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

But personally I would stretch as far as you can, while still feeling comfortable.

Excellent advice. Now if you could just tell me what those numbers are for me personally...

My first flat was a 2 bed (when most pals bought 1 beds) and I was eternally grateful for it, when they all hung up washing in their kitchens, and had guests on their couch! A second bedroom just gives you more flexibility.

God, the washing - totally with you on that. Currently have two clothes horses and a bike in my (not massive) kitchen

The point I'm making is that as long as you have a good/secure job and promotions are likely, there's nothing wrong with long mortgages.

Thanks. Genuinely people, you've almost all made me feel better about a longer mortgage!

My first flat had no balcony and no garden, shared or otherwise. I'm not even a particularly outdoorsy person but I did yearn for outside space. I did have window boxes which was something!

That does sound tough. I wouldn't consider somewhere that had no space at all - shared is something I'd like to move away from with time but it's not a dealbreaker and having lived alone and WFH full time for 6 months it's been a lifesaver for my sanity!

Are you looking to start a family in a certain timeframe?

No - I'm mid twenties and single, I think I would like a family but it's not looking likely to change particularly quickly and I wouldn't be in a massive rush to get to the baby stage - maybe 5 years from now. But obviously you can never say! But I've got the biological clock (hate that phrase) on my side for the most part.

Have you gone to a broker, as they will do "affordability" checks and I think that's a good guide to what YOU can afford.

I'm in Scotland so figures here will be nothing like London/SE, but a broker should be able to give you the best advice.

Oh, another tip is to get a 5 year fix if possible. I don't think house prices will go down much (if at all), but even if they do, most experts agree that they will bounce back by 2022. So if you're not remortgaging for 5 years it won't matter to you if the value of your flat goes down next year.

I've got a decision in principle for a 30 year term, but as far as I know the proper affordability checks are carried out by the mortgage lender on application? My DiP is from a mortgage broker, they asked about regular outgoings such as pension etc but other spending wasn't taken into consideration.

I'll definitely be aiming for an initial fixed term!

I definitely did affordability before finding a property but that might have been my own broker. Work it out yourself, but you need to include absolutely everything. I remember being surprised at having to count up dentist visits and contact lens costs! And don't underestimate.

However it's important to remember that you may well spend more now because you can! So just try and estimate as reasonably as possible about what you won't give up!

Look at ex council properties, look at the ones closest to where you want to live, you get more house for your money & they are usually a good size & if you choose a house have outside space. Flats are a bind as usually the council only sell them leasehold, you have to pay service charges & a portion of any structural improvements or repairs.

I'm doing it comparative to rent at the moment - because obviously I know what my living conditions are like and how much fun money/saving money/backup money I have etc each month!

I probably could stretch to more. I've looked up a couple of slightly more expensive places, I'll call up tomorrow and ask about the service charges etc - I think I was quite put off by the first viewing being in a purpose built block of flats that's known around here (it turns out) for having high service charges.

I don’t have time to read the full thread at the minute, but I agree with @Ariela - check about the cladding inspection thing and be absolutely sure you understand the implications of it with what you are buying.
With that in mind, I’ve seen a handful of nice one bed houses advertised recently for the same price as some two bed flats...

Just a note to say my friend started with a 25 year mortgage, but repaid a chunk each year out of annual bonus in January. After 3 or 5 years when the fixed rate ended, they remortgaged for 15 years, and by then interest rates were a lot lower so continued overpaying. So 25 year mortgage paid off in approx half the time.

When I was in a similar position I was also very cautious and didn't want to stretch too far. Possibly a shade too cautious, but I do still value knowing I'm in a position where I should be able to afford to keep a roof over my head even if my circumstances were to change quite a bit.

I did actually view having a second bedroom as part of the cautiousness, though - I looked at it as, if I'm ever broke I can rent it out, and were I ever to start a family I wouldn't be stuck in a one-bed with a baby/toddler/beyond. (I kept seeing one-beds on the market with toys unsubtly stuffed down the back of the sofa, or wherever!)

One tip, in looking for cheaper properties - look for ones that don't have central heating. People are really, really put off by this and it tends to be reflected in the price. In reality, it's something you can add to add value (yes, it's a hassle but probably worth it for the right property), and frankly you really can live without it quite easily in many places, especially in a flat where you're likely borrowing heat from other properties anyway. Also, yes, look for the ones with functional but outdated kitchens and bathrooms (hello, avocado bath suite!) and weird decor. Swirly orange carpets are not forever, and seeing past them is a useful skill!

It just depends on your lifestyle and what you value. I wouldn't want to stretch myself because I like being able to save, my goal in life is to be mortgage-free as early as possible and I like being in the position where losing my job/not being able to work for some reason doesn't impact me because I have savings and small outgoings. Not bothered about a big house. Personally I wouldn't want to be stuck with camping holidays and be worried about redundancy (especially during the current crisis, with house prices projected to go down and interest rates potentially going up) while paying a massive mortgage for a nicer house. I might be in the minority though. It depends on what is important to YOU.

My advice is don’t buy a flat unless you have absolutely no choice. Stretch your budget or be flexible with area to get a freehold house if you possibly can.

You’ll probably live there for longer, capital growth is usually better, your space is your own, and you won’t have any of the lease/maintenance/noisy neighbour problems that so often come with flats.

With that in mind, I’ve seen a handful of nice one bed houses advertised recently for the same price as some two bed flats...

