FTB - how much should I stretch

[flipperdoda]

Looking to buy my first property - exciting, people say. It's also a bit terrifying!

I started looking naively thinking I'd like two bedrooms and some outdoor space (direct access to private or shared space from ground, or balcony on higher floors). It's taken about three days to realise that is almost certainly not going to happen - I hadn't quite realised how much service charges are per month (freehold generally not affordable around here)!

My real question is, how much should I stretch myself financially? I've got a decision in principle theoretically allowing me a price that could get me a two bed with outdoor space, but the repayments per month would be higher than my rent and I'm not thrilled about that. I could slightly mitigate this by extending to a 30 year mortgage but again, that just costs more over time... a small one bed with a Juliet balcony on the other hand I could be paying the same as my rent/slightly less.

I can't decide! I'm still viewing so no hasty decisions to be made.

Pertinent points:

• it's just me, and I'm single so no potential move in partner (or child!) anytime soon
• the second bedroom wish was for guests (irregular, so not a massive problem) and now for the desk to go into as well - obviously this feels more urgent now than it probably will when the world calms down but I did tend to WFH once or twice a week before anyway
• I have a bike...this needs to be stored somewhere inside, I have no idea where but currently it lives in my kitchen so not high standards I suppose!
• I don't own much furniture, no big bits, which is good from a flexibility POV

Starting to think a decent sized one bed so that desk could go into bedroom/hallway/hidden behind a sofa in large living room, and ideally living room big enough for sofa bed for occasional guest, could work? But then there's the resell difficultly of one beds, and no option to get a lodger.

I'm just not sure whether I'm likely to regret a) not taking advantage of free stamp duty or b) having high mortgage payments more.

Help! As you can probably tell I'm talking myself round in circles

As a FTB I stretched myself to the max but that was because:
I fancied living in a prime location close to central London;
I knew my salary would go up;
I planned to rent out the spare bedroom which made it feel a lot more comfortable.

If it was just me and not willing to rent the spare bedroom, I’d probably go for a one-bed. You can always get a sofa bed for any guests. Mortgage payments, service charge and bills are lower on one beds.

I’d definitely have the mortgage over 30+ years to keep the basic repayments down. It’s easy to make overpayments if you’ve got the money to pay it down.

And do your research re management and fees, sinking funds, planned repairs etc as it can be a minefield. Service charges vary greatly but beware of very low ones as they can mean poor maintenance or being asked for thousands at short notice to cover big job costs.

As a FTB, I stretched myself to get that second bedroom.
I then had a lodger for a couple of years, which, in effect paid my mortgage. Obviously that is never an option in a one bed.

Service charges can be high, but you will be paying them for a one bed or a two bed.

A very clever lady who I respect a lot once told me, stretch yourself as much as you can as soon as you can. It only gets easier.

Yes a 30 year mortgage is paying more over time but in reality you won't have that mortgage for 30 years.

One beds are harder to sell, once you do decide to move on.

Ooh differing opinions - darn.

So - lodger is possible in second bedroom but honestly if I had the choice I wouldn't share. I've lived by myself for a year and a bit and it's been bliss! So I'm not negating that opportunity at all, but I do think it's worth being realistic about whether I'd do it.

Service charges can be high, but you will be paying them for a one bed or a two bed. right, silly question time - I assumed service charges would scale based on flat size (or at least number of bedrooms), is this not the case? Or maybe it is the case but not proportional obviously?

Salary - I'm early on in a career in technology, I am expecting my salary to go up but I'm wary of depending on that as a sole mortgage payer. I've been lucky to be unscathed through the last 6 months of mess but it has brought home how things can change rapidly!

stretch yourself as much as you can as soon as you can. I think my concern on this is - when do you stop stretching!? I know that might sound silly, but if I'm stretching for the sake of getting to the next and then next property... when do I stop and pay less proportional to my salary and enjoy it? I guess that's a muse rather than an actual question...

For context, the smaller one bed with a Juliet balcony (which I haven't actually viewed yet so this is all speculation) is just over 4x my salary (with just under a salary's worth of deposit), the 2 beds would be 4.8 - 5.4x my salary, same deposit. The lower of that range have a non double bed sized second room (poss problem for lodger??) and/or work needed.

My current rent is 33% of my salary.

Just to give some number context about stretching/not stretching!

Oh and I will definitely do research on service fees etc, thank you! There was one that was only asking for £16 a month, that definitely raised an eyebrow (came with a share of freehold admittedly). The others range from maybe 115 - 250. About to google what common costs are!

Interesting to hear views about 30 year mortgages. I'm quite anti risk (you may have noticed) and would tend towards keeping it as low as possible, but I'll have a think!

When I was a first time buyer I could afford a bigger home than what I bought but at the time I was single and probably would be forever and thought I didn't need extra room for just me. However your circumstances can change quicker than you think and 2 years later I was married and pregnant and wished I had bought a bigger home to save the stress of moving again!

