AIBU to wonder how people afford huge mortgages and we’re struggling to make ends meet?

[Beanbag12]

AIBU to wonder how people afford huge mortgages and we’re struggling to make ends meet?

We live in a very affluent area in rural Oxfordshire. We rent. The idea of saving for a 10% mortgage is so completely unrealistic as the cheapest 2 beds around here are £220k. We currently spend more than our wages every month (high cost of living, childcare costs). Everyone, and I mean everyone that I work with either already owns or are buying hugely expensive houses. They’re on similar wages to me. AIBU to wonder how the divide between us is so big?

I know this probably has obvious answers; we should have been more sensible when we were younger, inheritance etc. but I’m interested in other’s experiences in this.
I don't really want to divulge any more information about our situation and I don't want advice (I know people will say it's our fault we're in our situation, which I am willing to accept, so no critisism please)

I agree that it's much more difficult to buy once you have kids, both because it's much harder to save with childcare costs and because you then need a bigger property.

If you think of it, take away childcare costs and look at what you would need to save for a deposit on a 1bed flat in a not so nice area (don't need to care about local schools) and I bet you could do it.

I read 'How I spend my money' in the back of Saturday Guardian and am gobsmacked by people who are half my age earning twice my salary, who save like mad and have little internet 'side industries' etc.

Starting saving early is the best, and understanding compound interest. The pre-school childcare years (especially the pre-free hours) are the hardest. But they don't last for ever.

10k gift from my side of the family and bought a small 2-bed before children in an okay area. Made money when selling and bought a larger 3-bed in cheaper area for similar mortgage repayments due to bigger deposit.

Couldn't do it now we have children, only one income or would be two incomes plus large childcare bill. Won't be moving for a while now as I want to pay off the mortgage rather than extend it for a bigger/nicer house.

OP. As you can see from most of the responses it's mainly down to timing, inhertance and luck! I know lots of older people who like to pretend its down to savy investment & living like hermits but if you apply their experinces to current prices they wouldnt stand a chance. The UK property market is barmy. Don't get disheartened. Prices round my area (SW London) are dropping fast. These drops will ripple out, they always do & you may get your chance. Disclaimer...we just bought knowing full well prices may be much lower next year but with first DC on way and no signs of increased tenant rights we couldn't hold out any longer. Hang in there.

No help whatsoever, but we got mortgage before kids.

My 1st place was an unfurnished tip, in a crap area. Couldn't afford furniture for a few months, then got the bare minimum (like a bed!) and booked a holiday instead of splashing on making a show home

Did a lot of cosmetic improvements (mainly painting) and sold well, then bought a better flat, improved again, sold and so on.

The market was mainly in my favour, so with the equity we ended up being able to buy a decent size detached in a good area. Having kids a bit later is a financial choice. The price of someone's house has nothing to do with the amount of their mortgage. Someone might buy a £900k house with a £200k mortgage, whilst someone else will have a £325 mortgage on a £350k flat.

Once you have children, it gets really difficult. You can no longer camp in your kitchen whilst you are redoing the rest of the property, you have a loss less disposable cash. Unless you have generous family (in cash or free childcare), I don't really know how you do it.

It’s the having kids first.

Two full time salaries and no child care costs means it’s easier to save for a deposit and you can get a bigger mortgage.

There have been crazy property price increases over the past 10+ years. If you’d bought then this would mean you’d bought your house for a lot less and you would have built up equity.

You can start with a 1 bed as a couple and work up. As a family you have to jump straight to the 3 bed near the good schools which is unachievable without a huge inheritance/gift from family.

Then your rent will likely be higher than your friends’ mortgage so even with similar salaries you’ll have less disposable income.

1st house we had early inheritance so we could pay the 5% deposit. It was a small house but I was 22. 5 years later we moved but further away from the commuter line and could afford a slightly bigger house and the all important dog friendly garden.

3 years ago we made a huge move and lived with my parents for nearly 18 months whilst we saved like mad. We are now renovating as we wouldn't have been able to afford this type of house. We got a mortgage early and then married, expecting our 1st baby next month but have been married nearly 9 years. We are not flashy and only spend what we can afford and spend minimal on holidays and going out.

Mortgage on a share flat with two friends in early 20s resulting in negative equity, mortgage with DH on a flat in London in our late 20s, price increased, bought a semi outside London for same price. Couldn't afford to buy in this street now. First mortgage was 100% from Debenhams(!) - no help available from family. We were paying 18% interest on it, though.

One thing i have noticed is that you can see where people are spending money but you can't see where they are not spending money.
That is oh so very true.

I bought a house I could afford in a cheap area of the country and rented it out, and then sold it a few years later for double the price.

20 years ago my DP's parents gave him and his 2 siblings £1m between them.

We live in a large Tudor house with no mortgage. Although it is, I admit, in the Midlands so not an expensive part of the country. Our joint salaries (teacher and civil servant) would in no way stretch to cover a mortgage if we were to buy our house.

Both of our immediate neighbours, plus other people in our village, have either inherited farms and farmhouses, or have inherited property and money.

So in our case and many other people in my area, we (mostly) afford our large houses because of gifts or inheritance.

High salary combined with getting the house before the kids. No outside help from either side.

First house we had help from husband's father who stumped up the deposit and we have been paying him back ever since (£500 a month).

