Worried First Time Buyer - In Too Deep?

amosp

My girlfriend and I are first time buyers and have ummed and ahhed for a few months over a recent development and we’ve finally put a reservation down on a house. It’s a new build 3 bed semi detached with a garage that we’re absolutely in love with.

I’m a worrier by nature and my main concern has always been whether we are getting ourselves in too deep.

The property is 137,950 which is a stunning price for the property. So it’s difficult to imagine passing up this opportunity. The builder and ourselves combined are putting down 10% and the remainder we are able to borrow from RBS on a 2 year fixed rate at £688.00pm.

However when I’ve ran through our figures. I’ve deducted things like car tax, insurance, mobile phone bills, health bills and even haircuts from our separate monthly earnings, then (leaving us £70 and £100 respectively in “pocket money” a month) poured the rest into the joint account where I’ve deducted mortage, utilities, insurances etc. We’re then left with £100 in that. That’s not budgeting for things like nights out, clothes and other frivolities. I don’t know if we can live on this?

I’m now getting myself chewed to death about whether this is the right thing to do.

Have you guys got any advice/thoughts on this?

merlinthehappypig

It does seem tight financially, especially as you have made no allowance for mortgage rates rising, unexpected bills and so on.

I'd guess that there are a number of costs associated with home ownership that you aren't aware of and haven't budgeted for as well.

How does this compare with renting for a while and saving up for a bigger deposit?

It's not a great time to buy if you believe the talk about house prices falling, especially if things are already tight.

pinkshoes

IF your mortgage is going to be more than 3.5x your joint salaries, then sometimes it can be tough. Our first 6 months was at 3.8x our joint salaries (on top of buying furniture etc...), but since then we've both had pay rises, and it's now just less than 3x our joint salaries which means our social life doesn't suffer any more!

If you can't stand the thought of having no social life for a while, then maybe buying a house isn't for you! What are your future earnings? Pay rises? Bonuses? Plans to have kids (i.e. less income!!)? Are you paying mortgage insurance, which is often a waste of money? (i.e. you cough up for years, then when you need it, they don't pay out!). Have you got the best mortgage deal possible?

It's very sensible to be considering all the options BEFORE you buy, just to make sure you CAN afford it!

churchrat

hi
you ALWAYS need more money than you think you do, it seems to be a fact of life that you do a budget and then find out you should have added 10% more. why not write out your budget and show it to friends etc who can point out the things you may have missed or underestimated (easily done on your first house). having said that, you can live on very little if you try, but it might not be what you really want to do. Merlins point was a very good opne--what happens when the rates rise???
good luck

amosp

Thanks for those quick replies.

I don't think we would ever consider renting. We both currently live with parent(s). We've seen a couple of similar properties slip by us and we didn't want to let this go. House prices will always go up and I am feeling pressure to get in now rather than trying to save up as it doesn't seem like this opportunity will come up again for such a nice property.

Merlin you have hit the nail on the head though. If there are increases in mortgage rates by the end of the 2 years we may not afford it. Having said that, I would expect to be on a better wage by then. and yes there may be many hidden costs that I haven't even thought of having not had a house before. Which is partly the reason for this thread.

As far as social life goes we don't particularly have one at the moment. We go out very rarely and much prefer a quiet night in. Mortgage insurance we've discussed and won't be paying.

Sorry if I seem like I'm rambling I'm trying to get a thousand thoughts out of my head in one go.

Pinkshoes, as far as the first part of your post goes. Our mortgage would be 4.75x our current joint salaries

barnaby-bear

amosp wrote: »

My girlfriend and I are first time buyers and have ummed and ahhed for a few months over a recent development and we’ve finally put a reservation down on a house. It’s a new build 3 bed semi detached with a garage that we’re absolutely in love with.

I’m a worrier by nature and my main concern has always been whether we are getting ourselves in too deep.

The property is 137,950 which is a stunning price for the property. So it’s difficult to imagine passing up this opportunity. The builder and ourselves combined are putting down 10% and the remainder we are able to borrow from RBS on a 2 year fixed rate at £688.00pm.

However when I’ve ran through our figures. I’ve deducted things like car tax, insurance, mobile phone bills, health bills and even haircuts from our separate monthly earnings, then (leaving us £70 and £100 respectively in “pocket money” a month) poured the rest into the joint account where I’ve deducted mortage, utilities, insurances etc. We’re then left with £100 in that. That’s not budgeting for things like nights out, clothes and other frivolities. I don’t know if we can live on this?

