Can my daughter afford to buy a house?

[hollyberrytree]

My daughter brings home just under £3000 per month. Steady job. No risk of unemployment really.
Shes in a house share at the moment but unhappy
I think she should buy, she has a good deposit (15k or more)

2 bed terrace is over £220k. Nothing cheaper

These are her figures
“Mortgage is £1150 ish
Council tax £180
Home insurance £20
Gas water electric £100 absolute minimum
WiFi £25
Phone £24

= £1499

Not to mention… petrol, food, clothes, car insurance, MOT/services”

She thinks it’s too much of a percentage of her take home. She’s got a mortgage offer but has lost her nerve.
I think she can get a lodger to help ( she’s ok with this)

My knowledge of mortgages and household costs are out of date. But I don’t think there’s much point in waiting as it would be ages to get a bigger deposit and house prices may rise by then and more years of rent down the drain.

What are other people’s thoughts? Am I out of touch? It looks affordable to me.

Id be a bit cautious. Interest rates are rising not falling, in most areas thats pushing prices down, not up. If shes bringing home 3k after tax, im guessing shes on about 45k?

If your mortgage number relies on borrowing for more than 25 years, or hasnt stress tested rates going up another 2-3%, its not affordable.

I have a DD 27 and having similar dilemma. Except earns a bit more at £54k but only options at 4 x salary that would work are 1 bed flats or shitty 2 beds or a long and expensive commute. So she’s not doing it.
They do all seem very wary of flats now and I don’t blame them.
The old 3 x salary may be out of date but needs to become normal again! So a comfortable budget for your daughter might be nearer £160-180 with deposit. The lodger sounds like a great idea IF she is very keen on being a homeowner and IF she is quite sure she wants to stay in that area for a long time.
Rent being dead money isn’t really true if someone moves after 5 years and loses all the costs of the move, their first time buyer status and factors in maintenance. Renting can be much cheaper overall. Could she be that lodger in a 2 bed with a like minded friend?

Sounds doable unless she also wants a spendy lifestyle. She'll be able to easily cover her bills, save and be reasonably comfortable day to day but she won't be able to spend endlessly on lots of non essentials, she'll need to prioritise. Also some of the costs people have mentioned aren't necessary eg Ring Doorbells or TV licence if you don't watch live TV or use the iplayer.

But if it allows her to live alone it should be worth it to her. Could she look at a 'part time' lodger, eg someone who needs to stay in the area 2 or 3 nights a week for work, so she's alone most of the time? She could still earn a few hundred a month from that.

It depends what her priorities are.

If it’s getting on the property ladder early and paying the mortgage off in good time, then she should buy. A lot of people survive on less with dependents in tow.

If it’s to have a good disposable income, and she can continue saving, then don’t buy.

Fully agree with this OP. Your daughter is 27 and single and I really don't think tying herself down to a property is necessary. It sounds like she would like to live alone - I would rather personally rent a place alone and practice for a bit even if it was 'money down the drain'. The feeling of true independence and safety in your house after sharing for years is worth the money spent imo. I bought my flat at 31. She has time and can build up savings again still, just slowly.

Sorry but that’s not a good deposit if she’s looking at houses over £220k. Her LTV would be over 90%. She will also need money for furniture and homewares, decorating, repairs and maintenance. She would be better off waiting and saving up more.

Of course she can do it but she'll be skint for a few years.

How much is her current rent/council tax? What will the difference be after getting a mortgage?

Does she have other savings apart from the deposit to cover moving and solicitors fees etc?

Could she not still buy at reduced price and do the work gradually? Her mortgage will be lower abc maybe those figures sit better with her?

Agree with this.

Is her moving home for a few months an option? She could double her deposit in that time if she saved half her income or more each month. Does she have a LISA?

Her deposit may now be closer to £20k. I haven’t asked in a while. The figures in my first post are from her through.
She has a help to buyisa
Moving home isn’t possible as her job is several hundred miles from home and she’s lucky she has a job she really likes.

What are the chances for salary growth? And when you say £3k, you mean after tax / pension etc?

Back in the day they would say you should spend a third of your salary on your mortgage, which puts it in the affordable bracket. Ideally she should buy somewhere with the potential for solar panels, so she is insulated against heating bill rises

Yes, of course she can afford it based on those figures. Doesn't sound like she actually wants to sacrifice anything else though. Guess she'll have to put up with the house share.

Hi OP,

I am in two minds and perhaps it is worth your daughter doing some sort of vision board or one of those visual pie charts of what one wants in life and how to direct their energy to get it.

At 25 my dad strongly encouraged me to buy a flat. At the time, I remember being partially frozen at the size of the purchase and the permanence it represented. I pretty much went through with it on automatic pilot. At 40, I can say it was a brilliant decision: I immediately felt more secure and grounded, it removed a lot of "what next" anxiety I was cycling through, my mortgage was cheaper than rent and more secure (although I am in the EU and our mortgage rates are FIXED for the length of the term, so not comparable). Also, now, I am in a far more secure financial position than many others my age.

