Advice needed please - buying a house - can i afford it?

londongirl

I would be really grateful if people could give their advice and viewpoints including things I may not have thought about regarding my situation detailed below. (It is going to be long I’m afraid but I would be very grateful to anyone who reads to the end!)

Me: Single, 30, living in greater London, working in London, Income is £22,300 (take home pay £1352 per month). Was renting with my fianc! with view to buying a house but we split up in January and I have now been living with my parents for the last 3 or 4 months.

My parents are currently trying to help me get back on my feet and save for a house deposit therefore paying no rent only money towards food (£100 per month – or buying my own).

Having just turned 30 and having done the flatshare thing and the living with fianc! thing and now living with parents I would really like my own space and feel this will be the best thing for me since I have learnt nothing is guaranteed - I think my parents still want me to stay living at home for 2 years and imagine I will meet a new man who happens to be a stockbroker or something and I won’t need to worry about not being able to afford a place of my own! My however I’m more realistic and know I need to be independent and plan for the fact I might be single for the rest of my life and need to get a mortgage on my own single income.

Having looked at various government schemes the one that suits me best by far is the OwnHome scheme in conjunction with Places for People and the Co-op. I have had my first phone call with them and am eligible but need to call the co-op to get idea of mortgage. What I am really worried about is whether I will be able to manage on my salary. The most I ever paid in rent is £400 plus bills when I was flat sharing, and I was only paying £300 when I was with my fianc!. I have done my calculations til I’m blue in the face and it is going to be tight but I want to know what other peoples opinons are.

This is my estimate of income and outgoings if I were to buy a flat I have seen for £150k. (NB This is by far the cheapest nice flat I have seen where I live - others are more like £160k for flat in fairly unpleasant/ unsafe feeling road!) I have taken this from the moneysaving budget planner which I have used to estimate all costs.

Income: £1352
2nd job income – variable between £0 and £100 per month (am shattered if make £100 per month though but could do it if necessary)

Monthly Outgoings:
Mortgage: £600 (based on owning 60% of property (mortgage of £89500) – government loan for other 40% - interest free for 5 years with ownhome scheme, then 1.75% interest for next 5 years)

Buildings/contents insurance: £7
Council tax: £71 (assuming band B property which looks likely)
Water: £20
Gas: £25
Electrictity £25
Home Phone: £12
Internet: £12
TV licence: £12
Mobile phone contract: £15
Estimate of ground rent: £5
Estimate of service charge: £30
Travel insurance £2
Food shopping £100
Eating out £25
Snacks at work £12
Pub £30 (I don’t actually spend this much but thought it wise to overestimate!)
Train travel to work £72
Car maintanence £41
Car insurance £20
Car tax £10
Petrol £35
Savings £25
Hobbies £16
Other entertainments/ socializing £34
Denitst £2 (
Haircuts £6 (£75 per year – only get it cut twice a year usually)
Contact lenses £10
Toiletries £2
Clothes £30 (again I don’t usually spend that each month but may spend £150 twice a year – again overestimated to be on safe side)
Christmas presents savings £12
Summer holiday £33 (£400 per year)
Winter weekend away £20 (£230 per year)
Birthdays £12
Big expenses (eg furniture) £12 (£150 per year)


If I take into account earning extra £50 a month from 2nd job (actually have 3 2nd jobs but they are all flexible and I can do what i like each month -2 are self employed jobs)

This means I break even totally. If I earn £100 extra a month I have £50 to play with. Its so tight! But I also have budgeted for £25 a month savings and I don’t think there is anything at all I have left out of budget and if I fall on hard times I don’t have to have holiday or new clothes etc so there are ways to cut down – however I don’t want to buy a house to the detriment of my quality of life. If I move somewhere on my own only to sit in watching telly every night then that to me is not worth buying somewhere. However I also do really want to get on property ladder.

I can’t wait another year to see if house prices fall because the Ownhome loans are first come first served and funding in each area is limited. If I missed out on the funding then even after 2 more years at home I would probably only have saved £15k and on my salary would not be able to afford anything round here even if prices dropped 20%.

In terms of paying the interest on the equity loan after 5 years I would have hoped to have had a pay rise at work (not a huge one though) and for my self employed businesses to have kicked off slightly more – if not would just have to continue working 2nd job or cut back on things but to me 5 years is quite a way off yet and I couldn’t rent anywhere for £600 a month round here so ………….

Opinions please – have I overlooked something – am I mad to not have a cushion of £100 or £200 a month savings each month if I am to be a home owner.

Sorry it was so long but wanted to put in all detail so I could see what I had missed or over/ underestimated.

Also – anyone any experience with Ownhome loans?

Thank you!!

Londongirl

bikerqueen

i would worry that with stuff (fuel, gas, electric, council tax, food) getting more expensive you may end up ditching the fun things very quickly. with your own home if your boiler goes or something you need to replace it - and if (when?) your flat is worth 100k in 5 years and you want to move and start a family it won't be easy. how would you cope if you lost your job?

bryanb

How about a 2 bed flat, and have a lodger? I guess that would make financial sense.

boinging_2

Why rush into a falling market? I know the idea of living with your parents must be hell, but giving it another 6 - 12 months you could save another £10K at a push, with prices falling during this time as well I don't see why you'd want to buy now.

