To keep our council property when we can technically buy?

[HungaryForLove]

Hi all,

My partner and I are TTC and thinking about our future. Ideally, after I have a baby I only want to work maximum 2 days weekly so I can be around for our kids, and also save on childcare costs. Partner earns about £35k/year before tax/pension, and we have around £16k in savings. We wouldn’t be claiming UC, just child benefit.

We currently live in a council house that my partner grew up in — he inherited it when his mum moved abroad. It’s a 3-bedroom house. Rent is £480/month. The estate is fine, some people are bit rough around the edges but they never give us any trouble and there’s actually a nice community. I regularly walk to the local shop at night and never feel unsafe. It’s full of young families.

The alternative is buying a 3-bedroom house (we need 3 bed as want 2 DC and I often WFH), which seems to start around £160,000 here and with the 10% deposit of £16,000 our savings would go back down to £0 with no buffer for house maintenance, car issues, maternity leave etc. Also with a 30-year mortgage (we’d need 30 years to be able to afford the monthly payments) at 4.35% interest, I’d realistically need to work 4–5 days a week just to cover costs. I am currently only earning £26,000 full-time. Working so many days would mean barely seeing our kids and only taking home less than £1000 anyway after childcare, and that’s with taking into account the 30 free hours as you still end up paying hundreds a month anyway (I know this from my sister who uses our local nursery 4 days a week for her son who is soon changing to 2 days as she will pay nothing then).

If we stay in the council house, we could comfortably manage on one full-time income and one very part-time income and retain over £10,000 in savings (that would otherwise go on house deposit) to get us through maternity leaves etc, and the a portion of the money we’d otherwise spend on mortgage interest we would invest. Even considering rent going up a few percent per year, we’d still be much more comfortable.

So, AIBU for wanting to stay put in our inherited council house for now, even though we could technically afford to buy? I’m not saying we would stay forever but at least until the expensive childcare years are over, and maybe by then mortgage rates will have become more reasonable and I could go back to working full-time and we’d only be paying wrap-around care.

I do appreciate we are in a fortunate position to be even able to make this choice. Me and DP did grow up in severe poverty, I had alcoholic gambling addict parents and DP is originally from a very deprived country which his DM has moved back to and neither of us will inherit anything. Just to add context.

Yes I see your point there. Our thinking is that hopefully in those years or so we can save up a 20% deposit rather than 10% which would give us a better mortgage rate. Staying in this house we can manage to do that even if we have a baby. And hopefully at least DP’s income is likely to rise and he is likely to be on £40,000 within 5 years as that’s the trajectory in his work place. And if we just wait until we’re doing having kids and done with the nursery years then we will feel more comfortable with the responsibility of a mortgage but when we want kids in the immediate future it all just seems too much to take on at once. Just considering general quality of life and not putting ourselves under immense financial strain etc.

I know some will say “well you’re going to have to wait to have kids then until you’ve bought the house and re-built your savings, tough shit” but we have reasons for prioritising kids now - I am likey to have fertility issues due a a chronic condition and can’t particularly risk waiting until my 30s. As it stands we have a safe secure home to bring a baby into currently. If we buy now then it will be a house with issues which we won’t be able to afford to maintain and we won’t have any savings.

Honestly, if you do this, you really to sit down with a spread sheet and work this out properly. ATM you are pulling numbers out your head without really understanding them.

You say you'll struggle with the mortgage payments. If you want a 20% you need to be thinking about that mortgage figure of £675 a month - less your rent - that's £195.

If your theoretical £160k house rises in price by 3% per year for five years a 20% deposit is going to be around £37k for that same house. Meanwhile that £195 per month for 5 year clocks in at £11700. Otherwise you are going to be looking at smaller properties / worse area than you can afford now.

So you are going to need to be saving quite a bit more than that amount which you say you can't afford to do. Even accounting for career promotions and a big pay rise that goes with that, you need to be aware of how difficult it is going to be to hit that 20% deposit target.

Seriously, get Google spreadsheet and use formulas to number crunch on this and work out just what you need to be doing to get to where you want to be in five years. This is a skill everyone should learn if they can't do it already.

Compound interest is an absolute bitch to understand - but you need to for savings and mortgages.

Thankfully, not everyone has morals in the gutter like you do.

.

Even if house prices go up 1.5% annually for the next five years, a house that's currently £160,000 will be £172,000. A 20% deposit still clocks in at £35,000 for that.

Realistically I question whether you'd be able to save for that if you don't think you could afford a mortgage now. Biting the bullet and buying the house now puts the money into the house rather than burning up in rent or annual house prices increases.

If you already are expecting your husbands career to be better in five years, being extra tight now might not be as bad as you think. If you have that prospect the worry about the risk of the cycle of debt is reduced because you ultimately will have an extra strategy. Remember you can remortgage in a couple of years if it's too much - but you will have bought the house (and therefore aren't going to get caught out on rising house prices).

If you have a mortgage and did get into financial difficulties, you talk to the bank at the first opportunity - it's generally not worth them kicking you out and repossessing. They'd be more likely to let you switch to interest only for a bit - you have age on your side in this respect.

However you do it, the first few years are the worse on a mortgage. Personally I'd get the house before the kids even if you are trying to conceive now, because having kids also affects how much the bank will lend you too and you need to factor this into your plans too. Even if it you pretty much drop a sprog immediately after that (get that mortgage in principle!). I get you want to move quick on the baby, but it does have implications you might not have considered too in terms of borrowing.

