How to get onto the housing ladder

[OpenToSuggestions]

Interestingly for all the talk about 'getting on the ladder' my brother-in-law has chosen to hop off the ladder; he owned a property from 25-31 but has just sold up and moved into rented.

How come?

 

[Conanius]

I'm in the midst of saving for our house deposit with my wife.

The big realisation we had when we got to a point of looking seriously at houses is just how much extra expense you need to fork out on top.

You want to get the most thorough, detailed, and reputable survey possible. This is absolutely imperative. You don't want to miss out on any details with regards to the biggest purchase you will ever make. From investigations we have made, budget £1000-£1250 for this. There are huge horror stories from people who didnt check everything.

You have stamp duty to pay. Depending on how much you are thinking to spend, this might be nothing, all the way up to several thousand pounds. Its a % of the purchase price that varies based on the band the house falls into.

Then you have the solicitors fees. I've had friends buy places where they have literally had to drag the solicitor kicking and screaming the whole way, chasing paperwork on a near daily basis. Moving house is properly stressful, invest wisely. Budget another £1250-1500 here.

The list does go on - including removals, new TV/Phone/Insurance/etc policies - but its a decent chunk of cash that you don't end up having a lot to show for at the end of it.

The other thing we found is that several houses we went to look at would need some money spent on (either because of something simple like a lack of plug sockets, all the way up to the property benefiting from a new central heating and hot water system). Personally, i'd want this done before moving in. Depending on the amount of work, along with some quick painting afterwards, consider extending the rental term in your current property for an extra few months whilst you get all the work done. That way, you move in with it all ready to go. Much nicer.

We want to put down a minimum of 20% to get the lower interest rates on the mortgage, so with that and all other associated costs, it is a significant amount of borderline aggressive saving that we are currently doing. We agreed we didn't want to survive on mouldy bread and water between now and then, so just be sensible to make the most of saving cash.

If you aren't good with money, sit down and work out just what you spend your cash on, do a budget plan, and take out cash instead of spending on cards for a few weeks to see just how fast buying a cup of coffee at lunchtime, or not taking in your own lunch eats into budgets.

Importantly, set savings to go out at the beginning of the month just like any other bill. Be realistic at what you set to go out else you will just end up clawing it back, but also consider 'sweep' facilities to push over unspent money each month.

 

[HangTime]

How come?

Not altogether sure but I think it was a combination of factors:
-Some sort of arrangement to sell their property with no commission but required being able to complete within 30 days (probably haven't explained that very well as I don't know all the details - but basically meant they could sell with no estate agent fees if they could move quickly).
-They needed more room (2 bed flat was getting a bit small for a family of four) and possibly couldn't afford a house of the size they were able to rent
-Possibly disillusionment with the housing market (property wasn't worth any more than when bought in 2006)

The other thing we found is that several houses we went to look at would need some money spent on (either because of something simple like a lack of plug sockets, all the way up to the property benefiting from a new central heating and hot water system). Personally, i'd want this done before moving in. Depending on the amount of work, along with some quick painting afterwards, consider extending the rental term in your current property for an extra few months whilst you get all the work done. That way, you move in with it all ready to go. Much nicer.

This is a tough one as for some people extending rental term for a few months could carry a significant cost that would eat into the budget for the other things you listed as requirements. That ~£2500 budget you've set aside for surveys and solicitors could easily be swallowed up - unless there was an extended period of serious renovation work I'd choose to put up with it I think for the sake of saving money. In some cases paying mortgage + rent overlap might not even be an option. Certainly worth considering for FTB who are living with parents though I would have thought.

 

[Ev0]

5 Year Fixed
Fixed until 28/02/2018
85% LTV
3.89% fixed until 28/02/2018
Our Standard Variable Rate currently 4.74%
4.5% APR
£0 fee

So exactly how does it go drom 3.89% to 4.5%? Is this assuming I stay with them longer than the 5 year period?

Well technically it'd go from 3.89% to 4.74%, giving you an average over the term I'm guessing of 4.5%.

