Can I afford this apartment?

solo_two

Hello everyone, I'm new to the forums and looking for some advice as feeling a bit wobbly about a potential move. Would really appreciate a read through and some wise heads and advice!

Background

First, some background. I'm 34, live alone, and currently live in a 1-bed flat and have been here for approximately 5 years. I bought it for £190,000 and have a mortgage on the property. Recently I have considered upsizing to a 2-bed mainly due to the fact that I now work from home 95% of the time, and rarely have to go into the office anymore. This might occur once every few months. This has been my main driving force for looking for a 2-bed, to use that extra room for a home office - and even in the future for something else! Additionally, it would also be nice to have some sort of garden space and a driveway (Note - I have no car at the moment, but always useful).

I recently found a 2-bed new build property, which I really like. I went to view it last week and it ticked all the boxes - it's a new build (a strong preference of mine), the spare room, garden and private driveway However, based on the mortgage payments I'd be looking at, given to me by the estate agent's mortgage advisor, I left feeling a bit uneasy.

Financial situation

My current financial situation is as follows in my current property.

Salary: £60,000 / take home: £3340 per month.

Monthly outgoings:

Mortgage £602 
Service Charge: £133 
Council Tax: £140
Energy: £110
TV/Internet: £76
Phone: £10
Loan: £5
Food and utilities: £400
Gym: £36
Netflix: £18
Prime £9

= £1539

This leaves me with £1800 approximately for any additional spending and savings. I appreciate this is a substantial amount by many people's standards and I am in a fortunate position in that I don't often think about the money I spend. At the end of each month, spending the way I do, I end up with about £1000/1200 left over, but this can vary widely of course.

New property

The new property I saw last week is listed for £375,000 and I've been told there is no movement on the price - it had recently been reduced from £395,000. After viewing the property, I sat down with the mortgage advisor who told me based on having £65,000 worth of equity in my current home, which would be used as a deposit, I would be looking at approximately £1465 per month in mortgage payments. I was told however, the service charge on the property is £80, with no ground rent, which is a plus and a small reduction on what I pay currently on my property (£140).

So, having fiddled with my sums, I calculated this was leave me with roughly £936 leftover each month, after all bills, food spending and other necessary commitments. Other changes in costs such as energy, council tax band etc, I have not factored in.

Other considerations

I have approximately £20,000 inheritance coming in the next 3-6 months. I intend to invest the majority of this into a low risk fund and keep £5,000 closer by for easy access savings.

What are people's thoughts? Having done some research myself, it's clear that everyone situation is different and we all live and spend differently. And to many, having almost £1000 left over every month is a blessing - to others it might seem tighter.

Please let me know what you think and happy to answer questions you might have. Thank you.

Mark_d

Personally I like fairly modern properties but would never buy a new build.  New builds usually have many issues that need to be resolved...and they often drop in price after they've first been sold.

We bought our flat nearly 10 years ago, when working from the office every day, but now that we're mostly working from home I really wish we had a house.  With a house your garden is private.  When it's hot in summer, if you're in a house you can choose to spend more time downstairs where it's cooler.  In a house you can install air conditioning, heat pumps, conservatories.  If you're able to keep on top of the maintenance of a house, then I'd say it's a much better investment than buying a flat.

daveyjp

The £80 service charge is an unproven estimate as the property is brand new so you need to be prepared for a realistic charge after one year.

solo_two

Thanks both, those are considerations I will take forward in my search. From a financial POV, and the figures I posted, am I being reasonable looking at properties in this price range? Or is this total madness? Keen to get a steer on this as I have little to go on aside from my own way of living. I imagine posting on a money advice forum the advice is going to er on the side of caution!

Albermarle

The new property I saw last week is listed for £375,000 and I've been told there is no movement on the price - it had recently been reduced from £395,000

It is quite common for developers not to want to move on price, in case it sets a precedent. However they will often throw in freebies, like new flooring, washing machine if you push them. Also many will part exchange with your current property. Probably you will not get quite the same price but saves a lot of potential hassle with selling the flat.

