London First Time Buyer - Any Hope For Me?

LondonLife89 · 24 May 2018 at 10:41PM

I am in my late twenties and currently living in East London. Right now I am renting privately, and my current rent is £1,075 per month for a one-bedroom apartment. My salary is £30k. The rent takes up a large part of my salary, but it's extremely convenient and I like it here. My father is currently my guarantor on my rent, although I have never missed a rent payment from my own salary or needed him to bail me out.

Like most people my age I really want to get onto the property ladder, as renting is so expensive and I have nothing to show for it. I now want to buy a property in the same development, and an apartment has just come up for sale that would be absolutely perfect for me right now (coincidentally from my current estate agent).

The property is £260,000. With savings and a little help from my parents, I can afford a deposit of £60,000, so I would need to borrow £200,000. However having done some research, a person of my salary can borrow maximum £120,000.

What I don't understand, is that say I were to get a mortgage of £200,000 over 30 years with 5% interest, that would cost about the same as my current rent (£1,075 per month), which I pay just fine - but according to the estimates I cannot afford to borrow that much?

Is there any way I can get a mortgage for what I need to be able to buy the flat I want?

julicorn · 25 May 2018 at 6:09AM

Mortgages tend to be means tested for higher interest rates, in case rates drastically rise in the future - at 8%, you'd be looking at £1,468, at 10% it'd be £1755 per month. Maybe some form of shared ownership could be an option?

SamJ35 · 25 May 2018 at 12:06PM

I'm in exactly the same problem as you, albeit with a far lower deposit! Me and my gf paying £1400 rent and I earn 32k and she works part time. We can very much afford our rent and expenses, but a mortgage would be far cheaper! But can't borrow anywhere near what we would need, even on H2B.

Shared ownership is an option, but for us the HA affordability requirements are still too large.

I would look into these options for yourself:

1. Consider Help to Buy and see how much you could borrow (use the Help to Buy London calculator here - https://www.gov.uk/government/publications/help-to-buy-equity-loan-calculator-and-guidance)

2. Shared Ownership properties with your 60k deposit should be able to outweigh a few of the Housing Associations' affordability criteria.

3. Consider a Joint Borrower Sole Proprietor Mortgage if either of your parents would be willing to help out (you said they would be willing to help on the deposit, so going on this basis)

For us, its a waiting game. I'm hoping my salary will increase over the next couple of years and that gives time to save for a deposit. As soon as my gf enters full time work that'll help too. I've read a lot about how hard it is buying along, particularly in London, so good luck to you and hope everything works out!

csgohan4 · 25 May 2018 at 1:26PM

moving out of London would be an option as well, for the price of my house I could only get a rubbish studio in London, I have a much bigger space out of London and more happier too

LondonLife89 · 26 May 2018 at 3:02AM

Thank you all very much for your suggestions. I will investigate them all in turn!

JayRitchie · 27 May 2018 at 3:12AM

What kind of job do you do and is your salary likely to increase? I've been stuck in your position for years (partly due to very insecure jobs and fixed term contracts). I would seriously consider moving out of London to somewhere cheaper. There are lots of places where £60,000 would be a 50% deposit on a decent flat.

Alternatively look at resales on shared ownership - some can be attractive in your position.

LondonLife89 · 30 May 2018 at 12:32AM

IRT JayRitchie

I currently work in online retail, and our business is in an industrial estate as we need a warehouse for our stock. My salary is unlikely to increase, as I have literally only just been bumped up to 30k (hence why I'm looking to buy at this stage).

I'm trying not to move much further out of London if possible; on the principal that because the business is most easily accessible by car (the nearest tube station is over 1.5 miles away for example and the buses are a pain around that area too as the estate is off the A13). It is so easy commuting from an area slightly closer to London and driving outwards in the morning and inward in the evening, as I'm always going in the opposite direction to all the traffic (that is why I live where I do now, as I can tolerate losing such a large percent of my salary just for that convenience of a super-short and stress-free commute).

I've been taking a look at new-builds. Say I were to go down the help-to-buy route. Say I see a new-build I really like that costs 300k, in a lovely area with a nice balcony and parking etc - could I theoretically pay 20% deposit (£60k), get 40% from the government (£120k), and then get a mortgage for the other 40% (£120k, which is my maximum lending allowance) ? Or doesn't it work like that? I'm probably getting ahead of myself here and it's unlikely I'd go down that route, but I would like to know if it's feasible nonetheless (I could always look at cheaper new builds too).

Otherwise with shared ownership, can you still get a mortgage to cover what you cannot afford of your 25% (or whatever % you choose to take) share? Or does your share have to be paid 100% in cash up front?

csgohan4 · 30 May 2018 at 7:16AM

LondonLife89 wrote: »

IRT JayRitchie

I currently work in online retail, and our business is in an industrial estate as we need a warehouse for our stock. My salary is unlikely to increase, as I have literally only just been bumped up to 30k (hence why I'm looking to buy at this stage).

I'm trying not to move much further out of London if possible; on the principal that because the business is most easily accessible by car (the nearest tube station is over 1.5 miles away for example and the buses are a pain around that area too as the estate is off the A13). It is so easy commuting from an area slightly closer to London and driving outwards in the morning and inward in the evening, as I'm always going in the opposite direction to all the traffic (that is why I live where I do now, as I can tolerate losing such a large percent of my salary just for that convenience of a super-short and stress-free commute).

I've been taking a look at new-builds. Say I were to go down the help-to-buy route. Say I see a new-build I really like that costs 300k, in a lovely area with a nice balcony and parking etc - could I theoretically pay 20% deposit (£60k), get 40% from the government (£120k), and then get a mortgage for the other 40% (£120k, which is my maximum lending allowance) ? Or doesn't it work like that? I'm probably getting ahead of myself here and it's unlikely I'd go down that route, but I would like to know if it's feasible nonetheless (I could always look at cheaper new builds too).

Otherwise with shared ownership, can you still get a mortgage to cover what you cannot afford of your 25% (or whatever % you choose to take) share? Or does your share have to be paid 100% in cash up front?

Don't over stretch yourself, your salary is low as a Londoner, don't forget your going to be paying that government loan back in 5 years at considerable interest.

If you pay it back you will likely pay more back than you received from the HTB loan due to house price increases

Shared ownership has it's own problems

enthusiasticsaver · 30 May 2018 at 11:52AM

Income multipliers are based on the fact interest rates wont always be this low.

You have a deposit so that is good but realistically unless you are buying with a partner buying your first property at that level wont be possible until your salary goes up considerably or London property prices fall. We moved away from London 30 years ago for the very same reason so this is not a new problem.

You can either move further out as mortgage affordability does not take travel to work costs into account normally which I think is daft but there you go and it works in your favour. £180k may buy you a similar size property 10 or 15 miles further out and should be possible in your situation with a £60k deposit and £120k mortgage. Travel costs and commuting time will increase unless you can get a similar paying job closer to home.

Shared ownership is something a lot of people have to consider where you buy a percentage of a property and rent the rest and buy it back over time. Slightly more difficult to sell on though when you decide to do that.

London First Time Buyer - Any Hope For Me?

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