We stretched the mortgage to the limit to purchase a three bed terrace as opposed to a two bed for 10k less, so skipped the starter home.

Sold that house three years later for 65k more than what we paid (crazy house prices) and we are now increasing our mortgage to buy what will be our forever home.

Ironically our forever home is still a three bed, but it is a semi with massive garage, workshop, beautiful 100ft garden and more downstairs space. Also has planning permission for fourth bedroom over garage and wrap round downstairs extension so it's pretty future proof.

The one thing we have done though is get the best house we could before having children. Our parents live in our home area so no free childcare for us, which means our affordability will go through the floor once we have children.

So for us its:

Engaged->house->married->forever house

Recent reports into this subject have found that home ownership in younger groups has collapsed from a couple of decades ago.

amp.theguardian.com/money/2018/feb/16/homeownership-among-young-adults-collapsed-institute-fiscal-studies?__twitter_impression=true
Guardian article on an institute of fiscal studies report.

And houses are now more unaffordable than they have been since 2002 with some areas being particularly unaffordable.

www.independent.co.uk/news/business/news/uk-house-prices-average-earning-ratio-latest-unaffordable-housing-crisis-a8323086.html
Independent article on an ONS report.

and here's the FT article I mentioned:

ftalphaville.ft.com/2018/02/15/2198809/someone-is-wrong-on-the-internet-millennial-savings-edition/
Someone is wrong on the internet, millennial savings edition

The saving habits of young people are a popular arena of discussion nowadays. The problem is that much of the language framing this discussion is misleading.

example it gives:
Something is wrong on the internet here. These discussions of savings consistently fail to distinguish between savings reaped from the labour market, and savings received through inheritance and family gifts – even when the article literally mentions an inheritance. There is nothing necessarily savvy about merely having, rather than acquiring, wealth.

Anyone who is not under 40, who is telling you how they did it, doesn't really appreciate the current market, with a combination of high rents, stagnated wages and house prices.

We bought early, we skimped and scraped, seriously we did. Read no holidays, no going out, not even for a coffee, terrible cars, no new clothes etc etc
We went up the ladder as we improved our wages.
We bought our final house before we had children so we knew we could afford the house, we both worked after having the children, l worked all weekend 25 hrs nursing. DH looked after the DC so we didn't have to pay childcare.

Had a lodger and interest only mortgage

There are lots of ways people can do this, but I do sympathise, as getting your first mortgage is hard. For many single people I know, getting the deposit is actually the easy part. At least with two wages you will manage to get a mortgage for the amount you need to borrow.

Things people I know have done to get on the housing ladder:
-Work abroad (high wage, low tax, able to save a lot for a deposit).
-Bought in a cheaper area first (even in Oxfordshire, there are places that are less expensive. Could you accept a longer commute?)
-Bought a smaller property (e.g. a studio flat) first.
-Bought a property that needs a lot of work doing to it.
-Help from parents with deposits.
-Used inheritance to pay a deposit.
-Bought some land and built their own house!

It is bloody hard and even the people who appear lucky have often made big sacrifices. However, childcare is a big expense, and I think most people aim to buy/have a deposit saved before this really kicks in.

It does sound like you can't really afford to live where you are living, though. There are cheaper areas, even within Oxfordshire. Or you could make a more radical move to somewhere a bit further North where living and housing costs will be much less.

Careful, Mrsmadevens You'll get told that sounds like a wasted life, the first bit anyway

We bought in a posh commuter town not far from London in 2003 for 125k - tiny flat (400 square foot) - probably worth double that now. Sadly, it’s about timing mostly (if you aren’t ‘lucky’ enough to inherit)

I don’t know how old you are but I am early 40s - I think most people my age managed to buy just before prices went crazy. People a few years older than me have done far better with regards to price increases (we actually lost money on the flat sale, and the one after that, but have finally made a bit on this property) and most people younger than me have been properly shafted. I really feel for you and everyone else in the same situation. All you can do is save as hard as you can, and consider moving somewhere cheaper if that’s feasible for work - buy the cheapest house you can find and spend years doing it up.

The worst thing I ever did financially was leave MILs house after 3 months of living there and went into renting.

I forgot to add: another reason why it's much easier before kids is paid overtime. You can easily work late, or 6 days a week quite frequently, and it's very satisfying when you are lucky enough to be paid x2 on weekends or bank holidays. Even if you don't need to pay for childcare, it's much more difficult when you have young kids and broken nights, can't have early nights until they are finally asleep and so on.

We bought a house when we were very young and deposits weren’t so big, renovated it entirely and worked our way up.

Also we earn considerably more than our friends and family think we do.

There is a line in the sand at age 36. If you are older than that you are probably fairly ok. If you are younger you are much much more likely to be struggling. DH and I are either side of it. All our friends fit this pattern almost exactly.

Its all about when you first bought. We are now struggling to jump to the next step on the ladder and are in a better position than most. If you have kids and are trying to jump to rung two of the ladder it is impossible in many places without inheritance. Its simply not doable unless your household income is silly money.

Saved enough for a very modest wedding (around £1,000) and the deposit on a house. Both worked and paid mortgage for 7 years until mortgage was payable on one income (dh earned twice as much as me). Had children. Wasn't easy to make ends meet, but managed. It got easier as the mortgage got smaller compared to pay packet.

So maybe they started saving before they had children? Makes a massive difference.

You lot are doing it all arse about face.

Its house first, then kids.