However, at 40, I also think sometimes I led a slightly less adventurous life than I had imagined (or definitely experienced a fair amount of FOMO) because of the cost and the permanence of owning a property. In the first few years I had NO money because everything went on the bathroom, the kitchen, the flooring, the appliances, etc. All my friends appeared to be back packing in Thailand or considering jobs elsewhere while I was scouring the internet for boiler insurance. I have never had a "big holiday" although with hindsight I probably could have also scoured the internet for cheap package holidays so that's probably not a deciding factor.

It really gets up my nose when people say "Gosh, you're so lucky" when actually, my current position reflects 15 years of smaller, more sensible decisions. There have been moments where it was literally "I'd love to spaff this bonus on a new wardrobe, but I'll probably replace the double glazing first."

If your daughter does decide that a house is right for her, another thing I'd add as A Woman is: do not wait for a man to come along and split the cost. There is nothing better than having your own space, your own bolt hole, your own security and your independence.

Wow, its a time travelling miracle! How are you posting from 1932?

What if she doesn't meet "a man"? Why even assume she's straight? A third of the uk live in single occupancy households, and far more will be in non-couple ones (e.g. single parent with kids, houseshares like the ones she is in now).

Not to mention moving straight in with a partner is a terrible idea. At absolute best its a lot of stress at the start of a relationship when you've never lived with a partner before to add on all the stress of moving. At worst, after a year or so you want to break up you're stuck moving again plus all the additional costs of legally splitting the house when you haven't been in long enough to build much/any equity.

Even if she met someone tomorrow anyone sensible would wait a good while before being sure the relationship was strong enough to move in together.

OP, I suppose my only question is if she thinks she has at least £1k spare if she did buy then, presuming her house share is quite a bit cheaper, what is she doing with that money now? If she was really serious about buying she could be saving hard- an extra £12k this time next year (more if she put it in a LISA) would nearly double her deposit, or keep a good buffer for her moving costs. £15k sounds like a good deposit but the average is over £60k now I believe.

Is the £3k pre or post tax and pension etc? That makes a big difference.

One thing to challenge: OP and a couple of others have described rent as “dead money” or wasted money etc. This isn’t true, at least not any more. It buys you a place to live. Of course, so does a mortgage, and with a mortgage you’re also gradually saving by paying down the debt. But for someone on a 90 or 95% LTV like your daughter, the vast, vast majority of payments will be to interest which are just as much “dead money” as rent. The proportion going to pay off the debt will be tiny for the first few years. And mortgage payments these days are generally higher than rent on an equivalent property, which wasn’t true a few years ago.

So buying isn’t the no brainier it maybe was fifteen years ago.

It's 1/3 of her wage that's at the edge of affordability and feasible so it depends on her priorities and whether she's prepared for a lifestyle adjustment in exchange for a foot on the housing ladder or whether she prefers to save up more deposit to reduce her monthly payment on a future mortgage. I can understand why it feels like a risk as a single person so difficult to know how secure her income is and any support net you could provide if she was out of work for a while for example

She has a secure job. And we are able to bail her out if necessary. We’ve offered her a small chunk towards the department but she says no which is fine but an extra £10,000 on a deposit doesn’t mean a great deal in terms of monthly repayments. It’s surprising.

Very roughly every £10,000 is about £50 per month off the mortgage. This is why I think there’s not a great deal of point in waiting by the time she has saved up a huge chunk house prices and / or mortgage may well have risen.

Tell her to keep looking and putting in lowish offers. Someone will need to sell. Lodger as a back up plan, if you don’t gel she can ask them to leave or a Monday-Friday lodger is better if she can find one.

£24 for her phone- SIM only contract much cheaper.

It is doable. She needs to live on her £500 budget for several months and get a taste of reality of what it will be like long term.

£20 per month for buildings and contents insurance?!

“She’s in a houseshare at the moment but unhappy”
What’s making her unhappy? If it’s simply having to share, then the lodger option won’t work either.

TBH, I wouldn’t be pushing this at her age, in her position. If buying is what she desperately wants to do then she’ll actively go for it herself.
Otherwise, leave it. Buying a home is a massive financial commitment. I didn’t buy until my late 30s because I wanted to keep an element of freedom, to be able to move at short notice for a new job, or to travel, to not have the financial burden of being responsible for owning and fixing everything. Renting does have perks if she doesn’t feel ready to buy.

Edit to add: just because it’s doable doesn’t mean it should be done.

I'm assuming you're saying that's not realistic but mines actually less than that. It depends on many things, how much house would cost to rebuild, whether high risk flood area etc.

£1500 a month left for one person seems manageable?