To not understand how people afford next house up?

[evilnaggingwife]

We purchased our first house about 3 years ago. A 3 bed terraced house with a tiny garden for around 230k. As first time buyers, we only saved a 5percent deposit and got a mortgage with a high rate! That will end next year when I hope we can get a more sensible rate.

Our house has probably gone up to around 280-300k I'd imagine based on local prices.

dh and I earn around £60k combined (although he is self employed so always tricky to prove income). We have saved enough to pay cost of moving and stamp duty and fees etc of next move.

I keep looking on right move and houses that I would consider next one up are stupid money. I'm talking 3 bed semi with a drive and larger garden... £400-500k!!!! How on earth do people manage this? Are we stuck here forever?

I go to a mortgage calculator online, it tells me how much I can borrow and when I do a search on right move the same types as our house come up... Terraced, not in town, no drive, small garden, small 3rd bedroom.

I think it is to do with increasing your salary. DP bought our house in Manchester for £180k ten years ago and it's now worth about £350k (three bed semi). His salary has doubled since he bought it. He's the high earner but my salary adds on a decent chunk. We want to start a family so we're looking for a five bed semi-detached period home in this suburb, they start at £650k.

Been in same flat for 14 years with little chance of ever having enough to upgrade to a house. Raising 3 teens in a flat has been fun!

Baby "You cannot expect to move up the property ladder just because the value of your house has gone up. I have friends who can't get their head around this, their 2 bed has gone up yet a 3 bed is even more out of reach now than it was before. "

yes, my dad can't get his head round the idea that I can't afford a bigger place. It's like his brain is stuck in the maths of his age group - which is 40 years ahead of mine! Then he asks if I'd be willing to put some savings into it - no. I just can't sacrifice hard earned money for insane property prices.

I'm glad for the posters who found their salaries increased. I've not been one of them and at my age I have to be honest and say it might decrease, plus a lot of people tell me it's hard to get work at all after 50.

this thread has been very thought provoking - I really should have bought more space when I originally bought. Plus I really feel now that the only way a move would be worthwhile, what with stamp duty etc, would be to get a fair bit more space - which frankly means moving out of London. I'm not particularly attached to London anymore, I think a house and garden would mean much more to me - but I don't like the idea of leaving friends and family behind. Can a house compensate for missing friends and family, I wonder?

I think it all comes down to choices and what you are willing to compromise on / sacrifice. When we bought ourfirst house we couldn't afford to live where we wanted to or to have the size of house we ideally wanted. We literally marked my place of work and my husbands place of work on a map, drew a circle of reasonable commute around each (around an hour) and focuses on the area where the two circles overlapped. This was London heading SE - we started London and kept going further and further out until we could afford a two bed Victorian semi albeit on a main road and backing into a railway line. We were new graduates and had 95% mortgage 5% graduate loan! We both had student loans owing and we're trying to save for our wedding - basically we lived on very little!

With prices rising,moving further out again, and increased salaries we were able to move to a 2 bed detached with large garden. The mortgage seemed huge but we had plans drawn up to extend it, turning it into a 4 bed detached with ensuite. I sold my car and what I saved on car loan paid for the extra mortgage. We also maxed out on interest free credit cards bouncing balances around! Again, very little money for treats and did lots of work ourselves.

House number three was smaller (3 bed Victorian semi ) but in London - loft conversion added, new kitchen, moved downstairs toilet to create large eating kitchen etc, selling that we then moved out again to the country having had kids and bought a 5 bed detached with lots of land - £20k cheaper.

We have spent the last couple of years extending, renovating and modernising and now are fortunate to live in what is for us the perfect forever home. Still not finished - time and money does delay things, however it's lovely and I wouldn't want for anything else.

We couldn't afford what we have today if we were to buy today. We have only managed it having gone without, made huge compromises along the way and basically having little personal spending money.

There has been an element of good fortune involved, the market has risen as have our salaries. However every house we have bought we have added value to. Since having children we have far less disposable income but are reaping the rewards of the sacrifices made in the past.

It's not been easy but overpaying mortgages when able is what allowed us to do al the work to increase value as we effectively borrowed the overpayments back.