PasturesNew

You seem to be spending a lot on "fun", I've tried to break things downs so this is apparent:

NEEDS
7 Buildings/contents insurance:
71 Council tax: (assuming band B property which looks likely)
20 Water:
25 Gas:
25 Electrictity
12 Home Phone:
12 Internet:
12 TV licence:
5 Estimate of ground rent:
30 Estimate of service charge:
£219

Needs (2)
72 Train travel to work
2 Toiletries
30 Clothes
100 Food shopping
£204

Wants
20 Denitst
15 Mobile phone contract:
6 Haircuts
10 Contact lenses
12 Christmas presents savings
12 Birthdays
12 Big expenses (eg furniture) (£150 per year)
£87


Fun/Entertainment
25 Eating out
12 Snacks at work
30 Pub
16 Hobbies
34 Other entertainments/ socializing
2 Travel insurance
33 Summer holiday (£400 per year)
20 Winter weekend away (£230 per year)
£172

Car
41 Car maintanence
20 Car insurance
10 Car tax
35 Petrol
£106

Savings/Contingency
25 Savings
£25


£813 TOTAL

Taking home £1352, with a mortgage of £600, the mortgage and basic bills are about £850/month.

You seem to be spending about 25% of your money on having fun, going out, doing stuff. A lot of this would need to stop if you bought your own place because you'd need a safety pot built up.

In 5 years' time (which flies by) you'd have the 1.75% kicking in, which would be another £50 or so/month.

As prices are falling and will continue to do so, prices are predicted by many to not be as much as they are today for another 10 years, you've got time to save more and wait.

In that waiting time, see how you can cut back on your "waste" or get a 2nd job to add to your savings pot.

Good luck!

Debt_Free_Chick

londongirl wrote: »

This means I break even totally.

But you have no contingency for an "emergency fund" and/or routine maintenance or replacement e.g. decoration, accidental damage so you need to pay for a replacement ... carpet, washing machine etc.

And what if interest rates rise by 2%?

Opinions please – have I overlooked something – am I mad to not have a cushion of £100 or £200 a month savings each month if I am to be a home owner.

In my opinion, yes. I am nervous at the moment as I'm managing to save "only 25%" of my net income each month

It just seems to me that if one tiny thing goes spectacularly wrong, you're stuffed!

Bogof_Babe

I agree with PN above, you do have a contingency because you could easily cut back on the luxuries in your list if push came to shove.

You might find once you have your own place that the appeal of going out a lot and even holidays greatly reduces. Also £100 is a lot for food for one person for a month, you could practically halve that if you are careful and canny.

I would go for it, there's no time like the present and you obviously want to or you wouldn't have gone to the trouble of working out all the sums.

Even if interest rates go up, wages will too sooner or later.

PasturesNew

Try this, with immediate effect.

Set up a high interest savings account and/or a cash ISA (see Martin's links from Savings above) and with immediate effect, put all the house/bills money into a separate account. NOT to be touched.

Do it EVERY month. You should keep that up whatever you decide. And you can't touch it, you won't be able to touch it when you've got a house

Lakey

I would really think about what PN has highlighted and reconsider. Besides if you go ahead and purchase you won't be able to go out as much, so you will be stuck in on your own and not enjoying yourself as all newly split up people should.
After a major emotional turmoil it is my rule that thoult shalt not make any major decision for at least 6mnths, within which time thoult shalt lavish time and any spare cash JUST FOR YOU!!

Besides which watch what the market is doing, and to me it aint gonna be going upwards for a long time.

Don't forget you will need a fair amount of cash to actually buy a place solicitor fees etc, have you factored that in?



:T

zebulon

PasturesNew wrote: »

Try this, with immediate effect.

Set up a high interest savings account and/or a cash ISA (see Martin's links from Savings above) and with immediate effect, put all the house/bills money into a separate account. NOT to be touched.

You should keep that up whatever you decide. And you can't touch it, you won't be able to touch it when you've got a house

oooooh, excellent! :beer:

londongirl

Thank you all for your replies so far - i am just off to my mum's 60th birthday but shall read and digest all advice later tonight and reply then. Thanks!

Having scanned a couple of posts - i forgot to say that i currently have £6500 in savings plus £5k from my parents for a house deposit -but with ownhome i dont actually need to put a deposit down and as i have to take the maximum mortgage i get offered anyway it won't reduce my outgoings for the first 5 years even if i did put one down so my plan was to keep the 5k for my contingency fund. Should have put that bit in the first post i think!!
There is also the possibility that my parents are looking into giving me an advance of the 10k my nan is leaving me in her will (she's 86 but i'm hoping she has another 20 years on this earth as she's fighting fit!), but my parents were looking at giving me the 10k and then getting it back from my nan's money when she does pass away. (hate talking about that - but they have offered, it dosn't feel very nice but still its an option)