to tell my friend I think she's making a huge mistake buying an ex council studio flat for 200k on the outskirts of London at 35 when she doesn't earn much

[entiledornot]

My friend is an estate agent in London. She's currently living in shared houses but wants to buy something. She's had her offer accepted for 200k on a small ex council studio. She has only ever seen house prices rise in her few years as an ea so she thinks this flat will be her way to a millionaire rather than somewhere to live. She only earns 20k and is making virtually no commission as the housing market is dead. Shes looking at it as an investment not a home and can only afford it as parents have given her 60k. If interest rates rise even a bit she will be screwed and she will be paying back for this tiny studio until she is in her mid 60s.it isn't in a great area, zone 3 20 min walk from any tube. Prices are already in a bubble and this could pop at anytime.

Should I just stay quiet or tell her my concerns?

Agreed.. Im thinking bullshit too.

Also - it it possible to be granted a mortgage on a 20k salary?

The housing market is dead??

Yabu. You have no factual basis for believing she is making a poor decision. Zone 3 is also not the outskirts, not anywhere near!

A few years ago we bought a flat. A friend thought London prices were due to fall and rented, paying a fortune (far more than mortgage). We sold and made a load of money. They are stuck, still renting and paying a fortune. In the meantime house prices continue to rise and they are further away from home ownership.

She MUST be earning more than £20k surely in order to finance a £140k mortgage? Wouldn't that mean she'd be making monthly payments of about £1200 out of monthly take home pay of about £1500? How's she planning to pay for everything else?

I think you're right to urge caution. I'm old enough to have been in negative equity in London. Bought my flat (zone 2) when I was 30 and when I met dh 5 years later it was worth considerably less than I'd paid for it so it was a real problem. Had to rent it out for a few years until it recovered its value.

At 35, it must be depressing to be flat sharing. It sounds tight but I don't see what other options she has in London. Plus, as pp have said- being an estate agent she will know the score.

Off topic though, can I just say fucking hell London prices are mental
I have a 3 bedroom ex council maisonette that cost me £10,000 less than your friends deposit!!

New cross Donna

Stone I don't think she'd pay that much- about £700 PCM on £1370 take home?

That's still likely to be more than her room in a shared house though, which likely includes bills

No commission because housing market dried up on London??? What aare you having a laugh, property is selling very quickly, esp on outskirts! And yabu if your friend couldn't afford it she wouldn't have got a mortgage. Well done on her for going for her own place

No she is on 20k basic, in the good years her job got a lot of commision but it really is dead in the area she is working.

She's been an estate agent for a couple of years, all that means is she spends her time showing people round places to let mostly , she's not a financial genius and declared herself bankrupt in her 20s.

I'm shocked the amount of people that say just go for it, it is a tiny council studio on a busy road 200k isn't cheap IMO.

Just because they have risen for 20 years doesn't mean they will carry on as the housing market is in 20 year cycles. In Japan they did have falling prices for decades.

She was rejected by most mortgage companies but eventually found one that would lend to her.

She's only looking at how much it will cost on a two year fix, despite it being a 30 year term. Sure that's fine to still have a mortgage when your approaching 70, but one for a tiny studio? She will be screwed if rates rise, and everyone says they have to.

Whoops wrong name. Anyway I'm not jealous, lived in London for a decade mostly in zone 2, sometimes 1 and was happy to move out to an area of onb. I couldn't possibly live in a studio as I'm used a proper house now with a garden.

140K mortgage 943pm on 6% repayment. Monthly rental for property in New Cross - 940 - 1125 for a studio flat. So it looks as if she is paying about the right amount if she is looking for an investment - not a bargin because she will need to find money to put away for a sinking fund, cyclical maintenance and ongoing repairs. However assuming that rentals keep on increasing it could turn into a wise investment.

She should check that there are no outstanding major repairs on the building (or when the freeholder / management company are planning to do the next round and what they plan doing) and that the service charges are reasonable.

But having a two year fix mortgage means after the two years has finished you go back and get a new mortgage with less years as you've already paid some of it off and being London it's value will most likely have gone up.

The number of years on a mortgage is irrelevant. She won't end up paying a mortgage for 30 years. Unless you're daft enough to leave it.

Where is it?

As a matter of interest, OP, what would you advise a 35 year old living in a shared house to do if they have £60k capital available?

In her scenario it only works if prices keep rising infinitely. It is sw near streatham ? If that's how you spell it

Streatham is hugely popular as people can't afford clapham and Balham. House prices have risen there ridiculously.

Ha ha, Streatham is hugely 'on the up'.

I couldn't possibly live in a studio as I'm used a proper house now with a garden

Really, OP? If you want to advise your friend then do that, but don't look down your nose at her..

How patronising are some of the "advice" comments on this thread?! (glad to see common sense is in the majority tho). The jist being that this is a silly woman in a rubbish job, a scatterbrain who obviously hasn't thought things through clearly, and needs a lecture on her financial decisions to save her muddleheaded self from peril. What peril? She'll probably do ok with that flat

Streatham...? 2 rail stations, good regular, direct links into central London, London Overground line now added, many bus routes. Quite a sought after area these days. It will do

New leisure centre and massive Tesco, some lovely cafés especially on Streatham hill. Short bus ride to Tooting where there's the tube, good pubs. Yeah it's terrible.

This person keeps posting slightly odd threads only in AIBU.

You cant see yourself living in a studio flat now, but could you see yourself living in a house share?

The calcs upthread at 6% I would say would be relevant to the life of the mortgage, after the 2 yearfix, which at 70% ltv should be much lower, maybe 3%? So for now probably more like £800 pcm tops? When I lived in a shared house in zone 4 8 years ago it was £500 not including bills, so I dread to think how much it would be now!

As other posters have indicated, I'd rather sit in my own space living off baked beans miso soup that live in a shared house, especially at that age and with £60k burning a hole.

That said, with a transferable job like an estate agent I'd leave London and buy something much bigger with that kind of deposit. Or a flat and be damn near mortgage free.

YAB massively U - I actually thought this was a reverse!

OP I'd worry more about your husband committing fraud in your name and your inability to stop at traffic lights

leave your friend alone - and get back to bothering your neighbour x

This person keeps posting slightly odd threads only in AIBU.

I've hardly been on mn the last few days and even I've noticed this. The sums just don't add up.