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To buy... or not to buy?
SmokeJaguar
Posts: 2 Newbie
Hey guys,
I would really appreciate some advice here since I've been racking my brain and spending late nights reading about this, trying to come to a conclusion.
I'm 24 years old. I've been working for around a year. I earn quite well for my age, especially for my first job. I love my company and enjoy my job, and intend to stay here for a while.
I've been looking to buy in London (south London, actually). I've found a 1 bedroom place for £180,000 that I like - it's in a decent area and very close to the train station (like a 2 minute walk) with a 23 minute commute to London Victoria.
I have a 10% deposit. This means that I'm looking at around a 4.5% fixed mortgage (for hopefully 5 years). The mortgage would therefore work out at around 40% of my income per month. This would usually put me off as it's quite a high percentage, but I'm kind of blessed in that food is free at work so I only really cook at weekends. I practically have no other outgoings apart from a small student loan repayment and transport. My wage will increase over time - if I'm promoted next year, by a lot.
My concerns are the following:
1) I would be doing this alone. I've never lived alone, and not quite sure if I would particularly enjoy it all the time.
2) If the mortgage stayed at around 4.5%, once all of my necessities are paid for (mortgage, ground rent, transport, council tax etc), I would only have around 35% of my income left.
3) I'm wondering if, since I'm young, it's worth seeking more lucrative and risky investments. Stocks, although volatile, wouldn't trap me like a house would if property prices dropped. Even buying abroad may be better.
4) This only works out cheaper than renting if property keeps rising. In this case, the equity would cancel out the interest (e.g. I pay 7000 in interest, house value goes up by 3000 - 4000 is a better number than throwing away, say, 7000 on rent (arbitrary numbers))
5) If there is a bubble, and it crashes - then I'm kind of trapped.
6) I'd be tied down. I suppose I would be able to live abroad, but finding someone to rent the place could be tricky.
Reasons for buying:
1) Having my own place - I would love it
2) Property prices in London are increasing, and if they continue to do so, then it makes financial sense (see example 4 above - I would still be more empty handed each month, but the equity would cancel out some of the interest)
3) I think the house is slightly undervalued when compared to others in the area
If you guys were in my shoes, what would you do in this situation?
Apologies for the essay!
I would really appreciate some advice here since I've been racking my brain and spending late nights reading about this, trying to come to a conclusion.
I'm 24 years old. I've been working for around a year. I earn quite well for my age, especially for my first job. I love my company and enjoy my job, and intend to stay here for a while.
I've been looking to buy in London (south London, actually). I've found a 1 bedroom place for £180,000 that I like - it's in a decent area and very close to the train station (like a 2 minute walk) with a 23 minute commute to London Victoria.
I have a 10% deposit. This means that I'm looking at around a 4.5% fixed mortgage (for hopefully 5 years). The mortgage would therefore work out at around 40% of my income per month. This would usually put me off as it's quite a high percentage, but I'm kind of blessed in that food is free at work so I only really cook at weekends. I practically have no other outgoings apart from a small student loan repayment and transport. My wage will increase over time - if I'm promoted next year, by a lot.
My concerns are the following:
1) I would be doing this alone. I've never lived alone, and not quite sure if I would particularly enjoy it all the time.
2) If the mortgage stayed at around 4.5%, once all of my necessities are paid for (mortgage, ground rent, transport, council tax etc), I would only have around 35% of my income left.
3) I'm wondering if, since I'm young, it's worth seeking more lucrative and risky investments. Stocks, although volatile, wouldn't trap me like a house would if property prices dropped. Even buying abroad may be better.
4) This only works out cheaper than renting if property keeps rising. In this case, the equity would cancel out the interest (e.g. I pay 7000 in interest, house value goes up by 3000 - 4000 is a better number than throwing away, say, 7000 on rent (arbitrary numbers))
5) If there is a bubble, and it crashes - then I'm kind of trapped.
6) I'd be tied down. I suppose I would be able to live abroad, but finding someone to rent the place could be tricky.
Reasons for buying:
1) Having my own place - I would love it
2) Property prices in London are increasing, and if they continue to do so, then it makes financial sense (see example 4 above - I would still be more empty handed each month, but the equity would cancel out some of the interest)
3) I think the house is slightly undervalued when compared to others in the area
If you guys were in my shoes, what would you do in this situation?
Apologies for the essay!
0
Comments
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If you live at home and are in no rush to leave. Continue to save and build your deposit.0
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Prices in London, especially the cheaper end of the market is only going one way at the moment. You are single with no commitments, so I would buy. Being close to a station, 23min from Victoria means you will always have options when it come times to sell/let out.0
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If you want to maintain a degree of flexibility it may be worth fixing for only 2yrs and then taking a view.
I totally agree with Typhoon that if you can get on the ladder in London you should do so.
Whatever happens down the line, if you're able to keep it and maybe rent it out, it'll be a very very valuable asset.
We have a buy-to-let in West London we rent out (that we bought at the top in 2007 by the way!) and it is now 10% over the original price and generating a lot in rental income. We have a baby on the way now and there is no way we'd take a risk with buying in our situation if we had the chance now - I'm so thankful we bought back then (despite it being below the buy price for several yrs) as my children will have a university education funded in yrs to come.
I was 23 at the time and it was, in hindsight, a fantastic move.
GL whatever you do0 -
Your post gives me the impression you are not sure you are not ready to buy Smoke.
If you are not ready do not do it.I am a Mortgage Broker
You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0 -
Alas, the vendors ended up accepting another offer.
My mind has been made for me
Thank you for your help!0 -
You'd struggle to buy a property of that amount with your income anyway, if ~£850 a month is 40% of your take home then you're looking at over 5x your income for the property value.0
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If you are seriously thinking of buying you need to get an agreement in principle from a lender. It's no good just thinking in your own head what you could or could not afford, you need to find out what you could realistically borrow.0
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SmokeJaguar wrote: »Alas, the vendors ended up accepting another offer.
My mind has been made for me
Thank you for your help!
I am sorry to read this, but that is how London properties are going at the moment: fast.0 -
Marmaduke123 wrote: »If you are seriously thinking of buying you need to get an agreement in principle from a lender. It's no good just thinking in your own head what you could or could not afford, you need to find out what you could realistically borrow.
This is my advice for anyone thinking of buying a property with lending, not just the OP.💙💛 💔0
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