What property would you buy/what would you do if you were us?

[NightOwlMum]

Hi, me and my DP are FTB and have been in a long process of finding our first home. Currently staying with family so no costs for living right now apart from food (thanks parents). But I’m due to have a baby in 2 weeks or so, and we’re considering our options.

We were due to buy a flat for £185k but that might fall through due to leasehold issues.

We have a combined income of £32k (I work part time). I’ll be going on maternity leave very soon, it’s pretty standard, full pay for a good number of weeks then statutory which isn’t that much lower, then nothing for 3 months (we have savings to cover).

We have a deposit of £65k, which we think is high for FTB. We’d resent having to rent due to this, as our mortgage would be half the cost of rent after deposit paid.

My parents want to help me with childcare when I return to work so won’t have nursery to pay for. We need to live near them. 2 bedroom house starts at £215k locally (but these are rare and more common to find £225k+), 2 bed flat starts at £150k (but these are grotty) so a nice 2 bed flat is £180-200k.

We got approved for a £120k mortgage but that offer will expire very soon due to delays with the leasehold we were trying to buy.

It might work out fine in the end but my nesting instinct for baby has kicked in so I’m thinking- what else could we do with our cash?

P.s. there is an extra £35k we could tap into but it would involve the sale of something we’re using for starting up a business, we don’t want to sell it.

Any flats near you with a share of freehold? I'm a leaseholder who's been ripped off, I can't recommend it.

Tricky, your deposit is great but income quite low to service a mortgage.

Honestly if it were me I'd prioritise having my own place and rent somewhere to have my baby. I appreciate you don't want to but I couldn't have had my baby whilst living with family. But that's just me!

Are you handy with DIY, could you buy a cheaper flat and fix it up whilst staying at your parents? Have it all spanking new for moving into with new baby?

Also - I appreciate your parents will help with childcare but you might want to think about the possibility of at least one day of childcare per week. It's still more than a year away and things could change.

Good luck with everything

I think you will have to just keep on looking? Presumably each month that goes by you save a little more and your pot grows? Mortgage offers expire all the time, with a deposit of that size you’ll get another one I’m sure. I agree about not buying leasehold property if you can avoid it. Flats are out of fashion because of the pandemic so only buy one if it’s an absolute bargain as it might be difficult to resell in the future.

I'd use the extra £35k and buy a house.

It will save you having to move as quick as you would (presumably) and personally, if I had the money available, I'd do that. I know many would not necessarily agree. I think the house would hold its value or grow more than a flat.

Get through the next few years. I'd then concentrate on my career and decide the next step.

@BigGreen yes there are quite a few freehold/share of freehold flats nearby, maybe that is a better option. The market has gone slightly dry since I last checked but when it picks up again they should be there.

@UpAt5amAgain yes we can do up a place really easily as long as it’s not a massive project. Painting walls, redoing the floor was all in our plans. My parents don’t mind us staying until that’s done. They’re also anti renting because of how much it costs. If we rented we’d be losing so much money. So they’re supportive of us staying until we find somewhere to buy. They think we should tap into the £35k though, which we wanted to use for the business. Partly the business set up was to enable me to be a working mother with flexibility in my schedule. We have friends who this works well for and I’m more suited to running a business than being an employee.

Sounds like you've done amazingly to save such a great deposit!

I hate to be the bearer of bad news, but you going onto maternity leave is likely to have a huge impact on your ability to get another mortgage offer if the current one expires. Suddenly, affordability becomes more of an issue - childcare costs (appreciate you said there will be none), affordability whilst on SMP, likelihood of a return to work. I'm not saying you wouldn't get another offer, but you're likely to have to jump through hoops and it may be less than previously offered.

I'd also recommend a house if you can stretch to one. Moving again in a couple of years brings it's own expense and upheaval.

@londonsaint we’re very tight fisted which is why we ended up with so much... plus an asset of £35k. Always been on low incomes but the way we think is never to pay too much for anything, and the going rate is always too much!

I know getting a new mortgage offer will be difficult, that’s why I’m wondering what our options are. We were actually offered £150k mortgage before, but decided on a cheaper property. We could just about afford a cheap grotty flat if we tried again and it went down to £90k mortgage offer.

After a day thinking about this I think our only choice if our current purchase falls through would be to choose a cheaper flat in a different area that’s still within comfortable driving distance from my parents. I’m seeing things around £150-165k which even have share of freehold. I guess no one else wants flats right now so that’s good. Couldn’t afford a terrace unless we moved somewhere too far away from my parents. So instead of applying for a £120k mortgage, we’d apply for £85-100k mortgage, due to affordability as new baby and being on maternity pay.

For those who have experience of a mortgage right after having a baby, is the above realistic considering our normal combined income before pregnancy was £32k?

Why not contact a mortgage broker to see what you could get? They’ll be better able to find you a deal than you might think. Ask broker about charges (often covered by mortgage provider rather than you), then outline your circumstances and see what they can find for you.

Personally I’d add in the £35k and together with the £65k buy a house which can be extended or have a loft conversion some years down the line. This will save you the cost of moving. Put £100k deposit down and a mortgage of £125 in a good school catchment.

Two factors which might make a difference when I see the responses:

-We’ll probably move due to a change of work location within 5 years.

-£35k business investment is in a retail unit, there are ongoing low maintenance costs associated but in terms of retail it’s cheap to run, no business rates, easy to make money out of even a hobby business, but I had planned to develop it into something more full time and serious as it would be easier for me to juggle that around having a young child than working in a low paid office role.

Sounds like you really want to keep the retail unit and that's understandable. Are you making money from that at the moment? Can that be rented out? Even if not as a retail unit can it be rented to someone as storage? Every little will help you if its sitting empty and you're realistically not going to use it in the next year or so.

Flat-wise you're right that flats are less popular at the moment pretty much everywhere. Keep looking, something a little scruffy may come on at £150k or thereabouts and you are in a good position to buy it and fix it up. Then when you come to move again you might have some equity in it and you've retained your retail unit.

Try for a ground floor or garden flat if you possibly can - might be a premium on a garden flat but in the long run with a baby or toddler it is so, so much better.

Hope something comes up soon and good luck with the baby.