First Time Buyer Advice
Discussion
Looking to buy my first property early next year and have a 50k deposit available. I have spoken to Sparks and Sons after viewing a place and they have offered to give me a mortgage in principle (which could still be used if I went with a different agent).
The maximum mortgage I can raise is around £250k which has opened up a few possibilities - though none involving jacuzzis and double garages, Brighton isn't cheap.
Option A: 200k, Cheapish one bedroom place. 25% LTV so good deals available, happily afford to pay it off in 25 years.
Option B: 210k, Nice one bedroom place. Would need to take out a term of 30 years to pay it off. After sharing almost continually since uni (I'm 31 now) it would be great to get a proper bachelor pad.
Option: C: 250k, for just south of the higher stamp duty rate you can get an OK 2 bedroom place in the areas I'm considering. The places which are available tend to be a bit small with one OK double and a small double. Assuming I let the second room out for £400 a month I would be paying £100 less than option A every month and building more up more equity on a larger property on a 25 year term.
My heart says B, my head says C and A is a compromise.
Other bits:
I'm working on the basis of getting a 5 year fixed mortgage, as while the most expensive it is the most secure. It works out at about £100 a month over a tracker for me. Some people are suggesting 2 year trackers though?
In terms of payments I don't want to be spending more than 30% of my salary on my housing costs to leave me some wiggle room and cash toys.
Any advice?
The maximum mortgage I can raise is around £250k which has opened up a few possibilities - though none involving jacuzzis and double garages, Brighton isn't cheap.
Option A: 200k, Cheapish one bedroom place. 25% LTV so good deals available, happily afford to pay it off in 25 years.
Option B: 210k, Nice one bedroom place. Would need to take out a term of 30 years to pay it off. After sharing almost continually since uni (I'm 31 now) it would be great to get a proper bachelor pad.
Option: C: 250k, for just south of the higher stamp duty rate you can get an OK 2 bedroom place in the areas I'm considering. The places which are available tend to be a bit small with one OK double and a small double. Assuming I let the second room out for £400 a month I would be paying £100 less than option A every month and building more up more equity on a larger property on a 25 year term.
My heart says B, my head says C and A is a compromise.
Other bits:
I'm working on the basis of getting a 5 year fixed mortgage, as while the most expensive it is the most secure. It works out at about £100 a month over a tracker for me. Some people are suggesting 2 year trackers though?
In terms of payments I don't want to be spending more than 30% of my salary on my housing costs to leave me some wiggle room and cash toys.
Any advice?
While option D might sound tempting:
1. Did you mean £250k mortgage or £250k mortgage + deposit.
2. A 12% deposit vs. 20% will mean much higher interest rate I suspect.
3. You are 31 - is a one bed for the next 5 years going to be enough? Any significant other going to crowd the place? A 2 bed offers one hell of a lot more long term flexibility.
4. Don't forget to include the remortgage costs in any 2 year vs. 5 year fix comparison. Also in 2 years we might be a little closer to a rate rise so you can't assume 3 year rates (say) at that point will be what they are today - do a sensitivity on +25bps-75bps just to check how much wriggle room you have on ensuring a 2+3 would be cheaper than 5.
5. Owning a place is expensive - a sinking fund for a blown up boiler or new carpets or whatever is very sensible!
1. Did you mean £250k mortgage or £250k mortgage + deposit.
2. A 12% deposit vs. 20% will mean much higher interest rate I suspect.
3. You are 31 - is a one bed for the next 5 years going to be enough? Any significant other going to crowd the place? A 2 bed offers one hell of a lot more long term flexibility.
4. Don't forget to include the remortgage costs in any 2 year vs. 5 year fix comparison. Also in 2 years we might be a little closer to a rate rise so you can't assume 3 year rates (say) at that point will be what they are today - do a sensitivity on +25bps-75bps just to check how much wriggle room you have on ensuring a 2+3 would be cheaper than 5.
5. Owning a place is expensive - a sinking fund for a blown up boiler or new carpets or whatever is very sensible!
walm said:
While option D might sound tempting:
1. Did you mean £250k mortgage or £250k mortgage + deposit.
Isn't this the same thing?
2. A 12% deposit vs. 20% will mean much higher interest rate I suspect.
Not really, Especially if comparing an 80% 5 year rate with an 2-3 year 85%+ rate.
