Upgrading from Flat to House in SW London

[planforeverything]

Close your eyes for those of you who don’t live in London as the prices I’m about to mention will make your (and my!) eyes water...

I’m basically looking for advice and guidance on how to upgrade from a Flat to a house in SW London in the next couple of years and I want to know how people have done it and made it work (i.e stop have money to be able to leave the house for a coffee).

We lived in Bristol for 4 years and made enough money on our house to buy a flat in Putney 12 months ago for £770k. Neighbours identical Flat is on the market for £850k and have just had an offer at £815k which they aren’t accepting.

We want to move to a 4 bed house in SW London in approx 2-3 years time. We need to be in SW London for work (we don’t work in the city).

What I’m struggling to get my head around is - how are we going to do it?!

We have £180k equity and I’m hoping in 2-3 years we’ll get about £250k and have enough saved for stamp for a house around £1.2-£1.3m. Which means £1m mortgage which seems eye wateringly high. Is this the norm?

We each earn £80k and honestly, we are not flush. We are careful with our money as our mortgage is big and save what we can and have no credit card debt.

Our mortgage is £2400 a month and whilst I know we could mortgage ourselves to the high heavens, I’d like to stop work and have a baby in 3 years or so but maternity is awful where I work and there’s no way my husband could afford a mortgage on his own. I would absolutely have to go back to work after 6 months full time.

For those who have done the upgrade - how?! Any tips? Stepping stone in to a smaller property first to make money on then go for what we want? Most of the houses I’m seeing are more like £1.5m so even at £1.2-1.3 we might struggle to get what we want.

Any advice would be greatly appreciated - if were wasting our time I’d rather know now so we can come up with another plan.

Neither of us are bankers so don’t get huge bonuses so it’s not an option to make overpayments.

With difficulty is the short answer. And if you're planning on dropping to one salary it will be very difficult. You'll need to downgrade from Putney - take a look at places like Tooting and Streatham, lots of really nice parts to both, and you get a lot more for your money. If you keep close to the northern line you can get into the city super easy. I think with the numbers you are quoting you'll definitely be able to find a house in a decent area but you will have to compromise on location.

Move slightly further out - Raynes Park, New Malden perhaps even Surbiton.

In terms of areas, we are a little restricted due to my husbands job but really want to be in Barnes, Putney, East Sheen. We may consider Surrey (Teddington, Sunbury on Thames etc) but want to exhaust all options to keep us in the area we want.

Do people regularly mail drop through people’s doors on streets they like to save on estate agents fees? I’d never heard of this but 6 weeks ago I got a letter through my door from a couple saying they are desperate to buy on our street but want to avoid estate agents costs (which I understand). Is this another tactic?

Is £160k if joint income (likely £180k in 2 years time) enough to sustain £1m mortgage and associated house bills - only other bills are really 2 cars at £500 per month in total.

Would you even get £1m on that income? Sounds unlikely to be honest.

Do some online calculators to work out likely repayments, but I think it would be very very tight. And impossible if you wanted to go to one salary for any time (or indeed have to pay for full time childcare)

Bear in mind the high cost of childcare in the areas you are looking at - puts a big dent in your disposable income

You might hope for a property crash (or at least more of a decline), but IMHO those areas are more resilient than other bits of London

I think you need to go onto some websites and play around with mortgage calculators and see (a) what someone would lend you; and (b) how much the monthly costs would be at various different price points as that will then give you an idea of whether you are looking at £1m properties, £1.1m properties or £1.2m properties ... or less and need to move further out.

We're not in Putney any more as, each time we had a pay rise and re-did the numbers, the property prices had ridden as fast if not faster. The 3 bed terraces have always been out of reach unless we wanted to saddle ourselves with such a big mortgage that we would have had to limit other aspects of our lives. We got around this by moving out of London. The small number who have stayed have managed it by inheriting wealth/life insurance (both friends this has happened to would much rather have their parents/husband alive), being made equity partner, starting up a ridiculously successful company and selling it, being investment bankers or similar, parental help none of which were a possibility for us (well, other than unexpected inheritance). It's really difficult.