My dad taught economics and when we brought our house 2 years ago flapped his hands around taking about percentages and BUYING AS BIG AS YOU CAN in a rising market.

It's this: Assume a 10% increase in house prices.

10% on 100000 = 10,000
10% on 200000 = 20,000
10% on 300000 = 30,000 = Screwed.

If your house has increased by 30.4% ...

30% on 100000 = 30,000
10% on 200000 = 60,000
10% on 300000 = 90,000 = Screwed.

This also assumes a stable increase across the property market which probably isn't true.

It's not unreasonable. I have no idea how people afford to move up.

OP I don't know your circumstances (how many children, ages etc) but one answer may be to stay where you are, and save to extend when you need to. You don't seem that keen, but it's obviously one solution.

I bought my 2-bed, Zone 2 flat three years ago. It has since doubled in value, though obviously everything else in the area has gone up too. I repeatedly told DP that over my dead body would we be raising young children in a 80 sq. meter flat with no garden, but, well, we might be. He doesn't want to move further out, and flats/houses nearby (and in school catchments) are a huge jump with not much gain in size. Lots of people manage in less than ideal situations. I've reconciled myself to the fact that if we're not willing to move out/compromise, we'll need to make do.

Looing "We couldn't afford what we have today if we were to buy today."

surely this is the key? I did without, compromised etc - lord knows I didnt want to live in a tiny flat in a rough area that was about 1.5 hours from work! - but even with all that, I could afford to buy at the price it was 12 years ago. Now it's more than double. Choice doesn't come into it for a lot of people now. It's not like wages have gone up.

I keep an eye on the local property market and it's quite stagnant. I suspect it's because no one can afford to move up. interestingly, the local agents have said that in nicer areas, it can be worse because having got a foot hold in a nicer area a lot of people simply won't budge and who can blame them.

Aside from the obvious reasons listed above (supply vs demand, increase in house prices, greater competition etc) I've noticed on this thread that the people who say they've done well on the property ladder have (a) started very early because they were working at a young age (lots of people on here saying they bought their house in early 20s) and (b) always had a partner so have a dual income.

No sense being smug about both of these which are purely just luck (unless part of a machiavellian plan). Spare a thought for those who are/were at Uni until their mid-20s and only then started earning... and to those who haven't been partnered up with their high school sweetie since they were 19 and who therefore haven't been part of a double-income household their whole life.

These two aspects - earning from an early age and always being in a double-income household - do seem to make a difference, although not sure I would recommend either of these tactics to my children.

We did it by getting as low an interest rate as we could and overpaying our mortgage. This builds up equity more quickly.

Then when you move you increase your mortgage but keep your monthly repayments the same.

You have a massive deposit from the equity you have built up so you have access to better mortgage products.

We have done this a few times and doubled our budget each time.

If you want to aim for the 500k house you need to overpay and get your mortgage down to less than 100k so that you have a 200k deposit in the equity of your current house. Then you buy your new house with the 200k deposit plus you take on a new mortgage at your maximum borrowing limit, for around 280 to 300k, at the lowest interest rate possible. Aim for the new mortgage repayments to be around the same as the overpayments you have already be making to reduce the impact on your lifestyle. Then you stay there and pay it all off! When you can afford to again, overpay again.

Your options will improve when you get onto a better interest rate.

william "and to those who haven't been partnered up with their high school sweetie since they were 19 and who therefore haven't been part of a double-income household their whole life. "

This is why I asked if anyone was doing this alone, the maths is completely different and I don't live in a flat that could accommodate 2 people, unless they were both like little dolls.

Moving - I would have that size deposit from the equity in my place but it doesn't cancel out the insane price of the next step up - which, sorry to repeat myself - in my case is simply an extra bedroom and a separate kitchen, so not that much. In terms of square footage, it's just too crazy a price to pay and that stops a lot of people I think. Even if you do have the cash, it seems like a mad waste of money.

I can never understand why people think the property market never goes down. I left college in the late 1980s and went to one of the enormous graduate-eating accountancy firms. Obviously on a starting salary there buying in London was out of the question and all the junior managers were panicking and buying overpriced starter homes. To me it was obvious the bubble would eventually burst. Then they abolished double MIRAS and the bottom fell out of the market.