I’m now getting myself chewed to death about whether this is the right thing to do.

Have you guys got any advice/thoughts on this?

Hmmm us+builder putting 10% down - you mean "gifted deposit" alarm bell...

New builds generally drop a bit in price in the first few years because you are paying for new fittings etc so if you want to move within 3 years may need to overpay / save fees etc, often flooring isn't included so you may ned a bit for carpets etc...

Why does one of you get more pocket money than the other? £170 on non-essentials that can be cut though if the washing machine needs fixing so there's some slack in the budget - you could try an SOA on the DFW board to cut your costs. They reckon on about £30 pw on food for a couple. Without salaries no idea if your budget is realistic or has slack in it....

barnaby-bear

amosp wrote: »

Thanks for those quick replies.

I don't think we would ever consider renting. We both currently live with parent(s). We've seen a couple of similar properties slip by us and we didn't want to let this go. House prices will always go up and I am feeling pressure to get in now rather than trying to save up as it doesn't seem like this opportunity will come up again for such a nice property.

Merlin you have hit the nail on the head though. If there are increases in mortgage rates by the end of the 2 years we may not afford it. Having said that, I would expect to be on a better wage by then. and yes there may be many hidden costs that I haven't even thought of having not had a house before. Which is partly the reason for this thread.

As far as social life goes we don't particularly have one at the moment. We go out very rarely and much prefer a quiet night in. Mortgage insurance we've discussed and won't be paying.

Sorry if I seem like I'm rambling I'm trying to get a thousand thoughts out of my head in one go.

Pinkshoes, as far as the first part of your post goes. Our mortgage would be 4.75x our current joint salaries

It's getting quite hard to get a decent remortgage at high LTV ratios so be aware of the remortgage costs and SVR issues at the end of FTB fixed rates.... basically high LTV they can choose to make you go elsewhere by not offering decent rate and other lenders will also be cherry picking customers - credit lending changed quite a lot recently...
4.75x sounds a bit silly with virtually no equity ot me, but if you don't have kids for a while, secure jobs with increasing salaries and have family who could help out as a safety net there maybe factors to consider

amosp

Barnaby.

Salaries are £11897 and £14197 hence the difference in pocket money.

As I saw I do expect a wage increase soon and I am considering taking on a part time job on top of my current one.

seraphina

amosp wrote: »

Thanks for those quick replies.

I don't think we would ever consider renting. We both currently live with parent(s). We've seen a couple of similar properties slip by us and we didn't want to let this go. House prices will always go up and I am feeling pressure to get in now rather than trying to save up as it doesn't seem like this opportunity will come up again for such a nice property.

That is utter rubbish. Whether or not you believe that house prices are going to fall substantially (Nationwide figures show that the average price has fallen in the past 4 months in a row), negative equity was a very real problem at the beginning of the 1990's.

Renting is *not* dead money - in fact, in your case it sounds like it would do you the power of good - if you both live at your parents you have no real experience about how much it costs to run your own home, between just the two of you. In many parts of the country renting is much cheaper than buying, so you should be able to save a good deposit whilst you rent. If you really want a place of your own, then surely a year or two of saving isn't such a hardship?

There will always be another house that is just as good. ANd as for renting being dead money, what do you consider the interest on a mortgage to be?

SOrry to sound harsh, but it sounds like you're being pressured into buying.

barnaby-bear

amosp wrote: »

Barnaby.

Salaries are £11897 and £14197 hence the difference in pocket money.

As I saw I do expect a wage increase soon and I am considering taking on a part time job on top of my current one.

Gosh - that's low incomes for that level of mortgage.... but that's just my opinion, mine isn't far off that level but we both earn more than you combined and found it less than comfortable (although our commuting costs are high)... realistically relative to incomes and costs £170 pocket money is a lot - try an SoA on DFW or read some as it is possible to live on b&gger all and up income but you aren't going to have nice furniture or meals out or the lifestyle to go with the house on those incomes for a while.... a few people could buy at that level on that income but it's not going to be that nice for a while and will require a very basic existence.... in my opinion

VFR-Rider

amosp wrote: »

House prices will always go up

Well the past 4 months as a national disagree as would the thousands of people that bought in the 90's and had rather large negative equity.

However if you are planning to stay for a long while and can afford the payments then this might not be so relevant.

The point about if rates rise could really catch you out in 2 years though.