Honestly, I think you'd be insane to even try. A mortgage at over 5 times your joint salary is unsustainable, if in fact you'd actually find a lender. The risk profile seems far too high. Candidly, you can't afford a million pound house.

Thanks so much for your comments - this is really helpful.

In terms of affordability, we are okay to actually get a £1m mortgage (my husband co owns a business on top of his salary but the income he gets is reinvested but from the banks perspective it’s income and has always been accepted).

We love living in SW London but are both not from here so when we weigh up our options if we HAD to move ‘out’ of London (I.e reading, Surrey) we’d likely prefer to move back closer to our parents and friends. We just like our jobs etc, like the area we live in and could see our life here. We’ve done moving to a brand new area where we know anyone twice now and honestly, I don’t want to do it again. First world problems eh?!

We’re so desperate to stay but if it doesn’t work we’ll move away from London entirely and back up north.

As much as I’d like there to be a little ‘crash’ at the top end of the market, it’d likely impact the value of our property so would rather there wasn’t. When did the prices get this crazy?!

I’ve checked calculators online and to be honest, the mortgage amount we can ‘afford’ (£3.6k from a £7.0k monthly joint household income) but when we add bills, food, car etc the remainder starts to disappear fast.

When London living start to become this much of a debarcle. My neighbour is in a 2 bed Flat in Putney with 3 kids, both working full time and when I spoke to her about this her advice to mr was don’t do it - move out and don’t try it but I realise she’s already knee deep in a 6 week old, 2 year old and 5 year old

I think you’d be overstretching yourself too much once you factor in the costs of childcare later on. Pre kids our income was higher than yours and we’ve had a drop in income post kids. We’re sustaining a mortgage similar to yours currently but would have struggled with nursery fees and a higher mortgage. You can’t underestimate the pressure of having to earn high salaries to pay a large mortgage. I feel it very much now and there is no way I’d want an even larger mortgage. You’ve also got to factor in the sort of lifestyle you might want post kids and if private schooling might be on the cards. A larger mortgage would take away some options. You also never quite know what might happen once you’ve had a baby. A very large mortgage would remove the choice of part-time etc

You’ve got enough capital and flex that you could move into Surrey for more space while being in easy reach of south west London without having to dramatically raise your mortgage. Loads of people do it and places like Surbiton are full of ex SW Londoners.

OP that seems like a huge mortgage to be able to afford childcare and any kind of life - nursery is expensive and it doesn't get that much cheaper when they are at school if you need wrap around childcare and then factor in activities (dancing, music lessons etc) - I personally wouldn't (haven't!)

How is your take home only £7k? Dp and I have that (after pension etc) and we're on £30k less than you a year.

Doesn’t sound as if you could afford a million pound mortgage even if you could get one. I used to earn more than that but really struggled with a much lower mortgage plus nanny. I think you need to move somewhere cheaper.

Sorry typo - our take home is £8.5k but after cars were at £8.0k. We both pay large amounts in to our pension so if we didn’t our take home would be a couple hundred higher. My husband also has an obscure job so he’s taxed at different rates on different parts of his income.

There is the option my father in law will help us out but to be honest I don’t want to count on it and would rather be more realistic now than get our hopes worked up. He pays for our nieces childcare and will do for private school too but I don’t want to count on him doing the same for us as you never know what can happen to other people’s financial circumstances.

To be honest if you’d asked me 6 months ago I would have told you ‘we’ll both work full time until we retire ’ and there’s a good chance that might happen as we both enjoy our jobs and are so driven but a friend of mine has just taken a career break to recharge her batteries (doesn’t live in London) and seeing her be able to so easily walk away from work with no huge financial worry has opened my eyes. You never know when things can change.

Out of curiosity then, how much equity do you think is best to go in to a £1.3m house given going in with £250k is going to be rough?