Hmm I think I've been convinced into trying to get a two bed. You're all right, it does make sense to future proof (whether that's from a lodger perspective, an amount-of-stuff perspective, or a maybe I'll end up pregnant in two years perspective! )

Thank you all. I will prioritise two beds with a good layout over decorative quality and/or direct access to outdoor space. Given the British weather, even in the South East I'm much more likely to get more use out of a second bedroom than the outside space I suppose!

You've also made me less worried about having a longer mortgage. I'm even feeling slightly excited again, rather than depressed at the price of life!

Service charges can vary a lot. So definitely look into that as they will increase over the years. Sometimes the owners of flats take can take on these Charges themselves. It’s usually run by a management company though so worth comparing when looking at different properties.
I too would go for 2 bedrooms so you have the lodger option. I would Also Chose to go for the longer mortgage and then do overpayments if/when you can. You might even ending up moving and remortgaging anyway in future years, so not really worth worrying about now. Also if the interest rates were to go up it wouldn’t Impact on you too much.

Everything dreamscomingtrue said.

Go for a 2 bed and rent a room out.
It helps pay down way faster and tax free!!! To give you an idea after 6 years i had reduced mortgage term by 15 years!
You get some company annnnnd if you met someone you dont have to move as you have space for two (& a baby if you want )

Also moving buying and selling is bloody expensive so i wouldn't go for one bed unless LT you want to retain as a BTL.

Re bike: loads of people in london have them. get a wall rack for it and it goes in the hall/living room/wherever

I’d buy a 2 bed on a 30 year mortgage, and then start overpaying whenever you had spare cash in the future.

What’s covered within the service charge? Mine feels high to me (it’s 10x more than it was when I moved in 20 years ago) but it covers repairs to roof, external brickwork, Windsor replacements, and repairs to communal areas including gardens and drain. Having ability to phone someone and get them o unlock the drains saves me £400 potentially compared to my friend with a house who is responsible for the whole thing herself. Roof repairs can run into thousands too.

Second bedroom definitely. Might only be a single bit if your circumstances change big time, you could take the single yourself and let the double potentially, if you had to. I wouldn’t by choice either but if it were that or lose the flat...

Stretch for access to outside space whether it’s a balcony or a shared garden or both or what. Mental health if we end up with more lockdowns. Space to dry clothes. Full sized doors rather than just windows to air the place out. All useful stuff.

I stretched and went for 30yr mortgage. And it was more than my rent in the early years. But then things change over time and now I can overpay, and I should be on track to pay it off within the more usual 25 year timeframe. Yes, it’s more interest. But it’s a lot less rent than if I’d been renting and saving for a bigger deposit!

Check you could afford it if interest rates rise though. Mine have just dropped and stayed low, and I’ve overpaid by paying the same despite that. But I suspect they will eventually rise up again.

With service charges, you need to look at specific properties not a general ballpark. They certainly don’t ‘increase over time’, as they’re legally reflective of work done/planned.

My best experience has been with blocks that are older, say 20yrs+ as you can clearly see if they’ve been well maintained and if there’s a sinking fund. It’s more of a gamble with a new build or a conversion where you’re relying on 3 share of freeholders to agree and pay up.

Your multiples sound very very high. Are you sure you can borrow that much? Banks are being careful at the moment + it sounds like a 2-bed and no lodger will get very tight. Personally, I can’t see the point if you don’t want to share. I shared my first flat but that’s because I my lodger was a friend who I went out with a lot etc so I actually enjoyed it.

And no, you should only spend what’s comfortable and stretching yourself to the max is nonsense especially in the days of very low interest rates and market uncertainty. The interest rates will only go up, your flat might go down etc and you don’t want to feel like a slave to the mortgage.

I stretched myself as a FTB (2 bed flat, it was small and bed 2 was a small single but still better than a large 1 bed in my opinion). This was on the advice of my parents. No regrets. Definitely do the 30 (or 35?) year mortgage if you are concerned about monthly payment.

Moving is expensive. stretch now and get the 2 bed over 30 years. If you do get into difficulty you can get a lodger then. You Amy also meet someone and you have a ready made home if you want it. Simply put the 2 bedder is a longer term option, will be nicer to live in and saves money long term.

I also work in tech, the future is good and healthy, especially if you are a woman as we are a rarity. It's a well paid field. Go for it!

Speaking of when people stop stretching themselves for a property, it really varies. I only did as a FTB. Once I met DH and we wanted to start a family, the area we liked best is also v cheap so we’ve had low payments since. For some people it’s the opposite and they will max out their borrowing to live in a small property in an expensive area or even have to sell before retiring as their mortgage would go on till 70yo or longer otherwise.

I didn’t stretch myself and that was a mistake. I didn’t factor in that my salary would increase. And that was was a bit uncomfortable would only be so for a couple of years.