3. You are 31 - is a one bed for the next 5 years going to be enough? Any significant other going to crowd the place? A 2 bed offers one hell of a lot more long term flexibility.
Yep, hence the suggestion of buying the biggest/best you can afford.
4. Don't forget to include the remortgage costs in any 2 year vs. 5 year fix comparison. Also in 2 years we might be a little closer to a rate rise so you can't assume 3 year rates (say) at that point will be what they are today - do a sensitivity on +25bps-75bps just to check how much wriggle room you have on ensuring a 2+3 would be cheaper than 5.
Conversely, in two years time it might be the ideal time on jump on a long term fixed if we are are the verge of huge rate rises. Crystal ball time!
5. Owning a place is expensive - a sinking fund for a blown up boiler or new carpets or whatever is very sensible!
Agreed, although I'm guessing he's looking at new builds so you'd hope for lower maintainence costs. 1. Did you mean £250k mortgage or £250k mortgage + deposit.
Isn't this the same thing?
2. A 12% deposit vs. 20% will mean much higher interest rate I suspect.
Not really, Especially if comparing an 80% 5 year rate with an 2-3 year 85%+ rate.
3. You are 31 - is a one bed for the next 5 years going to be enough? Any significant other going to crowd the place? A 2 bed offers one hell of a lot more long term flexibility.
Yep, hence the suggestion of buying the biggest/best you can afford.
4. Don't forget to include the remortgage costs in any 2 year vs. 5 year fix comparison. Also in 2 years we might be a little closer to a rate rise so you can't assume 3 year rates (say) at that point will be what they are today - do a sensitivity on +25bps-75bps just to check how much wriggle room you have on ensuring a 2+3 would be cheaper than 5.
Conversely, in two years time it might be the ideal time on jump on a long term fixed if we are are the verge of huge rate rises. Crystal ball time!
5. Owning a place is expensive - a sinking fund for a blown up boiler or new carpets or whatever is very sensible!
Edited by Sarnie on Thursday 11th October 10:31
Sarnie said:
walm said:
1. Did you mean £250k mortgage or £250k mortgage + deposit.
Isn't this the same thing?
Isn't this the same thing?
So the £250k he was talking about was really the mortgage PLUS a deposit.
In which case option D is out just because no one will lend him more than £200k.
I just wasn't sure from the OP!!
Usually when people look at houses Option D is the default - yet he never mentioned even considering £300k places!
>1. Did you mean £250k mortgage or £250k mortgage + deposit.
Sorry should of been clearer. The total amount I have available is £250k. £200k Mortgage and £50k deposit.
>3. You are 31 - is a one bed for the next 5 years going to be enough? Any significant other going to crowd the place?
Currently single. I can see the benefit of a two bedroom place, it would be flexible enough to cover my needs even if a wife and kid came along to spoil my fun. That said it is easier to find that special some one if you have a nice flat to invite them back to rather than a shared house with a weird house mate - in my experience girlfriends always think your house mates are either weird and / or trying to seduce you....
>4. Don't forget to include the re mortgage costs in any 2 year vs. 5 year fix comparison.
While it is all guess work most indicators are that rates will start to rise in 2 years or so and no sudden rate rises are immanent. This puts me off the idea of 2 / 3 year deals as when they end it could be just as rates are on the up.
I understand the suggestions of borrowing as much as I can over as longer period as possible, while that tactic worked very well from the early 90's to 2005 or so with rapidly rising house prices. With house prices levelling out for the foreseeable (in my view) the potential gains don't outweigh the risks.
>5. Owning a place is expensive
So everyone has been telling me! Ensuring I have a few grand set aside for emergencies before I move.
Sorry should of been clearer. The total amount I have available is £250k. £200k Mortgage and £50k deposit.
>3. You are 31 - is a one bed for the next 5 years going to be enough? Any significant other going to crowd the place?
Currently single. I can see the benefit of a two bedroom place, it would be flexible enough to cover my needs even if a wife and kid came along to spoil my fun. That said it is easier to find that special some one if you have a nice flat to invite them back to rather than a shared house with a weird house mate - in my experience girlfriends always think your house mates are either weird and / or trying to seduce you....
>4. Don't forget to include the re mortgage costs in any 2 year vs. 5 year fix comparison.
