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My knowledge of mortgages and household costs are out of date.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.

So her mortgage and bills would be about 50% of her take-home pay? That's on the fortunate side of normal IMO. Of course she can afford it!

If she can get below 90% LTV she might get a lower interest rate so even if it's not much cheaper per month she'll save money over the long term.

How many years is the mortgage? I took mine out for 35 years at the start, couldn’t over pay at first, but I did once I could afford it. Got it down to 23 years at the end

Does your DD have additional savings in addition to the £15-20k for a deposit? I'd advise saving up more if not. Ideally she would have deposit plus the £15k to cover an emergency fund and initial set up costs for the the house (expected and the unexpected which are likely to arise particularly if she is looking at older properties)

I think it's a bit more £7,500.

See, thats the trade she has to come to terms with:
Cheap rent = more disposable money, but having to share with housemates, and rent money gone with nothing to show for it
Or:
Expensive mortgage = tighten her belt for a while, but peace, privacy, and gradually owning a house/flat.

She'll probably buy at so.e stage, when she's come to terms with the mild discomfort of less available cash, but its worth warning her that on average, house prices go up, so she'd better keep adding to that deposit if she wants to wait, because it may never feel as if the sums are any more comfortable.

I'd do anything to be out of a house share frankly! And yes, it's doable but obviously she'll have less disposable income.

I mean it respectfully when I say that, in this period of the beginning of the AI impact, no job is secure and that deposit isn’t good.

There will be cheaper houses if she goes further out or to a different area. Based on those figures and her income I understand her reluctance to commit and personally I’m of the belief that if you need to get a lodger to help with your bills you can’t afford the house.

Well said. I also suggest that if a partner does move in, she protects hers assets.

How much does she pay in houseshare + bills currently? And then, what's the difference between that and the proposed mortgage+ solo bills? Say that was £500pm, can she save £500pm comfortably currently?

Des anyone think the world has gone mad? As a teacher at the top of the main pay scale with 29 years experience, I will never earn much more than £3k a month. And yet people are saying that kind of salary can’t buy a £220k house. You can’t get a 1 bed flat for that round here. So depressing.

personally I’m of the belief that if you need to get a lodger to help with your bills you can’t afford the house.

I think the point is, if she doesn't want to cut back on this or that then she has the option to let out a spare room.

You can afford to 'manage' on your own, or choose the option to share her house for a bit, in order to be able to save up for a nice holiday next year, or save up to have a bathroom refit or whatever.
My dd has a house that she can afford quite comfortably. The mortgage rate looking like it is increasing means it will be less comfortable. Because she has a spare bedroom, she is then able to choose if she wants to tighten her belt and have less spending money each month or to rent her spare room to a friend for a few months and ease her cashflow. She can still 'afford' to live there, either way - as the OP's dd should be able to.

In her shoes,at her age, steady job, steady income I would go for it. She is paying rent and that is lost money, often paying someone else's mortgage. She could try on her own first, not hurry the lodger bit. If necessary look around for someone suitable ...maybe work colleague, friend of a friend, recommendations. .that sort of thing. Buying a house is not lost money in the same way as renting is. With a decent deposit she shouldn't end up in negative equity so her deposit, and maybe some profit should be retrievable if she decides to sell up and go back to renting.
She can also take her time redecorating, doing it up, putting her own stamp on. She won't be in danger of spending money this way when renting them the landlord decides to sell up, wants if for his daughter or something.

It's affordable, but I can see why she doesn't want to.

While living alone may improve her life in one way, if it means she'd have to cut out other things she really enjoys, it may not be a benefit overall, at least in the short term.

My daughter bought a cheap terrace in the North when she was 24. All the way through the buying process she was having colly-wobbles. We were enthusiastic for her, but she turned that round to say we were coercing her. She did go through with it and after 6 months of panics she has settled , got used to it and says it’s the best thing she could have done. Looking at it now , imo it does seem that young people are ingrained with the fact that buying is out of reach, that they will always be poor etc and obviously this isn’t always the case. In some areas of he country houses are not out of reach even for someone on a low full-time income. Your daughters purchase looks fine to me.

Over a third of take home pay is pretty high, IMO.

It sounds like she's done the sensible thing already by getting a proper survey, so that money wasn't wasted. If her budget is a worry, it's worth her asking an adviser to look at the term, the deposit split and whether a lodger's rent could be counted, and building in a small buffer for repairs. As she'll be buying on her own, it's also worth her thinking about some income protection, so the mortgage is covered if she's ever off work ill for a long time. That can make the whole thing feel a lot less scary. Good luck to her.

When I moved from a shared place to living alone I saved loads on going out, because I spent a lot on weekends just to be out the house.
Also being in total control of the thermostat, water usage, more fridge space for meal prep (no food lining anyone else’s stomach) really helped my monthly budget, even though rent(now mortgage) and council tax were more.

I think it’s doable but understand her reluctance after the last one went south.

Surely it depends on household size and what take company is.

A single person with nearly £2k left over for other costs is going to be far more comfortable than someone earning £2k with a £400 mortgage and a SAHP and 2 DC to support despite their mortgage only being 20% of salary.

Yes of course, easily affordable. She would be silly not to imo. At 27 she is really getting to old to be living in a house share.

Rent or mortgage should ideally be about 30% of your income, so she's not far off. If she doesn't do it now, she never will. It's always scary getting a mortgage when you look at the figures, but most people make it work and it gets less scary as the years go by,.

She absolutely should do it if she can. Definitely take a lodger too. One day, future her will thank her for doing this!

as for the one she paid for a survey on, money well spent, she will see this eventually. Right now, she should go to as many showings as she can. Even the worst duds teach you more about what your wants, needs and non negotiables are. This way, when the right property does come along, she will recognise it more quickly.

@Nonimity Thank you for sharing! This is pretty much where I am! DD was crushed after the survey. It looked so good on paper/ first inspection. She’d even began a list of furniture she needed. I think I’m getting a bit of backlash that I pushed her into buying. She’s lovely and we have a great relationship but I’m convinced buying now is fine. And saving , for example, another £10k will only save. £50 a month.
Its a drop in the ocean.
I do think young people have been conditioned to think they are Generation Rent but it’s not actually true if you have a bit of saving and a good job. We are in a lucky position with her. She just needs a bit of confidence!

I would go for it, get a female lodger, a friend or someone recommended. Most houses are only going up and she might regret not doing it in 5 years time.
Following on from another post about waiting to meet someone - hopefully she will meet someone in the future who did the same (bought a property) and they both made the most of the first time buyers scheme!

However, if the price was dropped, could she afford the renovations?