DH not at all into DIY so doer-upper route didn't work for us. How we did it:-

DH and I moved out to the provinces and bought 3 bed semi and commuted into London (4 hours a day) using an interest free season ticket loans and saved like hell.

Waited for market to bottom out and bought a flat in London Zone 2 with decent deposit from all that saving on an interest only mortgage (cost same as commuting costs) and rented out nice house. Continued to save like hell. Worked like stink - 70 hour week not unusual - to get promoted. Also did other work - marking 80 tax exam scripts a week at £2.30 a script, music gigs etc. Paid off mortgage on flat in 7 cheerless years.
Bought forever home (not huge and half the size of my parents) in "grotty" but central part of London cashing in the 2 properties we owned and taking out massive mortgage (only 1 bank would lend us the money) with a fixed rate. Overpaid on that until could afford to have Dc No1 in my late 30s.

Since then we have inherited and that money went into paying off the mortgage. However rather than put the freed up cash into buying a bigger house (wish we could) we have to spend it on school fees.....

Yes I was lucky with my timing but you don't have to buy in London to get on the housing ladder. And that bubble will burst eventually - so just keep saving until you can take advantage of it. But saving to buy property is grim - I always felt that you could either have a house or have a life but not both. I have yet to travel further than Greece (and that was when I was still at school). I have never owned a new designer dress or matching crockery (still do most of my shopping in charity shops). I don't own a car, and walk/run cycle most places. I still wish I could have children before my hair went grey. I haven't been to a night club since I left school. I don't have much of a pension so will have to downsize when we retire.

london " I always felt that you could either have a house or have a life but not both."

I know what you mean. I've never regretted the choice not to have a life, but now I look at my younger friends and I understand why they buy nice clothes and go away to pricey places - because that money would never buy them a flat here anyway, no matter how much of it they saved. According to the Evening Standard, the average 1 bed in my crappy outer zone is now £480k! If you're on an average salary, you might as well save differently or not spend at all.

I did consider renting really far out, commuting longer and trying to realise the rental value on my flat but it seems like too big a pain for not that much of a financial gain.

I think I'm going to have to find a way to make peace with living here till I cark it. But if I believed in god, I'd be praying fervently for a price crash!

Ha looking for the answe to this our selfs we have a 3/4 bed semi but it's in a crap area for 190 it's now worth about 260

Looking to move to a 4 bed detached in a cheaper area but it dosent look like we have a cats hell

We paid our £100k mortgage off in 4 years earning about the same as you. We did it using a current account mortgage. Whatever was unspent at the end of each month automatically came off your mortgage. We didn't scrimp and save but we weren't extravagant spenders so typically had £2k 'spare' each month, over a year that was £24k, so a quarter of the mortgage paid already. This was Virgin one account. they are very helpful on the phone and if it works for you, you can move up the ladder quickly.

If you're doing it on your own, the answer is lodgers. Get the best two bed you can afford and have a lodger. Scrimp and save as those with partners have done and move up as soon as you can afford it to a three bed. Have two lodgers. Scrimp and save etc. That's the way to do it without a partner, at last as far as it's possible to do it at all. Because of the lack of dual income you'll probably have to look further out etc., but lodgers can be very lucrative and if you put all the money back into the house you can build equity fairly fast.

Of course whether you're on your own or with a partner the big thing these strategies all rely on is stretching yourself thin and that's really risky when you don't have a term-long fixed rate on your mortgage (which you can't get). If interest rates rise as they did in the 80s these strategies could well leave you completely screwed - just as the bottom falls out of the market.

Getting a bit depressed reading this thread. I dont even play the lottery to stand any chance of a windfall

Having said that, through renting, DCs and I are living in a house I could never afford to buy.

I've done relatively well in my houses (by myself - no partner or money from family), but I cannot say that it is through any clever thinking on my part as I am no property speculator! First house two bed mid-terrace on the edge of the Lake District - doubled in price to £127k. Second house three bed mid-terrace in Wiltshire - 50% increase in price to £190k, and now I am off to Hampshire due to a promotion and can now afford a three bed end-terrace for £260k - all the time slightly bigger and better with increasing equity along the way, but no great huge leaps in property size though.

