First Time Buying (flat)

[pAntscat]

Dearest PH-ers I turn to you to help me un-muddle my very muddled head!

Girlfriend and I are looking at purchasing our first property as she is in the very fortunate position of receiving a large sum of money (50k now... another 100k in approx 18 months). So we're looking to purchase a new-build flat in surrey for £250k.
BUT... she is a little bit, how shall I say this?, flighty when it comes to being responsible with money and so I thought I'd do a nice full breakdown of purchasing costs and then monthy costs to make her see how much a 200k mortgage will cost until she gets rich... but I have a few questions...

1. Will we need life insurance in order to take out a mortgage? Or did I dream that one?

2. Monthly costs - at the moment I'm thinking electric, water, gas, phone, broadband, home insurance, council tax... anything I've missed?

3. What are the average monthly costs for a 2-bed flat? (at present I've not got a clue as I rent a flat from my employer and all costs are thrown in)

4. For purchasing costs I've got the deposit, stamp duty, moving costs and solicitors fees - have I missed anything here?

5. I'd be very grateful for any other advice!

Oh... and I'll probably have to downsize my car... My dreams of getting a TVR are well and truly buggered for the time being. Fiesta TDCi here I come...

Thanks and manly-back-slapping hugs.

[mawds]

1. yes

2. I have no idea, I live in the North, where we use steam and water wheels, and only Harrogate is posh enough to have electricity, but they don't use it, as it's a bit common.

4. There's always a few more charges, but those are the main ones.

5. Think of a house as though it's a car, let's say a TVR. Never buy a new one - get one where somebody else has had the plaster fall on them, things not work, cracks appear, etc., rowed endlessly with the builders as to whose fault it is, and had it all fixed.

[bga]

If you are looking at a flat the service charge can be an important consideration. Currently I pay £1k a year for mine - it can be much lower or a fair bit higher. Makes sense to factor it in.

[robbieduncan]

1. It depends on the mortgage. The first one I had (as a student) required it, since then they haven't. Check the terms and conditions!

2. Ground Rent if it's lease hold (normally paid annually). Home Insurance should cover 2 things: buildings (i.e. the fabric of the structure) and contents (your stuff).

3. Depends where it is!

4. Your solicitor will be doing a lot which you will end up paying for: searches and so on to ensure that the building is OK. You may be lumping all this in the fees though.

5. Don't buy new build. The builder normally charges a premium for the fact that it's new build. Don't buy anywhere you are not sure about. It'll just end up being wrong and you'll spend a lot of money sorting it or moving again quickly. Take your time and see as many places as you need to. Don't let estate agents mess you around!

[pAntscat]

Cheers Mawds! - Thought that was the case.

Thanks BGA too... forgot about that... is about £1k a year for the place I'm looking at too.

and thanks to Robbie too! - sorry, not sure how I missed your post!

>> Edited by pAntscat on Sunday 8th January 16:07

[Plotloss]

£200K costs a little over £1000 a month, maybe a little more...

And yes, you do have to have life insurance, to underwrite the risk the bank are taking.

[OUTLAW-1]

another thing to watch for other than service charge are charge for comunal stuff that needs repair

some pepole have been hit real bad with ex councile flats for thousands.

[pAntscat]

Thanks Plotloss... I think the best quote I've had so far was about £1150 a month.

[Plotloss]

About right, when I last looked at a mortgage the interest rates were a little lower.

[pAntscat]

OUTLAW-1 said:

another thing to watch for other than service charge are charge for comunal stuff that needs repair some pepole have been hit real bad with ex councile flats for thousands.

I'll double check that... I would have assumed the service charge would cover that... ta!

>> Edited by pAntscat on Sunday 8th January 10:40

[Piglet]

Not a question that you've asked, but since you're buying together but both putting in differing amounts of money - think about how you are going to "hold" ownership of the property and agree NOW how this will be expressed on the title documents or in a separate agreement between you. Better to have to deal with it now whilst you're all lovey dovey than further down the line if it doesn't work out between you.

It's not being unromatic, it's just being mature and realistic!

[Kinky]

One thing that I would consider is getting one of those all-in-one accounts - like the Virgin One account, and being a little bit savvy with your cash.

For example - lets say you went for an all-in-one account - every time you take money out (to pay for petrol, shopping, etc) you are losing the benefit of interest earnt on that money - no matt how small it is.

So get a credit card - by EVERYTHING on that card for the month, and leave your bank account alone. Then when your credit card statement comes in - pay it off in full. And if you get a card that gives you cash back, or points for something (M&S, Nectar, etc) - then even better.

Added to this get the water/leccy/gas/phone folks to receive payment as late into the month as is possible.

This will ensure that you have the most money possible in your account and earning the most interest possible - which will reduce your mortgage payments.

