Home Home, Law & Money
We're aware of several bugs/changes to the discussion boards. We're looking into them and will give an update as soon as we can. Thank you for bearing with us. :)

First time buyer queries

Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
Hi there,

As I'm finding it difficult to muddle through the jargon on various websites about mortgages, I wondered whether someone might be able to put it in laymans terms what I might be about to afford.

I'm a single 23 year old on a salary of £20,000 and have savings of around £25,000.

I've had no credit cards or loans in the past and therefore have no credit history. Will this drastically affect me?

I was thinking of possibly buying a 2 bedroom appartment or house in the region of 80-100,000. Does this sound too much?

I plan to live there and rent the other room out.

Does this sound feasable? Could/should I go any higher/lower with the property value?

Comments

  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    I expect at the moment that would be about the limit that most places would loan out given your salary and deposit. If you're canny about it you could get a really good deal from a seller, maybe if there is a new development in one of your areas? Your lack of history may make it slightly more complex, but so long as you can prove your income etc. and actually have a bank account it should be ok. (Though of course there is a crunch on lending at the moment.)

    I'm not sure if I would tell the mortgage company that I was intending to rent a room out. It could go either way.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    hi there konnor,

    hope you will enjoy the site?

    I suggest you go to your bank and discuss things also try local estate agents they will help you and tell you if you qualify. You can also do tests online if that helps?

    Good luck anyway.
  • littlemissylittlemissy knit chick Posts: 9,972
    Go seek advice from an independent financial advisor. They will tell you what you can and cannot do. You do not pay for them - the institute that you would eventually take your mortgage out with would pay for them as they received your business. They will be able to look at everything that is going on with the market, your current cinancial situation and then maybe at banks that you wouldn't normally consider because they are not your normal bank.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Go seek advice from an independent financial advisor.

    :yes:

    There are loads of free ones which are worth seeking out. I always use London & Country, who are ace, but I know there are others. You don't pay anything, they always give me good advice, and you can just ring them pretty much whenever is convenient, rather than having to make an appointment in working hours.

    The other thing I would say is that you should think carefully about the maximum you can afford to repay monthly, rather than the maximum the bank will lend you. Especially as a single person, your wage will very quickly get eaten up by mortgage and bills. Having a lodger will definitely help (you should be able to get a tax break on income earned from renting out a room - google it), but you have to make sure that you can, if push came to shove, afford to stay in your house if you couldn't find a lodger for a few months, or if they moved out unexpectedly. Think of any money from them as a bonus rather than an essential.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Hi im mortgage owner when i was 18 now 24+my house up for sale market so slow i dnt see why u should ave probelm as u got salary+savings u wil have the deposit u need usualy 5 percent x
  • littlemissylittlemissy knit chick Posts: 9,972
    Aj fan wrote: »
    Hi im mortgage owner when i was 18 now 24+my house up for sale market so slow i dnt see why u should ave probelm as u got salary+savings u wil have the deposit u need usualy 5 percent x

    Three years ago there wouldn't've been a problem. However, we are in the midst of a credit crunch and banks are not as happy to lend money the way that they did before.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    most banks are now looking for quite high deposits on houses now. But there are still some who would consider lending. the deposit you have it quite a good one. It also depends on where you are looking and what the market is like. My best advice would be to get some advice from mortgage brokers or a quote from your bank. The best way is to just get out there and look. x
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Also - I thought to add the fact that I think you should hold off until the property market settles a bit or you could instantly find yourself in a negative equity situation.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Personaly i woudnt get mortgage again we goin rent once we manage sel ours we only makin 2grand+that pay fees finger x a deposit down on rent place+ive had mgage so far 6yr+5mth
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Aj fan wrote: »
    Personaly i woudnt get mortgage again we goin rent once we manage sel ours we only makin 2grand+that pay fees finger x a deposit down on rent place+ive had mgage so far 6yr+5mth

    You've had your property over six years and you're not making any profit on it?!?!?
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    g_angel wrote: »
    Also - I thought to add the fact that I think you should hold off until the property market settles a bit or you could instantly find yourself in a negative equity situation.

    I was thinking about starting to look for somewhere this year now I'm not tempting anymore but thats on hold til the market picks up. You can use this time to build a bigger deposit. (Dont forget you have to pay solicitors, moving costs, buying furniture if you dont have any already and it all adds up)

    Speak to an indpendent financial advisor for mortgage advise.

    As for renting a room out, you can earn up to £4,250 a year under the rent a room scheme without paying any tax. http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017804
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    g_angel wrote: »
    You've had your property over six years and you're not making any profit on it?!?!?

    Hi hun we had remortgage a couple times to do it was right mess 10grand went instantly new windows+doors +we end house +had pebbledashed wall had that removed etc that cost 4grand fix otherwise the house wudnt be worth what it is if we hadnt done it up x:yes:
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    I'd personally avoid apartments if you can help it. They're normally over-priced, smaller than a house and you usually get stung with quite a hefty service charge.