 .However, based on the mortgage payments I'd be looking at, given to me by the estate agent's mortgage advisor, 
Normally it is advised not go with mortgage brokers or conveyancers suggested by an estate agent.
Mortgage brokers charge a fee and you can get mortgages easily enough directly. Coneyancers vary a lot in quality, so you really should shop around.

I have approximately £20,000 inheritance coming in the next 3-6 months. I intend to invest the majority of this into a low risk fund and keep £5,000 closer by for easy access savings.

As you are planning to invest the £20K then I assume you do not need it for a few years at least.
Due to your age, you want to steer clear of low risk funds and invest in a fund for growth.
Alternatively being a higher rate taxpayer, the tax relief from adding more to your pension is very generous.

Otherwise it looks like you can easily afford  a step up the housing ladder.

Mark_d

I wouldn't like the thought of having a £300k+ mortgage tied to me.  What happens if you lose your job, get involved in a serious accident etc.

Since you work from home 95% of the time, perhaps you could consider living in a cheaper area of the country slightly further away from your office.

Bigphil1474

I think you are over thinking it. When I've paid my bills and necessary spending has been budgeted for, I have about £500 left over, leaving about £200 for 'entertainment', and I try to save £200, and pay an extra £100 off the mortgage. I think you are in a much stronger position. 

Don't forget you will have a decent equity in the property from your sale, and even though its a new build and likely to have a dip in value initially, it will only be a couple of years before it should start picking up. We went for a five year fix just to make sure we could have 5 years of knowing exactly what the mortgage would cost, and after a year or two I'll be able to increase my mortgage payment as my wages go up.

Jude57

solo_two said:

Hello everyone, I'm new to the forums and looking for some advice as feeling a bit wobbly about a potential move. Would really appreciate a read through and some wise heads and advice!

Background

First, some background. I'm 34, live alone, and currently live in a 1-bed flat and have been here for approximately 5 years. I bought it for £190,000 and have a mortgage on the property. Recently I have considered upsizing to a 2-bed mainly due to the fact that I now work from home 95% of the time, and rarely have to go into the office anymore. This might occur once every few months. This has been my main driving force for looking for a 2-bed, to use that extra room for a home office - and even in the future for something else! Additionally, it would also be nice to have some sort of garden space and a driveway (Note - I have no car at the moment, but always useful).

I recently found a 2-bed new build property, which I really like. I went to view it last week and it ticked all the boxes - it's a new build (a strong preference of mine), the spare room, garden and private driveway However, based on the mortgage payments I'd be looking at, given to me by the estate agent's mortgage advisor, I left feeling a bit uneasy.

Financial situation

My current financial situation is as follows in my current property.

Salary: £60,000 / take home: £3340 per month.

Monthly outgoings:

Mortgage £602 
Service Charge: £133 
Council Tax: £140
Energy: £110
TV/Internet: £76
Phone: £10
Loan: £5
Food and utilities: £400
Gym: £36
Netflix: £18
Prime £9

= £1539

This leaves me with £1800 approximately for any additional spending and savings. I appreciate this is a substantial amount by many people's standards and I am in a fortunate position in that I don't often think about the money I spend. At the end of each month, spending the way I do, I end up with about £1000/1200 left over, but this can vary widely of course.

New property

The new property I saw last week is listed for £375,000 and I've been told there is no movement on the price - it had recently been reduced from £395,000. After viewing the property, I sat down with the mortgage advisor who told me based on having £65,000 worth of equity in my current home, which would be used as a deposit, I would be looking at approximately £1465 per month in mortgage payments. I was told however, the service charge on the property is £80, with no ground rent, which is a plus and a small reduction on what I pay currently on my property (£140).

So, having fiddled with my sums, I calculated this was leave me with roughly £936 leftover each month, after all bills, food spending and other necessary commitments. Other changes in costs such as energy, council tax band etc, I have not factored in.