Then when those lump sums of cash come in, they will reduce your monthly payments.

I know that Virgin have a pretty comprehensive calculator on their website which shows how your payments reduce over time. I'm sure Halifax and the Woolwich have the same (plus anyone else who offers this type of account.

K

Edited to add: Out of curiosity - why buy a flat over a house?

Also note I'm not a financial expert in any way shape or form. The comments above are my own personal experiences.

>> Edited by Kinky on Sunday 8th January 10:53

[pAntscat]

@Piglet - You're absolutely right there - have discussed this a little but need to get something legal drawn up.

@Kinky - that's some very good advice! Had thought of the all-in-one account but hadn't considered using a credit card like that. If I got a credit card with cashback too I could be quids in!

[Kinky]

The thing to note about the cedit card is that you do really have to pay it off in full each month. If you start paying interest on credit cards - then it defeats the whole purpose and you'll be in a worse position than before - assuming you want to maximise every penny that you've got.

K

[Piglet]

pAntscat said:

@Piglet - You're absolutely right there - have discussed this a little but need to get something legal drawn up. @Kinky - that's some very good advice! Had thought of the all-in-one account but hadn't considered using a credit card like that. If I got a credit card with cashback too I could be quids in!

When you look for a conveyancing solicitor look for a firm that has a Private Client department or similar so that they can give you all the advice you need in one go.

Be slightly careful if your contribution is not going into the property ie you're paying fees, stamp duty etc - make sure it's still counted as a contribution.

Kinky's suggestion is a good idea - just think of the practicalities of this if you have a girlfriend who is flaky with money and who currently is feeling "rich" - this may turn into potential for dispute!!! (I speak as a female with a tendancy to spend wildly - particuarly when I feel "rich" even if I'm not!!!)

[pAntscat]

Piglet said:

[ Be slightly careful if your contribution is not going into the property ie you're paying fees, stamp duty etc - make sure it's still counted as a contribution. Kinky's suggestion is a good idea - just think of the practicalities of this if you have a girlfriend who is flaky with money and who currently is feeling "rich" - this may turn into potential for dispute!!! (I speak as a female with a tendancy to spend wildly - particuarly when I feel "rich" even if I'm not!!!)

Yes - I think it could prove to be interesting!

[Kinky]

Ahh yes - I forgot to mention that ...... the 1 downside to this is blowing it all away with percieved riches ... hence the need to be savvy with the cash.

Tricky one.

Good luck with it though - sounds like you've got some fun times ahead.

Can I ask why a flat and not a house?

K

[pAntscat]

Yep - it's certainly going to be a challenge!

We're open to houses but have not found anything really suitable for around £250k around Leatherhead...

We want to live somewhere with good train links (35-45 mins into Central london) and we really want to be equidistant to our work places... I work in Wimbledon and my dearest works in erm... uh.. umm... can't remember exactly now but it's about 10 miles south of Guildford.

Also - I quite like the fact that at the moment with the new build property there is quite some flexibility about the specs, decor and fittings... no need to rip out kitchens and such!

[mcflurry]

Kinky said:

One thing that I would consider is getting one of those all-in-one accounts - like the Virgin One account, and being a little bit savvy with your cash.

On the other hand...

(from moneysavingexpert.co.uk)

mse said:

Current account mortgages, like The One mortgage (formerly Virgin) offer the ultimate in flexibility. Here your current account, mortgage and debts are wrapped together in one account. This means as your salary is paid directly into your account it automatically decreases the amount you owe on the mortgage, in turn automatically decreasing the amount of interest that accrues. The concept is very clever and for many people proves worthwhile. However, the marketing of these accounts tends to make the benefits look a lot bigger than they are in reality. A commonly-used trick is to illustrate the benefits that are available in all flexible mortgages not just current account mortgages. The actual benefits from a current account mortgage are much smaller e.g. £100,000 repayment mortgage over 25 years for someone with a £30,000 salary. Standard: 7.74% you'd pay £750 a month. The hype: If you had a current account mortgage at the same 7.74% rate but you also left £100 a month in your account each month you'd save £43,000 paying the mortgage off 7 years earlier. This is equivalent to the cost of a standard mortgage costing just 6%. Current account mortgage reality: Most of this gain is due to the fact that £100 left in your account is an overpayment. In other words it's equivalent to upping your monthly contributions; this feature is available with any flexible mortgage. Strip out the overpayment benefit and you are left with the pure benefit from putting your salary in which is just £7250 or £24 a month. Equivalent to an interest rate of 7.4% or a benefit of just 0.3%. The main use of current account mortgages for most people is the ability to overpay. These days many even standard mortgages allow overpayments without any penalties. As the interest rate on standard mortgages is much lower - the gains of a current account or even just flexible mortgage are easily wiped out.

[rich1231]

2.8k service charge here.