I ended up buying a house with no outside space and it was a pain t9 sell on.

I should have stretched myself.

Also interest rates are v low at the moment. A 2 bed would be much easier to sell on.

You could get a 5 day a week lodger and have weekends to yourself. Look at spareroom.com to get an idea of what you could receive.

Wow, thank you for all the replies! A few answers...

Second bedroom definitely. Might only be a single bit if your circumstances change big time, you could take the single yourself and let the double potentially, if you had to. I wouldn’t by choice either but if it were that or lose the flat...

That's definitely a good point - yes, it's not my preference to have a lodger but I would absolutely still do it if I had to! Don't mind a single for myself in that situation either.

Stretch for access to outside space whether it’s a balcony or a shared garden or both or what. Mental health if we end up with more lockdowns. Space to dry clothes. Full sized doors rather than just windows to air the place out. All useful stuff.

I'm not sure I can stretch to direct access to outdoor space as well as a second bedroom, but most 2 bed flats I'm considering do have shared gardens (just you'd have to go through the block to get back out).

With service charges, you need to look at specific properties not a general ballpark. They certainly don’t ‘increase over time’, as they’re legally reflective of work done/planned.

Yes, I am looking at specific property charges, just wanted to give an indication above of the range they cover! Everything I've read has said they certainly can increase though - I'll be reading documents carefully.

Your multiples sound very very high. Are you sure you can borrow that much?

I mean, I wish they were lower! But did you realise those don't include the deposit? So the mortgage multiples range from just over 3 to just under 4.5 and the upper end is the price I'm saying I personally, currently, don't think I want to take on but I'm not sure if I should stretch to my very max (if the bank even agreed on it, I have a decision in principle but I know that's not a definite!).

And no, you should only spend what’s comfortable and stretching yourself to the max is nonsense especially in the days of very low interest rates and market uncertainty. The interest rates will only go up, your flat might go down etc and you don’t want to feel like a slave to the mortgage.

This is what I was concerned about, and I find it interesting there's only you/a couple of you that have said it. My older sibling has certainly recommended not to stretch - they also bought alone then had unforeseen and unavoidable issues that meant they seriously dropped salary and were barely breaking even despite having not stretched as far as possible with the mortgage.

Most people on here bought when prices were lower and since their interest rates have dropped, and property prices increased dramatically so the first thought is to stretch.

However, interest rates are the lowest in history (my first mortgage was at 6.9% and I’m now 39, older people will remember rates of 10%) so they will eventually go up.

Also, the upcoming recession should be a lot worse than the last one. House prices are predicted to fall by 14% next year although that will be v much area dependant. I really don’t think now is the time to stretch unless your only other option would be to stay renting for years.

Are you looking in fairly affordable areas or expensive ones?

JoJo, that makes a lot of sense, thank you.

It's a commuter town into London - pretty expensive, and I'm torn whether to try and buy here (been here a year and a bit, very happy) or uproot yet again to try and move somewhere cheaper. Financially the latter probably makes more sense but I've moved a lot and want to settle, and if everything does go horrendously wrong there will always be a tech job in London for me - so there's some security there too.

As others have said, stretch as much as you can. We didn’t when buying our first flat and it meant that although we stayed for 5 years, we were looking to move after 2.
We went for a 2 bed without a garden thinking we would have people to stay. In reality, we rarely had people to stay and would have got better use from a one bed with a garden. I wouldn’t have wanted a lodger so if I were to be in that position again, I would compromise on 2nd bedroom to get a garden.

Look at problems with the ESW1 certificate before you buy a flat. Lenders are very picky about which flats they lend on.

Hi OP, I just want to add another opinion. Now I don't live in the UK but I did very well out of the last property slump and I have witnessed every slump since the post 1987 crash in the UK. So, with that in mind, I read an interview with Kirsty and Phil yesterday and they believe, as do I, that property prices are likely to fall, and that the stamp duty waiver has increased prices. They urged anyone who is not buying a 10 year plus home, to hold off. I would not buy a short term property now, I would only stretch to a 2 bed with outside space - because that is what will last for 10 years, irrespective of your life changes, and also because that is what will sell, into the Covid future of WFH and lockdowns where you need your own personal outdoor space.

Also, I bought a 1 bed as my first property, had a change in circumstances 2 years later and had to sell at a loss to move on - that would not have happened with a 2 bed. Since that time, I have always stretched to get an extra bedroom.

Also: don't bank on finding a perfect lodger.
I had 3 lovely ones but the 4th was a nightmare and I had to get the police involved to get rid of him!

Oh, never rely on a lodger - I once shared with someone I didn't know in her house while I was waiting on my mortgage to buy - it was hell. I vowed there and then that I would never have to rely on a lodger and family experiences since then have only confirmed my worst fears.