While it is all guess work most indicators are that rates will start to rise in 2 years or so and no sudden rate rises are immanent. This puts me off the idea of 2 / 3 year deals as when they end it could be just as rates are on the up.
I understand the suggestions of borrowing as much as I can over as longer period as possible, while that tactic worked very well from the early 90's to 2005 or so with rapidly rising house prices. With house prices levelling out for the foreseeable (in my view) the potential gains don't outweigh the risks.
>5. Owning a place is expensive
So everyone has been telling me! Ensuring I have a few grand set aside for emergencies before I move.
Perhaps the secret is the cheapest 2 bed you can find so you can plan for the future and not have to worry about weird seductive housemates.
Then shack up with a GF asap so she can start paying half the bills!
I agree with your assessment on 5yr vs. 2-3yr.
On the length of the mortgage issue:
- I would simply aim to pay off what you can as quickly as possible.
- The variables on interest rates over 25-35 years and your possible earnings in that time are too complicated to do any real analysis.
- A longer mortgage term just means you are saving less (i.e. paying off less of the principal) - you should still be saving as much as possible.
Then shack up with a GF asap so she can start paying half the bills!
I agree with your assessment on 5yr vs. 2-3yr.
On the length of the mortgage issue:
- I would simply aim to pay off what you can as quickly as possible.
- The variables on interest rates over 25-35 years and your possible earnings in that time are too complicated to do any real analysis.
- A longer mortgage term just means you are saving less (i.e. paying off less of the principal) - you should still be saving as much as possible.
If I went for a really cheap 2 bed then it could be difficult to get that pretty bill splitter to move in 
Prices are daft down here and I'd end up in chav ville or a junky filled highrise.
Leaning towards the nice one bedroom at the moment, it's still affordable and a good location will mean its easier to sell if I need to.
A 30 year mortgage does sound daunting though unless anything crazy happens with interest rates then the real cost of a mortgage goes down over time and I can always make overpayments.
Prices are daft down here and I'd end up in chav ville or a junky filled highrise. Leaning towards the nice one bedroom at the moment, it's still affordable and a good location will mean its easier to sell if I need to.
A 30 year mortgage does sound daunting though unless anything crazy happens with interest rates then the real cost of a mortgage goes down over time and I can always make overpayments.
CountZero23 said:
A 30 year mortgage does sound daunting though unless anything crazy happens with interest rates then the real cost of a mortgage goes down over time and I can always make overpayments.
It's all well and good taking a shorter term like 20 years or so, but that hikes up the committed monthly payment that you have to pay each month, no matter what else is going on in your life.
A few thought from me which may cloud your plans even more but firstly I would never ever consider a lodger or even a flatmate. They will eventually leave, you will find a missus and she'll want to move in. At 21 it'd be fine but at 31 it's just not going to work so don't assume anything other than you paying the mortgage and all bills until your cock drops off The next bit would be to not spend all of your hard earned deposit - well done for getting such a huge sum by the way! I would set yourself an amount for how much you are willing to pay for the mortgage and bills and then stick to that. Try to make the deposit sum get you as close to that or over as possible but leave yourself a few K over. Even if you're buying a flat you'll have expenditures that you won't think about and will need to sort out. I had this when I found the floorboards in the bathroom were soaked because the cow who we bought off didn't know how to use a shower curtain. New bathroom from the boards up and £6k gone instantly. Of course you could have another £50k sitting in a Swiss bank vault for all I know but it's worth considering. You can always overpay with it afterwards and that'll get you to the same destination. It's also handy to have a fighting fund just in case the worse happens.
I'd also consider a house rather than a flat if you can.
Best of luck!
The next bit would be to not spend all of your hard earned deposit - well done for getting such a huge sum by the way! I would set yourself an amount for how much you are willing to pay for the mortgage and bills and then stick to that. Try to make the deposit sum get you as close to that or over as possible but leave yourself a few K over. Even if you're buying a flat you'll have expenditures that you won't think about and will need to sort out. I had this when I found the floorboards in the bathroom were soaked because the cow who we bought off didn't know how to use a shower curtain. New bathroom from the boards up and £6k gone instantly. Of course you could have another £50k sitting in a Swiss bank vault for all I know but it's worth considering. You can always overpay with it afterwards and that'll get you to the same destination. It's also handy to have a fighting fund just in case the worse happens.I'd also consider a house rather than a flat if you can.
