How do people afford nice houses?!

[Dededot]

We have always been extremely careful with money. Bought our first home 4 years ago in quite a cheap area that isn't very nice. It has no communal parking and we never get a space and with number 2 on the way I am desperate to move closer to my parents. We paid £250k for our house, and it's worth £290k now. We still owe £263k.

Between me and DH, we earn £96k a year, but we just cannot afford a nice house in the south. Maximum we could go to is £420k, and then I'd worry about whether it'd be affordable should interests rise to, say, 5%. For that, nowadays you can get very small houses with tiny gardens in the area I want to move to. Have looked at other areas too but seems everywhere is around the same.

I could wait another 5 years when my kids are all at school and I don't have to think about paying £800 a month on childcare, but by then maybe the houses that are 500k now will be 1000k?! Ours is in a bad area so its price isn't increasing in proportion to the nicer areas.

How do normal people afford nice houses when we're in the top 10% earners according to gov stats and can't? Seems everyone I meet has a huge house in a nice area!

When we were your age I remember dh complaining about the same thing - everyone seemed to have big houses often more than one. Comparison is the theft of joy. We didn’t max out on our mortgage, we did buy something that needed a total refurb - we lived in it for 5 years before remortgaging and spending all our savings on a massive renovation - we were prepared to downsize if things went south. Dh got loads of promotions and then we started our own business - money is no longer a limiting factor but time very much is. Not complaining just saying you have to pay some way.

I think it sounds like you may be being a bit overly cautious (not necessarily a bad thing) with your budget. May be you can afford more than you think? I would sit down with a good mortgage broker and go through options you may be able to go for a more expensive house and still comfortably afford it.

@Handsoffreturns I think you are very honest to acknowledge luck and circumstance.

It can just as easily run the other way. Buying in an area just before a major local employer announces a site closure. Suddenly struck by job loss or ill health. Buying and then discovering a hidden flaw in the property (all those people stuck in flats with unsafe cladding as an example).

We were caught in negative equity for a number of years in the early 90s. We were okay because we had enough room to get on with our lives. Other people in similar circumstances weren't so lucky if they needed to move for jobs etc.

I agree with PPs suggesting you consider biting the bullet and buying a better house now and saving less for a few years.

all my friends who are asset rich have made bigger gambles then me and bought larger houses early on. We bought a small house with a smaller mortgage and haven’t seen the same price increase.

some of the issues you face is that your annual savings and house price increase combined are not making up the difference in the jump in equity in the bigger houses (esp as you presumably you want to spend your savings elsewhere). If you are anything like the average person you are also losing out to wage inflation.

we had the same problem and bought the big house as our second purchase because we risked being priced out of the next jump up - the jump up was huge and our mortgage is large but amazing area and schools so will always sell. We overpaid our mortgage on our previous place so had a decent bit of equity. We will have about 18 months of not saving much and then will be back onto it when childcare costs decline.

Personally I doubt any huge market correction is coming soon - the current government look set to announce policies which will prop up the market. It will cool, but good areas/houses will remain sought after. You might take a different view though and that is valid too.

You earn double what we do but our houses are worth the same. As others have said, you're saving a huge amount each month. We save a little but prefer to overpay the mortgage and have watertight insurance policies for all unforseen circumstances that would cause major upheaval.

And define "the south". 2hrs from which bit of London? I'm 2hrs from London by train and your budget would buy a 4/5 bed detached house with garden and garage.

Hi OP,
You ask how do people afford nice houses?

"We have always been extremely careful with money."
Most people that afford nice houses by being cautious and saving are taking the long route and will be in their 50s plus if at all to buy the detached etc.

Most people that afford nice houses young (unless inheritance) will be more comfortable with risk. E.g. the 110% mortgages of the past - buy the nice new house and furnish it with new stuff or the help to buy - max out now on a nice new build and in 5 years pay even more. Fingers crossed you can afford it. Have a tight few years winging iton a monthly basis.

Some people will lose their job/have negative equity and it goes pop, for many others it pays off and their 400k new build becomes worth 600k a few years later.

It's like saying "how do so many people afford 60k land rovers" (they get them on finance). And the cautious person saying " I don't want to get a car on finance". You get yours in 10 years then or a decade old one in 5 years.

I don't have a glamourous home or car or a big mortgage or car paymemts. I have a 12 year old kia Picanto. I could have a nice new Volvo if I wanted to pay £700 a month for it. I'd like the car but the payments - no thanks! I'll stick as I am.

If you want a big glamourous house in a place of high house prices you are going to have to dig deep. If you want high disposable income and thousands to save a month then stay where you are.

If Heathrow was in London that’d be a really helpful post.

Why are you saving so much? Looking at your post it might be that you are ultra cautious which means that you will never stretch yourself.

It reminds me of the people who claim to have little money (bar the £200k in investments but they dont want to touch/include that). Tons of people do this, various relatives, my DF. They only include what is in their current account. That is why when pensioners say they are worried about the cost of living - its not all of them. Around here there are lots of people sitting on huge amounts of equity, savings etc but they just dont want to dip into them.

I am not talking about ALL pensioners though. Just thought it was a reasonable example!!