Other considerations

I have approximately £20,000 inheritance coming in the next 3-6 months. I intend to invest the majority of this into a low risk fund and keep £5,000 closer by for easy access savings.

What are people's thoughts? Having done some research myself, it's clear that everyone situation is different and we all live and spend differently. And to many, having almost £1000 left over every month is a blessing - to others it might seem tighter.

Please let me know what you think and happy to answer questions you might have. Thank you.

Others have/will comment on the mortgage and property aspects but I'm going to say that your budget is wildly inaccurate. You need to research the Council Tax and likely energy costs for a start. You have nothing down for the building insurance that will be a condition of your mortgage, nor the contents insurance it's always wise to have in place. You might want to look at critical injury insurance to cover your mortgage payments if you become unwell. There's unemployment insurance too but it can be very expensive. Only you can know if it's worth having. You don't mention travel costs and while you may not have a commute to pay for, do you really never get a bus, train or taxi? Don't you have a car or bike? If you do, those costs, including insurance and maintenance, need to be added. You haven't included anything for clothes, shoes, haircuts, dental treatment, opticians appointments/glasses or lenses. You haven't allowed for birthday and Christmas cards and presents, a fund for general maintenance of the house of an amount for socialising. The occasional night out can be very expensive and needs to be allowed for in your budget. It's important to include every tiny bit of expenditure so that you have as clear a picture as possible of the lifestyle you can afford it you buy this (or any other) house. The Debt Free Wannabe part of this site has links to excellent, detailed budget sheets so that you can see exactly where you stand. If you look at your bank statements over the past 6-12 months, you'll see where your money goes and can decide whether that's acceptable to you I'd whether you want to make some changes. There are tons of threads on here about keeping household costs down so you might want to look at those to see if your costs are reasonable or where you could get a better deal.

I'd also recommend you pay off whatever loan is costing you £5 a month. It's only a fiver but if you're paying interest on the loan, at £5 a month, you're likely to be paying for a long time and far more in interest than you need to. I'd advise you look at saving something every month, however small an amount, towards things like holidays or something else you want to be able to do in the future. It's a good habit to get into anyway.

I hope this hasn't come across as negative because that's not my intention. I hope it helps you understand your finances and whether you can happily afford this, or any other, new house. Good luck.

solo_two

Jude57 said:

solo_two said:

Hello everyone, I'm new to the forums and looking for some advice as feeling a bit wobbly about a potential move. Would really appreciate a read through and some wise heads and advice!

Background

First, some background. I'm 34, live alone, and currently live in a 1-bed flat and have been here for approximately 5 years. I bought it for £190,000 and have a mortgage on the property. Recently I have considered upsizing to a 2-bed mainly due to the fact that I now work from home 95% of the time, and rarely have to go into the office anymore. This might occur once every few months. This has been my main driving force for looking for a 2-bed, to use that extra room for a home office - and even in the future for something else! Additionally, it would also be nice to have some sort of garden space and a driveway (Note - I have no car at the moment, but always useful).

I recently found a 2-bed new build property, which I really like. I went to view it last week and it ticked all the boxes - it's a new build (a strong preference of mine), the spare room, garden and private driveway However, based on the mortgage payments I'd be looking at, given to me by the estate agent's mortgage advisor, I left feeling a bit uneasy.

Financial situation

My current financial situation is as follows in my current property.

Salary: £60,000 / take home: £3340 per month.

Monthly outgoings:

Mortgage £602 
Service Charge: £133 
Council Tax: £140
Energy: £110
TV/Internet: £76
Phone: £10
Loan: £5
Food and utilities: £400
Gym: £36
Netflix: £18
Prime £9

= £1539

This leaves me with £1800 approximately for any additional spending and savings. I appreciate this is a substantial amount by many people's standards and I am in a fortunate position in that I don't often think about the money I spend. At the end of each month, spending the way I do, I end up with about £1000/1200 left over, but this can vary widely of course.