Best of luck!
OP- you need to consider carefully what your plans are in the future
If you are hoping to live anything other than on your own a 1 bedroom won't cut it, too small for a couple, hassle having guests and if she gets pregnant then oops as moving is expensive.
Either get the cheap one bed in a decent area with a view to an easy sale/ let out in the future or get somewhere with 2 rooms and ideally a bit of outdoor space nearby to primary schools.
As said above I would get longest period mortgage and aim to overpay/offset.
If you are hoping to live anything other than on your own a 1 bedroom won't cut it, too small for a couple, hassle having guests and if she gets pregnant then oops as moving is expensive.
Either get the cheap one bed in a decent area with a view to an easy sale/ let out in the future or get somewhere with 2 rooms and ideally a bit of outdoor space nearby to primary schools.
As said above I would get longest period mortgage and aim to overpay/offset.
Sarnie said:
Option D: Buy the best property you can afford and buy a nicer bigger property. Look at £300k properties, barter the price down to £285k, take the max £250k mortgage, £35k deposit rest for fee's. 3 year fixed rate over 35 years.
Or Option E: you buy a £300k prop for £250k then same as above. I get these discounts and more easily. Sarnie, agree with your point about taking a longer term for more flexibility. Will certainly look into products which have overpayment options.
Ved: Yup, currently living with a couple and fully appreciate how far from ideal it is. Still it means I get to save up the cash I need to actually pay for the move and having a few k spare as you suggest.
Porridge: A nice one bedroom place for a couple is fine. A mate at work is buying and said the same, thing is he is already renting a two bed with the other half. I think it's like 2 seater cars, once you've had an estate you'll never be able to entertain the idea just two seats. Yes, in the long term it could work out cheaper to get the place I'd want to have kids in but while I'm 31 and single I want to take the only opportunity to have a nice bachelor pad pad!
cerberaperv: Any advice on how you get a property for below market? The market in Brighton is very buoyant, any tips welcome!
Cheers for the advice so far
Ved: Yup, currently living with a couple and fully appreciate how far from ideal it is. Still it means I get to save up the cash I need to actually pay for the move and having a few k spare as you suggest.
Porridge: A nice one bedroom place for a couple is fine. A mate at work is buying and said the same, thing is he is already renting a two bed with the other half. I think it's like 2 seater cars, once you've had an estate you'll never be able to entertain the idea just two seats. Yes, in the long term it could work out cheaper to get the place I'd want to have kids in but while I'm 31 and single I want to take the only opportunity to have a nice bachelor pad pad!
cerberaperv: Any advice on how you get a property for below market? The market in Brighton is very buoyant, any tips welcome!
Cheers for the advice so far
OP - Out of interest, what contingency do you have built into your calculations around affordability? What multiples would you be entertaining if going for your max mortgage budget? What, if anything, makes you teflon? (assuming by your original question that you don't have rich/gullible mummy & daddy insurance)
Maybe a POV could be to get into something slightly less desirable but more affordable as a short-term thing, protect a bit of cash/affordability and then when you pick up an other half, you have something with greater retail/rental potential to your younger equivalent.
Maybe a POV could be to get into something slightly less desirable but more affordable as a short-term thing, protect a bit of cash/affordability and then when you pick up an other half, you have something with greater retail/rental potential to your younger equivalent.
DukeDickson said:
What multiples would you be entertaining if going for your max mortgage budget?
I would be looking at paying a maximum of £750 a month initially, in theory I could pay double that amount and still be 'ok' though it wouldn't leave much enough over for savings / toys. Not having any commitments or outstanding debt does mean I could stretch. Best avoided though!DukeDickson said:
What, if anything, makes you teflon? (assuming by your original question that you don't have rich/gullible mummy & daddy insurance)
I'm making sure I have a 3 month cash buffer in case anything drastic happens. Parents couldn't pay my mortgage for me though if it did come to it I could always rent the place out if I lost job / couldn't work. The idea of a short term purchase on a more affordable place isn't a bad idea. My only concerns there is the cost of moving (at least 5k in a small place) would negate any mortgage payments / house price rises if I was only there a few years.
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