Along with the added time required for check in etc etc

How do normal people afford nice houses when we're in the top 10% earners according to gov stats and can't?

OP, our household income is similar to yours. We live in a small terraced house that's a renovation project in an average at best area of a relatively expensive city. We're in our early 40s.

Of our friends in this city, we're in one of the cheapest houses by far. We are far from being the lowest earners. But they have wealth that we don't have. We only have our incomes and our own savings from those incomes. Others have inheritance or bank of mum and dad. I think the link between income and property value disappeared long ago.

The really key thing is not to have children early in the relationship. Yes, I'd have liked to have children earlier but we worked and saved hard so we had a decent deposit, and cracked on with paying down our mortgage as fast as we could. When you are paying huge amounts in child care for one or more children it is very difficult to get ahead. Yes we had decent salaries and I inherited a small nest egg but we really scrimped to get that initial deposit. I told my husand we wouldn't be using paper towels or having bottled freshly squeezed orange juice till we were mortgage-free! My parents who arrived as near-penniless immigrants did the same thing.

I told my husand we wouldn't be using paper towels or having bottled freshly squeezed orange juice till we were mortgage-free! My parents who arrived as near-penniless immigrants did the same thing.

The thing is, when I was buying (and certainly when my parents were buying) house prices were low enough that little savings like that made a difference. The reality now is that they are not, for most of the UK. If a house costs £900k then not using paper towels will have no impact whatsoever on your ability to buy it.

Maybe a bit of a wild suggestion here but have you thought about moving abroad for a few years to save some more money? Friends of ours moved to Dubai for two years, they managed to save around 150k so when they moved back to the Uk they could afford a bigger house. I know it's not doable for everyone but maybe worth some consideration if you're really determined to boost your savings?

Delaying having children can make a huge difference though. It lets both partners put far more into progressing in their careers, cuts down hugely on expenses, and can make all the difference in what you end up being able to afford.

Most of our friends live a fairly miserable existence ( in my opinion) with very little money for the fun things in life, purely because they have a massive mortgage. We chose to go the other way and buy a smaller house as we like to travel and eat well. Our friends seem happy with their choices though and we are happy with ours so each to their own i guess.

I agree with pp. I'd cut down the savings drastically until your children are in school (and you're not paying childcare) and use the money to buy a bigger house in a nicer area.

We were paying interest rates of around 12 % in the 1990s so it was not as easy as all that. I didn't mean to suggest that not using paper towels was all we did to save money either. And the house prices might look cheap now but they didn't look that cheap at the time especially if you had to factor in a mortgage interest rate of 12%. I do think it is almost impossibe to save a deposit and get ahead on a mortgage if you are paying childcare.

You save more than I or DH earn individually.

We own (mortgaged) a 4 bed detached house on a joint income of £60k.

We do this by -

1. Absolute Main Factor - we live in the NE, our house was £225k 2.5 years ago.
2. we 'only' save £500 a month (currently have childcare fees over £1k a month)
3. both still working FT even with a small in FT childcare, this is because as soon as he gets his 30 hours we will reduce by around £600 a month spend, while working my salary has increased by 7k in 3 years - this wouldn't have happened if I'd stopped or reduced work.

no parental help, sold our first house at a 12k loss 2.5 years ago to get out of the awful area we lived in - but the 6 years there the mortgage was only £300 a month so allowed us to save the deposit towards the next house as rent in the same area was more than double that.

I also agree with PP. Having children later and also not doing some very part time role to 'save' on childcare makes a huge difference.

Has the OP answered with regard to why they are saving so much

Who suggested Cardiff at 32 mins! What a lot of nonsense. Have they not seen the news. I am flying on Saturday internationally and they are requesting check in 3-4 HOURS before take off.

Easyjet are in a real mess at present, queues are literally out the door. We are travelling to the US later in the year and I am taking the train from Boston to New York rather than paying large taxi fees both ends, messing around, risk of flights being cancelled etc. Boston to NYC is about an hour's flight and the train 3.5 hours but overall and expense wise I feel its much better to take the train.

To be honest OP if you've got £127k worth of equity, you're saving £2,500 a month which you partly spend on a big holiday per year and flights to visit a relative, and spend a further £800 a month on childcare I think you are doing incredibly well as you are!

Just going on your income and equity, you could afford a 550k+ house. If that’s the price it would cost to get what you want, I would just buy it and get the longest fixed rate you can if you’re concerned about interest rate increases.

What percentage of your take home salary do you save each month??

The answer is we don't have the same level of savings as you.

Mortgage/ rent is considered 'affordable' at approximately 20% of gross salary.

In my experience the honest answers are- there’s usually some chunk on family money in the mix- inheritance, a gift, proceeds from the sale of a family property. The other part of the answer is, people buying later in their career when they are earning a bit more.
Sounds like you’re being sensible and doing everything you can, except I would agree with other posters here that the money you’re saving would likely work better for you as a mortgage payment or as an investment. You may be working from a fairly financially naive and overly conservative framework, I would recommend get some professional advice on how to make the money you have work better for you. Research carefully. Low interest savings is rarely the way to go, knowing what to do with your money may not be as intuitive as you think. All the wealthy people I know have put a lot of thought into how, where, and why they invest their money they take reasonable risks occasionally.