Buying a 1 Bed flat in London

[asquare14]

Hi! Me and my husband are 28 and 27 and we are planning to live in London for the next 4 years and the move back to our home country. We were thinking of buying a 1 bed for around 400k because we feel we are already paying 2100 rent and we might as well pay mortgage. We were looking in woolwich area but open to other areas, what are your thoughts?

Make sure you budget in buying fees / stamp duty / furnishing a flat / any service charges / insurance / upkeep etc. plus if you’re selling after 4 years selling fees, potential capital gains etc too. Not trying to put you off just if you’re comparing monthly mortgage on a 400k flat vs rent it’s not necessarily a fair comparison

Firstly, can you get a mortgage for a £400k property? Just because you're paying rent equivalent to what a mortgage repayment would be doesn't mean a lender will lend you that much money.
What are you looking for advice on.....area, buying specifically a 1 bed flat, or financial advice?

If it s short term stay renting. No service charges maintenance etc to pay
Flexibility
For 4years just rent
Do you have 40k deposit? More? Why tie up£in UK if you going to leave?
A 360 k mortgage would cost what?

I'd buy but be careful what you buy. If it makes economic sense then do it.

Why Woolwich? There are nicer areas for the budget. Consider service charges, lease length and fees, transport links, is the area safe etc.

I doubt you'll make any money and surely a £360K mortgage will be the same amount as rent? You'll have all the other expenses people have listed too to buy and more expenses when you sell plus any maintenance you might need to do, furniture to buy. One bed flats are not that popular post covid, particularly if they don't have outside space.

The flats in Woolwich close to the Crossrail station are mostly costly leasehold places. There are similar flats in Greenwich for not much more if you are determined to go down this route. My advice would be not to buy for this short a period of time but, if you do, better to get a two bed or go a bit further out to Bexley Borough to get a more re-saleable property.

I can see the logic but I would not buy. 4 year is to short, it could take 6 months plus to buy/sell. The UK economy forecast is not great and we have 4 years of Trump...who knows how the London market will be in 4 years. I would see the flex of renting as a advantage in your situation.

Why on earth would you want to tie yourself to bricks and mortar in UK when you have no intention of staying longer term? As well as mortgage you would be fully liable for all service charges, ground rent, repairs, replacements etc that your landlord currently covers. Not to mention the costs of purchase- often ac4 figure sum in itself. Then what happens if you can’t sell when you leave UK, or market conditions change such that you end up in negative equity?

Honestly while I’d normally advocate for buying over renting where possible in your position it’s a bonkers idea

Also the cost of interest on your mortgage (and/or lost interest if you have savings). If, say, you had a £50k deposit and a £350k mortgage how much interest do you pay by borrowing £350k for 4 years? You'd also miss out on about £10k lost interest compared with having the deposit money in an ISA.

Plus it's risky. You could gain or break even on the value of the flat, but equally, you could lose money.

£2100 rent x 48 months is around £100k.

Compared with buying, add up:

Interest on borrowing £350k for 4 years (about £50-70k)
£10k on lost interest on £50k of savings
Stamp duty
Estate agents fees for selling
Buildings insurance
Furnishings and repairs that you wouldn't pay as a renter

The cost of staying renting is looking very similar without the risk of being unable to sell a flat for at least what you paid for it.

Look for a flat or maisonette where you have a share of freehold so no ground rent , service charges or difficulties with shortening lease. If you can stretch to a flat with a garden or second bedroom, so much the better! (To give you better future proofing and / or saleability).

Do you feel your employment is secure? Are you reasonably expectant that your salaries will rise over the next 4 years?

Could you consider a flat to which you could add value with good DIY updating?

Can you please suggest other areas

For 400k 1 bed you could get a place much closer in and on the tube. I'd have a real good look around at Southwark and Lambeth.

(Know that's casting net wide but you could get anything from an ex LA flat in Waterloo to a share of a freehold house in Brixton and everything in between so all depends on your taste and inclinations. But I certainly wouldn't be in a Woolwich one bed with all your options.

Hither Green (SE13), Plumstead Common (SE18), Charlton (SE7), Eltham (SE9), Lewisham (SE13), Lee (SE12), Catford (SE6), Brockley (SE4), New Cross (SE14). The further in you go, the more expensive it gets and the 'grittier' the area at this budget.

Assuming you work and commute then consider your commute and look at areas that are convenient for that. There's no point in people suggesting areas if it's going to mean an hour across the city and 3 changes of tube when you could have an equally nice flat a stone's throw from your office!

Try searching the Property threads or post on there asking for specific suggestions. There's tons of similar threads that'll help.

Thinking about it, I agree with those saying for 4 years it’s not worth it. At £400k that’s another £10k stamp duty (less any first time buyer discount), legal fees of £3k+, then estate agent fees of at least £5k to sell, legal fees again, plus all costs for maintenance and service charges etc whilst you are there. Mortgage arrangement fees could be another couple of k, plus survey another 1/1.5k. Then if the sale falls through you have more survey fees for the next property. Call it a total of £25,000. Plus 6 months minimum to buy and same again to sell. If you wanted to be able to leave on a certain date (leave the UK I mean) you’d face either leaving the flat empty and trying to finish selling whilst overseas and still paying the mortgage and bills, or staying put and risking having nowhere to live. Even if the flat went up in value over the four years, would it go up by enough to make up for all of the above? Given the above you would really need it to go up at least 10% in those four years, which is not a given in today’s economy.

Just curious, why would they need to pay capital gains tax if they sell? I thought you only need to pay CGT if you own another property in the U.K. or abroad?

Oh yes maybe ‘main home relief’ I didn’t know that was a thing. I just assumed it was like anything… if you sell it for more than you bought it for you pay CGT