 10 years and halfway through I cannot afford the repayments, is it possible to switch to an interest only rate or does my house get automatically repossessed?

2) In your opinion should we buy now or wait till we've saved a bit more?

3) Does it make sense to buy a flat? I've read a lot of advice against it but it's pretty much all we can afford right now. We're buying it to live in but we would like to upgrade to a house when we can afford it so we don't want to end up with something that depreciates drastically in price.

Would really appreciate your thoughts and comments.

Happy New Year!

Doozergirl

mouche wrote: »

We have spoken to one financial advisor and he says we can get a mortgage of £250,000 without any difficulty. Monthly repayments on a fixed rate will be £1500, which we can afford fairly easily now but may not be able to in a couple of years when I take a career break to start a family. Based on this he's suggested we take a 2 or 3 year fixed rate deal and then find a new one based on what we can afford at that time.

I'm not entirely sure I see the logic. Changing your mortgage from repayment to interest only after 2 or 3 years, you're still gambling with what interest rates will be when your fixed rate ends. It might be that the full repayment is cheaper, it might be the even IO works out more expensive! To be sure of what you need to be earning to pay the mortgage in the future, I would have thought a longer term fix would provide less surprises.

mouche wrote: »

1) If I take a fixed rate mortgage for say 10 years and halfway through I cannot afford the repayments, is it possible to switch to an interest only rate or does my house get automatically repossessed?.

I think most lenders will allow you swap from repayment to IO but you should check this when it comes to applying. Taking off the capital part of your monthly repayment will have an impact but won't reduce it massively and you'll have to make it up at some point. IO is supposed run with a seperate investment vehicle, it isn't supposed to be there for people who can't afford the repayment section.

mouche wrote: »

2) In your opinion should we buy now or wait till we've saved a bit more?.

You'll lose nothing in waiting an extra year. The higher deposit, the better interest rate you get. Plus, for every £1 you save in the form of a deposit, you save another £2 in interest.

mouche wrote: »

3) Does it make sense to buy a flat? I've read, a lot of advice against it but it's pretty much all we can afford right now. We're buying it to live in but we would like to upgrade to a house when we can afford it so we don't want to end up with something that depreciates drastically in price..

You live in London. Most people live in flats. The new build apartment 'thing' that we're always banging on about doesn't apply to your average London flat. People live in flats in London out of need - there are simply not enough houses because there isn't enough space! Apartments in provincial cities and towns have the price tags of houses! - it's a con. Providing you with the *glamour* of London style living. The reality is that people only live in square boxes in London because they can't afford more space; it's not glamorous, it's cheaper! People in London will always need flats.

ruggedtoast

No one knows what interest rates are going to do, not even the Daily Express, we do know however that the market has fallen for the last two months in a row. Not a great time to be spending £250,000 on a flat imo.

jaype

Please don't buy - your priorities will change so much after you have kids - for instance, many friends found Brixton loads of fun before they fell pregnant and a scary hell-hole once they were pushing a pram!

DaisyFlower

If you plan to have children in the near future, i'd hold off buying and continue saving for your deposit. With children you have to consider many more things than you do as a couple so personally I would wait a while and continue saving.

After maternity, you may have the longing to be a stay at home mum but with a large mortgage may not have any choice etc. Schools etc are another consideration as well as other children to play with etc.

Running_Horse

Could you commute? 30 minutes from London you would get a lovely house and garden for your family, for the same price as a couple of tiny rooms in a London slum area.

samihostan

jaype wrote: »

Please don't buy - your priorities will change so much after you have kids - for instance, many friends found Brixton loads of fun before they fell pregnant and a scary hell-hole once they were pushing a pram!

oh come on. get a grip! of course that should buy. you always get your money back when you are on a mortgage.

buying house should be the first priority.

sami hostan

Running_Horse

Having suggested commuting, I would also say hold off a while and keep saving. Out here in commuterville the market is not dead, but is definitely more competitive.

Lavendyr

samihostan wrote: »

oh come on. get a grip! of course that should buy. you always get your money back when you are on a mortgage.

buying house should be the first priority.

sami hostan

Unhelpful post, reeks of troll to me :rolleyes:

I too would recommend you keep saving for a while before buying, OP.

Clackerooney

Running_Horse wrote: »

Could you commute? 30 minutes from London you would get a lovely house and garden for your family, for the same price as a couple of tiny rooms in a London slum area.

Sorry to hijack this discussion but where could I get a lovely house and garden 30 mins from London for £250k?

Cheers,

jonewer

Clackerooney wrote: »

Sorry to hijack this discussion but where could I get a lovely house and garden 30 mins from London for £250k?

Cheers,

I could tell you that but then you would be competition and I would have to kill* you.




*no, not really. just joking. dont call the police.