New property

The new property I saw last week is listed for £375,000 and I've been told there is no movement on the price - it had recently been reduced from £395,000. After viewing the property, I sat down with the mortgage advisor who told me based on having £65,000 worth of equity in my current home, which would be used as a deposit, I would be looking at approximately £1465 per month in mortgage payments. I was told however, the service charge on the property is £80, with no ground rent, which is a plus and a small reduction on what I pay currently on my property (£140).

So, having fiddled with my sums, I calculated this was leave me with roughly £936 leftover each month, after all bills, food spending and other necessary commitments. Other changes in costs such as energy, council tax band etc, I have not factored in.

Other considerations

I have approximately £20,000 inheritance coming in the next 3-6 months. I intend to invest the majority of this into a low risk fund and keep £5,000 closer by for easy access savings.

What are people's thoughts? Having done some research myself, it's clear that everyone situation is different and we all live and spend differently. And to many, having almost £1000 left over every month is a blessing - to others it might seem tighter.

Please let me know what you think and happy to answer questions you might have. Thank you.

Others have/will comment on the mortgage and property aspects but I'm going to say that your budget is wildly inaccurate. You need to research the Council Tax and likely energy costs for a start. You have nothing down for the building insurance that will be a condition of your mortgage, nor the contents insurance it's always wise to have in place. You might want to look at critical injury insurance to cover your mortgage payments if you become unwell. There's unemployment insurance too but it can be very expensive. Only you can know if it's worth having. You don't mention travel costs and while you may not have a commute to pay for, do you really never get a bus, train or taxi? Don't you have a car or bike? If you do, those costs, including insurance and maintenance, need to be added. You haven't included anything for clothes, shoes, haircuts, dental treatment, opticians appointments/glasses or lenses. You haven't allowed for birthday and Christmas cards and presents, a fund for general maintenance of the house of an amount for socialising. The occasional night out can be very expensive and needs to be allowed for in your budget. It's important to include every tiny bit of expenditure so that you have as clear a picture as possible of the lifestyle you can afford it you buy this (or any other) house. The Debt Free Wannabe part of this site has links to excellent, detailed budget sheets so that you can see exactly where you stand. If you look at your bank statements over the past 6-12 months, you'll see where your money goes and can decide whether that's acceptable to you I'd whether you want to make some changes. There are tons of threads on here about keeping household costs down so you might want to look at those to see if your costs are reasonable or where you could get a better deal.

I'd also recommend you pay off whatever loan is costing you £5 a month. It's only a fiver but if you're paying interest on the loan, at £5 a month, you're likely to be paying for a long time and far more in interest than you need to. I'd advise you look at saving something every month, however small an amount, towards things like holidays or something else you want to be able to do in the future. It's a good habit to get into anyway.

I hope this hasn't come across as negative because that's not my intention. I hope it helps you understand your finances and whether you can happily afford this, or any other, new house. Good luck.

Thanks Jude - didn't take that negatively - it's the type of response I'm looking for, so appreciate your comments.

I probably should have been a bit clearer by what I meant with "monthly outgoings". Those outgoings I listed are only what I consider to be essential outgoings that I either must pay for or are vitally important to me. Of course there are other costs that I consider more "optional" or less important to me - maybe some I could even look to reduce. So it's not to say I've not considered the things you mention and mentally I am factoring them into the equation.

Living with a healthy amount of disposable income at the moment means I have a mindset of tending not to look too closely at some of of the other things you mention (birthdays, travel etc), but you are totally right that I need to really add the pennies up to see where my money is being spent if I'm trying to evaluate my affordability. I also need to investigate what some of the other costs will be associated with the property as you mention.

I don't think I need to worry about nights out though. Vaguely remember what one of those felt like even at my age.

Anyway thanks for your suggestions - I will go ahead and make sure I don't dive into anything without having a clearer picture of things.

born_again

As above on utilties.
How is the property heated?
If electric panel heaters. Then expect far bigger electric bills come winter.

gwynlas

If you just want a room to use as a home office then you could consider  one bed garden flats that offer the space to install a garden room.

You could also look to see what else is on offer at this budget rather than a new build which carries a premium