You're on 3.89% for the fixed period, then after that you revert to the SVR which for them is 4.74%.

In reality you generally won't sit on the SVR, unless you're on a good deal, where you'll either go for another product with the same lender for another set term or move your mortgage to another provider on one of their set terms.

For us when our deal came to an end the SVR of the lender wasn't bad so we're just on that at the moment, plus knowing we want to move soon we don't want to be tied in with any possible redemption fees.

We probably lost most of the equity in our place so are effectively starting from scratch to move which isn't a great position to be in. 'Second time buyers' as we are can often be in more awkward and difficult situations than FTBs depending on how much equity you have (or don't).

It's not going to be too much of an issue for us and has still been cheaper than renting over the years we've been here.

Yeah it'd be nice to have that lost equity to go towards the new place but not the end of the world, have been lucky with work so am able to stick a fair whack away each month to go towards it without affecting our quality of life.

Also lucky that when we sell we'll save on agents fees (won't be paying any), solicitors fees will be low as will removals due to family working in those areas.

 

[craptakular]

What typical deposit does one require if buying a house in the £110-£120k bracket?

Say if one is on between £35k-£40k?

I have £8k so far, I want 12k by the end of 2013.

 

[the shadow]

Put down a minimum of 20%

 

[adam cool dude]

Me and the missus saved like buggery for our deposit. We ended up putting down 37500 for a 150000 home which gave us the magic 25% which gave us a great rate of 3.35% (We just renewed for 2.89% fixed for 2 years). We are on a combined salary of 60000 which I would consider pretty average. We were renting but went into a house share as it meant we could pile more into savings. We also had a 10k slush fund for kitting out the house although we had a lot of items already from our renting days. We got a fantastic 3 bed detached with a garage in a good area.

I have no idea how people in the south east afford to buy anything as I know 150k will not land you much.

We are hoping to be mortgage free by our mid 40's.

 

[Relapse]

The earlier you get started on a mortgage, the sooner you get to live your life 'rent free.' It's by no means a given though. You need to be prudent, have good credit and preferably be applying jointly.

If you check out the graphs on www.housepricecrash.co.uk you can see that properties are historically quite affordable.

The new Funding for Lending scheme is designed to help mortgage lenders loosen their criteria, but my advice for anyone in their twenties is not to worry about it if they can't see any prospect of getting a foot on the property ladder. Look for other benchmarks of success in your life that are more readily achievable and one day a mortgage may be attainable.

I used what money I had to invest in the stock market, and it took my mind off property completely, while at the same time, I was still aiming towards getting a deposit for a house together. Of course, it was like gambling with my deposit, but it helped me to become more comfortable with risk, see my money as something other than a slow accumulation and feel like it was possible to influence the outcome of all that virtuous saving.

There are factors that are beyond your control in life. Economic forces are one such. The mania for home ownership stems from a time when any idiot could make a profit from property investment and the criteria for lending were so lax that we ended up with the worst financial crisis outside of a world war.

 

[joelk2]

Me n the Wife got onto the housing ladder almost 4 years ago now, we're both 28.

We couldnt save a huge deposit so our only option was a new build.

we ended up with a no deposit mortgage, developer put in the deposit which we have to pay back within 10 years (we plan on moving in that time anyway)

might be another option to look at. a lot of the new builds around here are only asking for 5% at the moment.

 

[lordhughes]

I have just started to rent a house (£700 a month), I did look into aggressively saving for a mortgage to get around 15-18k for deposit but the best monthly repayments I could find was around £1000-1200 a month for a house smaller than the one I am currently renting.

The money required for first time buyers to get on the property market is ridiculous, we are just totally zoned out of it at the moment.

 

[TommyV]

I have just started to rent a house (£700 a month), I did look into aggressively saving for a mortgage to get around 15-18k for deposit but the best monthly repayments I could find was around £1000-1200 a month for a house smaller than the one I am currently renting.

The money required for first time buyers to get on the property market is ridiculous, we are just totally zoned out of it at the moment.