I hope this doesn’t seem like I’m financially inept (I’m an accountant) but I’m curious as to people’s personal experiences and if they do/don’t regret taking an enormous mortgage

You sound pretty organised and financially astute so I think you should do a budget with all your incomings and outgoings after you have children. My husband and I earn more than double you and our mortgage is less than your current one, and we don't have lots left over. No way would I take on a mortgage at the level you're contemplating. We spend >£50k on childcare (nanny plus nursery and about to increase when one starts school) so that we can both work full time. We have never been fussed about stretching ourselves on our mortgage though, we've always taken the view that we want either one of us to be able to quit our job (or suffer being sacked!!) and the other to still be able to pay the mortgage etc on their own. I realise you might think differently.

At that level of income I personally wouldn’t do that sort of house price unless I had equity of at least £500k. If there is the potential for your FIl to pay for nursery/school fees it puts a different spin on things but just because he can do one child, doesn’t necessarily mean he could do multiple grandchildren so it would be more sensible not to factor it in to your own decision-making. You’d need to have a realistic idea about childcare costs before budgeting for the mortgage. My spending has changed a lot since having children. Far less goes on clothes etc but we spend a lot on food and activities(as well as childcare).

I would get an interest only mortgage as it doesn't sound as if you want to be in London for ever.

(and I would say go for it. As long as you sit tight for a good few years, it won't be a bad investment)

Lulu12345 thank you for this - that really helps as a comparison - especially hearing you’re on double us and find it tricky. To be honest we find our current circumstances okay - we don’t have lots left over but we do everything we want to do, go on holidays 3-4 times per year and have a little left each month for savings - but we don’t have kids.

If one of us needed to take time off right now though - we couldn’t. If I wanted a career break now it just would not be an option. So taking on more is a lot. The only thing I hope that might help us is 50% bonus in my new job but the past 2 years the business I worked for paid out at the lowest level so you can’t even guarantee that.

I’m mid 20s and husband has just turned 30 so maybe we need to play the long game and wait a lot longer than we originally anticipated.

Thank you for your comments - this has helped greatly

Re: FII - his rules for his 4 children have been: he’ll pay for stamp duty on 1st property, will pay for the wedding and nursery/private school for any grandchildren. So far all but children have happened to us and came to fruition, the 3 others have had weddings and stamp paid for and the only one who has kids has her nursery fees paid for and is enrolled for private school next year. BUT I still don’t want to rely on this - as if he lost his fortune tomorrow I don’t want our livelihood to depend on it. We couldn’t have a child in our current living situation so we’d need to move first then decide when on children but obviously need to budget for them in our new house

You will never be able to afford a second child until 1 is at school. You will struggle with £80 A DAY nursery fees.

I think you need to be realistic, £80k jobs is not £1.3m house territory. You cannot afford it.

Ah sorry just seen your ages! I would say sit tight, your earnings could sky rocket in the next few years. Earning double would be realistic. Then the big house can happen.

If you're contemplating moving out, have a good look at Richmond. The state primaries there are excellent. Have a look at the 'Nappy Valley' website, that corridor from Wandsworth out to Teddington is full of people with helpful advice. In your position, I'd want to keep the financial levels where they are, but get the bigger house. And Teddington's lovely. :)

I think you've realised the critical component of all this - time. You're mid twenties. By saving hard for say 5 years (with increasing salaries) you'll be able to throw a much larger equity stake at the next house. It's definitely possible to find nice 3-4 bed places in central SW for £1.2-1.3. So you wouldn't be needing to increase your mortgage much if you have a larger equity stake.

You do have time on your side if you’re only mid 20s. If staying in London is important to you then you might just need to delay children for a few more years and that is a choice you’ll need to make based on what is ultimately most important for you. Your best saving years will be before children. I’m so glad we saved hard beforehand as we have had a buffer and been able to buy a house we love. We spent a long time debating how much we should stretch before buying our house. If we’d have gone to our maximum budget pre kids we’d be in a bit of trouble during the period of paying double childcare. I’d also say in hindsight I wasted money before kids. If we’d have really wanted to, we could have saved more.

I agree with the other posters saying you have time on your side! Absolutely possible to think you could be earning double and sitting on a massive deposit in 6+ years when you're in your early 30s. Things will look much differently then! You might even decide you've had your fill of SW living and be happy to trade it in for much more space and a different way of life further out from London, or closer to home. I'd say don't rush kids, but that's another thread entirely