I'm very risk adverse when it comes to mortgages / savings. Believe me, I get it. But equally in hindsight we were probably over cautious and made the exact mistake of waiting longer than we perhaps should - which cost us a lot in the long run. If you want to buy you almost have to take that leap of faith at some point because it doesn't ever get easier - there's always some other financial barrier or concern.

Yes, I know. I should have used.a sarcastic smiley.

Social housing. So the rent they pay goes back into the social housing system.

When you say below market rate, do you mean the private rental rate, where rent paid is lost to the system ?

Not that this applies here of course, because they are not talking about going into private rental.

OP you are very naive. Investigate Right to Buy and purchase the house. You are entitled to and would be mad to move. Ignore the naysayers on here.

Are you in the tenancy agreement? Because if not and you split up, it will be you looking elsewhere for somewhere to live.

What if you split up - why aren't you married?

Yes I am on the tenancy agreement, we sorted this the first day I moved in.

this is a joke, many people out there do not have this safety net and you’re clearly abusing the system just so you can have children.

How is op abusing the system?

She is on the tenancy, they are paying rent, everything is legal and above board.

She's using 'the system' for its intention.

In terms of house prices rising and “missing the boat” so to speak, our plan is to invest our disposable income to make up for that. If we were to move now we’d lose our savings straight away and once we have a baby (which we’re actually trying for, I may already be pregnant) no longer be in a position to save for years and as I said, anything going wrong would throw us in to debt. We’d also have to take on a 30 year mortgage if we started now. I’m 24 and partner is 28 so we have plenty of time. We’ll likely need to work well into our 60s anyway and even if we end up taking a 25 year mortgage when my partner is 35 for example then it would be paid off by 60.

we have calculated if we stay in our current home, we already have our emergency fund and can start investing straight away. We can afford to invest £800 monthly and should be able to maintain this even if I go very part-time after having a child, having taken into account all costs we need to consider (increased food, increased heating, childcare should be free of very low cost if I only work 2 days).

We would review again in once we are done having children and the nursery years are over and I can go back to full-time work and only need to pay wrap-around care. Hopefully by then we would have a 20% deposit. Even if house prices have risen - we are assuming this will be offset by the childcare years being out of the way, DP hopefully having his promotion and me going back to work full-time. Hopefully would be in a position to take a 25 year mortgage. I know that all of this is just assumptions but even so we just don’t feel ready to buy yet. We are giving up security for a huge risky liability. All the homes in our budget have issues and need work

My council don’t think we’re abusing the system.

And yes when we both work-full time, don’t drink or do drugs and are in a happy and stable relationship then we do feel entitled to have a family, deal with it.

I presume you’re writing this post from your home? Aren’t you awful, so many people are on the streets! Maybe you should set up a soup kitchen and campsite in your property.

This is great advice @HungaryForLove I think you have to set aside the fact it's a council property and treat it like any other rental. You're perfectly entitled to live there and once you do move someone else can live there.

@HungaryForLove You’re not breaking the law or any guidelines so of course the council say you’re not abusing the system. This isn’t about the law and you know it.

carry on with the rotten tomato throwing, I’m not going to make my life harder because of it

It’s morally wrong though isn’t it. You are no longer in need of subsidised housing. In fact, you’ve made money from it if there’s £16k of savings there. Your home should be going towards a family who needs it. It’s not a level playing field, and you know deep down you’re exploiting the system.

You have a sensible head as a young couple. Stick to your plan and ignore the outliers.

Don't be ridiculous. The OP has said that they are not claiming any sort of housing benefit. As has previously been pointed out, this means that private money is being directly put into social housing. Given that between two thirds and three quarters of council house tenants receive some form of housing benefit, the irony is if they did move out at this point the chances are the new tenants would indeed be in receipt of 'subsidised housing'. It's also ironic that some PP are suggesting Right to Buy which would remove the home from the housing stock permanently.

Yes social rents are lower, but they are probably where rents actually should be if it wasn't for the rapaciousness of many private landlords

I think when people say ‘subsidise’ what they mean is the gap between the council charging lower than market rates and the actual market rates. Ie if the council was to charge market rates then the council would make more money which could go to more people in need and the tax dollar goes further. And what council housing would become is stability for people over private lettings rather than stability and cost savings.

If you have this great deal and you are happy living there - there is no reason to move. Especially when you plan to have young children and childcare expenses / raising kids is very expensive. Owning your own home is just more expense. It makes more sense for you to save until kids are older

This!

if you split up you may not have a home if you stay in council. If you buy you are racking up equity which can be split.

I’d be very careful what you decide and think long term.

But you would get your discount with RTB and after the 5years you can use the equity that you got via the discount as a deposit for another .. A 35% discount would be worth 70k to you if the property is worth 200k and you'd be bonkers not to utilise this ....

Not any more, the discounts were capped last year so the max is now £38k, or even lower (down to £16k) in some parts of the country. Financially the savvy thing to do would have been to make an application last year to lock in a higher discount (I have relatives who did this as they have a discount of £136k and their sales have still not gone through as there was a huge influx of applications which has caused a backlog). But OP would only expect a discount of £16-38k now, though that is still not to be sniffed at and it seems a bit daft not to consider it to speed up getting on the housing ladder (many mortgage lenders accept the discount as part of a deposit).