    Plus they're almost impossible to sell privately, my mum had to drop £25,000 from the asking price just to get some interest.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    g_angel wrote: »
    Also - I thought to add the fact that I think you should hold off until the property market settles a bit or you could instantly find yourself in a negative equity situation.

    Negative equity is a non-issue unless you're planning to sell within the next couple of years. If you are planning to stay in the property long term, you can definitely afford repayments, you have no property to sell and you are in a lendable situation (big deposit, stable income), then this is a great time to buy. There are some ridiculous bargains to be had - people letting their houses go for tens of thousands of pounds under the asking price. That won't happen when the market starts to pick up, cause the sellers will hold out for a more decent offer. Not to mention that sales are going through in around 4 weeks cause the banks and solicitors are so quiet. If I didn't have a house I couldn't shift, I'd be buying my face off right now.
  • PearlyPearly ********* Posts: 345 Boards Initiate
    Hi Konnor,

    You are definitely in a strong position with a 25% deposit (keep behind at least £1-2k for solicitor's bills) but as things are a bit choppy out there on the housing market, some property experts are claiming you'll need at least a 40% deposit. I don't believe this is entirely true though... most people, especially if they have no debts like yourself, manage it with a 20% deposit, so if you were buying somewhere around £100k that would be £20k (clever me with my maths!), so you should be OK.

    Your best bet is to go and have a meeting with a mortgage broker or an agent and tell them what you have and they can give you an idea of what is being accepted by lenders. Every lender is different - I bought a year ago and from one to another, they differ greatly.

    Pearly
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    We had a money chat recently and they said it was better to rent for the time being. If you imagine a house to be an asset in the same way a stock or share is (something you buy, in the hope it will go up in value), then it's never a good idea to 'catch a falling knife' as it were. It's my understanding prices are still dropping, so why buy a 2 bedroom house today when in 6 months the same money could get you a 3 bedroom house.

    Anyway, it's up to you, thats just advice I've picked up from here and there.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Olive wrote: »
    Negative equity is a non-issue unless you're planning to sell within the next couple of years. If you are planning to stay in the property long term, you can definitely afford repayments, you have no property to sell and you are in a lendable situation (big deposit, stable income), then this is a great time to buy. There are some ridiculous bargains to be had - people letting their houses go for tens of thousands of pounds under the asking price. That won't happen when the market starts to pick up, cause the sellers will hold out for a more decent offer. Not to mention that sales are going through in around 4 weeks cause the banks and solicitors are so quiet. If I didn't have a house I couldn't shift, I'd be buying my face off right now.

    I disagree. ShyBoy's post right above this outlines why there is no way I would be buying anything right now. You may pick up what seems a bargain right now, but if prices continue to drop, then you will still end up with a property worth less than you paid for it.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    house prices have another ~30% to fall at least (just in nominal terms not counting the sterling's collapse) and aren't going to bottom out until 2010/11, so i would hold off buying unless you can get something well below market value. you have to be pretty sure about your job security to be getting a mortgage right now as well, even in the public sector.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    ShyBoy wrote: »
    We had a money chat recently and they said it was better to rent for the time being. If you imagine a house to be an asset in the same way a stock or share is (something you buy, in the hope it will go up in value), then it's never a good idea to 'catch a falling knife' as it were. It's my understanding prices are still dropping, so why buy a 2 bedroom house today when in 6 months the same money could get you a 3 bedroom house.

    I think it is a matter of opinion, and also differs depending on what area you are buying in, but I don't think that's necessarily the case.

    We're currently selling 2 houses (in different towns) to buy another, and in my experience the market has significantly picked up since mid-December. Prices around here have definitely steadied, and new sold signs are going up, where for months last autumn there were none. People are also withdrawing their house from sale rather than dropping the asking price further, so there are loads less to choose from - probably what is keeping the prices steady.

    I think what the banks and the media will have you believe, and what is actually happening in some parts of the country may not be entirely the same. Even so, the price a seller will accept now, while things still seem relatively bleak will generally be well below the asking price. As soon as the sellers get even the slightest sniff that the market is improving, they will stop accepting the cheeky offers and hold out for something nearer the asking price.

    I don't think the OP should be making asking price offers at the current time - he should be undercutting them as a starting point by at least 10-15%, but I think it's wrong to suggest he shouldn't be looking at all.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Like I said it was just on the advice I'd seen elsewhere. In the recent money chat someone asked whether they should get a house or rent and they basically said for the time being it's better to rent.
  • Former MemberFormer Member Posts: 1,876,324 The Mix Honorary Guru
    Also, try and get the biggest house you can afford. You may stretch yourself a bit in the short term but you'll soon learn to budget better and it means in the long run you'll be in a better position when it comes to selling.
Sign In or Register to comment.