This time I have a four year old so I can no longer just pick and choose the right house - need to look at schools which also places a premium on property. I'd love a three bed semi-detached, but quite simply can't afford that. I will be perfectly happy with my new house - especially as it has a proper dining room instead of a pokey lounge-dinner, which is just a lounge with a table shoved in the corner!

In our case, luck. I sympathise with people trying to get on the housing ladder or move up. We bought our first house in Greater London 18 years ago and sold it 7 years later for 2.5 times what we paid for it, a profit of about 160k. Then moved to East Anglia where we were able to buy a 3 bed house with plenty of land outright with the money we'd made on the first house. 8 years later, we part-remortgaged in order to extend the house. So we now have a massive house for a small mortgage. But we couldn't afford to move back to London even if we wanted to.

Would moving to a cheaper area with good transport links to wherever you have to get to be an option? Find somewhere that needs work done on it so you can get it cheaper and then do the work as and when you can afford it? Or move to a small house with room to extend, and again, do when you can afford it?

willamina
I started working at the age of 25 and bought my first property on my own just before my 27th birthday (2 bed flat in London Zone 2). I had lived in crappy house shares before that, only just got a mobile phone, never owned a TV and walked as much a possible to save transport costs. However, there was a huge element of luck and timing because this was 1996 when London house prices were languishing. They started to pick up shortly after. On the other hand the interest rate on my mortgage was 8.8%.
The flat I bought in 1996 for £73K would now cost £650K
(I sold the flat and bought a house outright in Zone 5 and later bought another house in Zone 3 because I was mortgage free. The only realistic way for us to move up at the momont without taking on an astronomical amount of debt would be to sell both houses - so we are staying put)

OP, like others I would suggest overpaying your mortgage even if its only a few pounds a month. There is no point in thinking about moving until you've improved your LTV and brought down the cost of your mortgage a bit.

I am one of the lucky ones but I still find house prices in London and the SE terrifying.

The only way we managed it was to get the hell out of London! Bought 3 bed tiny 3rd room, tiny garden 2004 for 230k sold 2015 for 675k. Moved to Oxfordshire 4 bed semi, rural location, massive garden, peace and quiet! We'd have had to stump up 850/900k for a four bed where we were. Crazy!

Pimms, if I could drag one friend or family member with me, I'd do that in a heartbeat. Maybe if I hold out till 50 someone will fancy it...

but lodgers can be very lucrative

And tax free up to £7,200 which is basically like a £12k salary uplift if you're a HRT :-)

We were fortunate to buy a flat in the NW in 2001, and when we sold it used the equity as deposit to buy a 3 bed semi (albeit in a dubious area) in the south east. The balance of the equity went a little way towards funding the massive works needed to renovate and add value to the semi. We moved again nearly two years ago but have saved extremely hard to be able to do so. Where we've moved to is a much nicer area, and whilst the house is ok for the moment, it needs a lot of work and an extension to make it our forever home (although we can see the potential - but won't be able to afford it any time soon sadly). I am a SAHM and DH works long hours and a distance away, so I am almost a single parent. We have no family nearby to assist with childcare so currently returning to work isn't an option. I have become obsessively frugal (possibly not in a good way). Neither of us has a smartphone or a phone contract. I shop around for everything even just groceries. We don't have holidays so to speak, we just go to stay with family in the UK and do days out from there. The way things are going our children will be living at home well into their 30s or expecting to live in a cabin in the garden...

The big problem for us is the lack of salary increase. DH didn't have a pay rise of more that 1% for 5 years, during the worst part of the recession, so this has not only meant he's not where he expected to be but his industry has become much more cautious and there just aren't the big pay rises and bonuses there used to be.
I work in the public sector and have been under a pay freeze since I started 5 years and we are now capped at 1%.
We have nearly 70% equity in our current house due to extending and general uplift in the area, but we can't afford more than our current mortgage so can't move anywhere bigger or better.
Still we fit in our current house and it could be a lot worse!

I do often complain that DH should have bought a small flat in London which would have increased more quickly than our semi in the suburbs meaning we could have gone larger sooner!