True that. It's a very very daunting feat for us in our early/mid 20's, and even into mid 30's according to a previous post, these days.

 

[Third Opinion]

£200k seems a lot for a single FTB in Stoke (assuming that is where he wants to buy) although of course his situation may have changed in 5 years time.

Up front bills I can't see being £1k - even if one assumes there is no phone line connected and no deals being offered I think it is still only about £125 to get a line connected

Yeah both figures were probably a bit over the top. I would rather have a bit of money behind me. I moved into a new build a few years back, cost me an arm and a leg.

BT had us for £250 to turn the phone on, other people who tried sky took up to 6 months to be connected. The water board said they needed to fit newer meters so we had a lovely water rates charge for £280 siting on the mat when we moved in. The gas cooker cost another £120 to be plumbed in. The washing machine was unsuitable for the plumbing as it was designed for solely cold fill so it was new washing machine time.

If it's a flat you could end up with a ground rent and maintenance charge.

To be honest a grand disappeared in the first two days. Most of the things I would never have thought of. Until you move in you really have no idea what is going to crop up.

 

[Relapse]

House prices have hardly moved for two years, but the inflation rate is around 2.7% at the moment, so property has got cheaper, relatively speaking.

 

[OpenToSuggestions]

House prices have hardly moved for two years, but the inflation rate is around 2.7% at the moment, so property has got cheaper, relatively speaking.

I agree, buy buying a house that is very slowly losing value is still better than renting.

I have viewed four houses in Meir Hay this week, which is east of Longton (Stoke On Trent) and seems to be one big housing estate.

 

[SoSolid]

£500 per month over 2 years is only £12k. A 90% mortgage is pretty much best you can hope for at the moment, though I expect that we may well see the 100% mortgage coming back in, in a few years.

That can afford you a £120k home. You will need to be earning over £25k per annum with no financial liabilities to obtain a mortgage for a property worth £120k. Student Loans are taken against you as well so you will need to be earning £30k plus and then some if you have student debts.

Your have to bear in mind that the average age of the first time buyer in the UK is now 37 which says something about the state of the property market.

Student loans are not taken against you. These are not considered when evaluating a candidate for a mortgage.

 

[One]

Student loans are not taken against you. These are not considered when evaluating a candidate for a mortgage.

They sort of are. It's the monthly payment they have to take into account and how long you'll have to make that payment.

 

[Mackass]

I'm in a identical position as you OP, but being in London the property prices are simply crazy.

Based on my salary and these online 'how much can I borrow calculators', I can probably borrow around £100k apparently. A small flat in South-West London is roughly £150k? So I'll need at least £60k in savings before I can actually buy.

Which means I have to remain living at home for a good 5-6 more years (saving £10k-£12k a year), but I just can't stand living at home, not at the age of 24.

I've been looking at these shared ownership schemes, where you buy 25% of a property and rent the remaining 75% from the developers (paying rent and service charge each month). It means I only need to save say a 20% deposit for a mortgage on 25% of the property's value. Has anyone got any experience of these schemes? I feel it's the only way for me to get a tiny foot onto the ladder (without being stuck at home for the rest of my twenties).

 

[Relapse]

They sort of are. It's the monthly payment they have to take into account and how long you'll have to make that payment.

Like you say, any repayments you've got to make each month are deducted from the mortgage company's assessment of what you can afford to pay each month.

The stupid thing is, even if you have a loan that only has a short time left until it is paid off, it takes a hit out of your current disposable income, which is what they base their calculation of what you can afford on.

One of the terms of my mortgage agreement was that I would pay off a car loan early. Paying off loans late in the term is always going to be punitive compared to letting them run their course. It can, however, make the difference between getting accepted or refused for the amount of money you ask to borrow from a mortgage company.

 

[Deleted member 77746]

Both renting / buying has pro's and con's but depends on how you view your own life I suppose. A lot of factors can sway either way.

 

[platypus]

I feel it's the only way for me to get a tiny foot onto the ladder (without being stuck at home for the rest of my twenties).

Is it really that bad?