Not round here unfortunately or I'd 100% be going for a one bed house. There just aren't one bed houses around here from what I can see at all!

When I was in a similar position I was also very cautious...I did actually view having a second bedroom as part of the cautiousness, though

Yeah, this makes sense. I suspect it will come down to what's available, but I'm definitely pushing for the second bedroom if possible.

(I kept seeing one-beds on the market with toys unsubtly stuffed down the back of the sofa, or wherever!)

This made me laugh - 'we're totally not moving out because of the lack of space, nope, this place is perfect but we're moving back to family/any other reason'.

Definitely looking for the properties that are functional but outdated/random issues that look worse than they are. Not seen any without central heating yet!

My advice is don’t buy a flat unless you have absolutely no choice. Stretch your budget or be flexible with area to get a freehold house if you possibly can.

My choice is buy a flat or move. As I said earlier up, it's an extra 70k+ on top of what is currently my maximum budget to start getting to house prices. It's just not at all possible right now!

Personally I wouldn't want to be stuck with camping holidays

Thankfully I like camping no - I do take onboard and appreciate the rest of your points. Thank you.

Viewed one of the strongest contenders today - one bed, it was lovely but has a real noise issue so that's basically ruled it out. Couple more to view tomorrow evening... one which looks great on paper so fingers crossed that a) it's as good as it looks, b) I can afford the mortgage (it's the max of my mortgage in principle) and c) other people piss off and don't offer

Bizarrely I've costed it up and if the service charge includes building insurance (I will check) then it would only be costing me £50 more per month than my current rent. Despite being the highest possible mortgage they think they'd give me. Not sure if I've missed something

Well, little update to say I've had an offer accepted this morning on a 2 bed with some outdoor space which does stretch my budget but I can still afford - some work to do but it's liveable in so I'll save up for a couple of years to do that!

Really excited (and terrified, which I'm told is normal!) and wanted to thank you all for your advice. Fingers crossed it doesn't fall through!!

Most service charges do include buildings insurance.

If I were buying a flat (freehold or leasehold) I would be looking for a small block built in or around the 80s with no lift and no electric gates. In my experience (and I work in this industry) they have the most affordable and stable service charges. You want a decent sum each year going into reserves and when your solicitor is doing the due diligence ask the managing agent or the ManCo to see their CapEx plan. Smaller older blocks are less likely to fall into the category of requiring an EWS1 form; they won't have cladding and they'll stay under the 11m which seems to be the new trigger for lenders to ask for one. Incidentally, if the managing agent does have one, I'd suggest that they're probably pretty good as they've been on the ball and responded to the market requirements quickly.

I agree with PPs to stretch yourself. At the stage you're at in your career, your salary will just increase - mine doubled between my early twenties and early thirties. Which makes your mortgage much more affordable, and you'll still have a fallback position of being able to take a lodger in if your financial situation does change adversely.

Ah, good luck!

@flipperdoda

Well, little update to say I've had an offer accepted this morning on a 2 bed with some outdoor space which does stretch my budget but I can still afford - some work to do but it's liveable in so I'll save up for a couple of years to do that!

Really excited (and terrified, which I'm told is normal!) and wanted to thank you all for your advice. Fingers crossed it doesn't fall through!!

Congratulations!!

Don't worry it is totally normal - we were FTBs 3 years ago and I had a couple of massive wobbles during the buying process 🤦‍♀️ It is scary to commit to spending that much money....

Thank you! Yes - I wasn't expecting my immediate reaction to being told they were accepting my offer to be terror, but I seem to have worked through that to excitement (for today, at least!).

Possibly it's terror because the mortgage approval still needs to be done, even in terns on not having to withdraw your offer.
Sounds like the flat is exactly right (and the type that most pp advised to buy ).
Good luck with the mortgage! (btw really like your writing style, OP).

Fantastic update! I was reading through hoping you would find somewhere perfect congratulations, I hope everywhere goes to plan.

CatAndHisKit I think the terror is because it's all gone so quickly and I've been aiming to buy for enough years that it hasn't really felt real...even the offering (obviously I knew it was!)...and then once someone went 'yep they'll take your thousands of pounds' I was a bit oh, right, okay

Thanks for the luck. Glad to provide an update AND it actually be based on PPs advice. Rare but happens!

btw really like your writing style, OP
This has made my day. Seriously.

I wonder if your offer was the highest to beat competition - it seems impossible to 'win' anything currently where I'm lookng unless yo offer (overvalued) asking price or higher. I hope someone will accept my (more realistic but solid, cash from proceeds) offer soon .
And yeh, you could write for the press, imo .

Are you thinking of buying a new build?

I'd buy a two bed freehold with access to some outdoor space.

Downsides of leasehold are length of lease and service charges.

A spare bedroom could be an office for WFH or a room for a lodger. You can let a room Mon-Fri.

Interest rates are at rock bottom, some of us remember when they were 15%.

@flipperdoda, stretch yourself, get a 30 year mortgage and pay (I'm just about to do this and had multiple conversations with my broker with this as had the same worries as you). I'm on a fixed rate mortgage for 2 years and will then remortgage, after having hopefully overpaid to the maximum during that time and saved a bit (easier when I'm not having to pay rent AND save for a deposit, like the last 15 years!!!)

Also, get some income protection. It foesn't cover everything, but does cover many eventualities. Mine is £100 a month and I'll get a £3k a month payout which will be enough to keep me going if I got really sick (not with covid).