Help! Mortgages/affordability/nursery fees

[Tee20x]

Massively in need of some help/advice in relation to my housing situation. I have previously posted for advice on shared ownership but now don't even know if that's a viable option for me.

Background: currently living with parents, gross annual income of around 35k basic, with overtime payments accounted for more like 41k gross. Work in a professional role, so overtime is there if I choose to do it rather than being more unreliable such as shift work or something. I have savings of about 45k but would only want to use 30-35k for a deposit as don't want to leave myself with nothing.

Most expenses are minimal, £20 phone bill & grocery costs but that's about it. Luckily am living rent free, but contribute through other avenues such as chores, garden work, cooking etc. The big stickler is nursery, shared costs with child's father but my share is still £760 a month.

Long & short is that the flat is overcrowded & I need to get out, DD is 2 and we share a room. Which is fine if that's a choice, however as the house is not ours, it means that all of our belongings are crammed into that room and I feel as if I have no space to breathe. The flat is a 2 bed flat, so not like there is masses of extra storage space etc.

I would be buying alone, for reasons that I cba to go into here - relationship has been on the rocks for a while, not married so don't want added hassle of buying with him & then splitting which seems inevitable, plus he has a history of poor credit so it just seems illogical to buy jointly with such a person. Plus I have deposit through inheritance which he doesn't have, I know this could be ring fenced but for the reasons above I just wouldn't want to buy with him anyway.

I am looking for a 2 bed property, shared ownership. Am currently in London but am looking outside of London, Basingstoke, Redhill, kent - basically anywhere on the outskirts - not fussed as long as there is a reasonably short/direct commute to London where family network is but seem to be really struggling.

I am yet to speak with a mortgage broker- which I am in the process of arranging but getting somewhere just seems to be such a long shot.

Just did an AIP with Halifax and was advised that I wouldn't be approved to borrow 90k, I presume that this is on account of the extortionate nursery fees but just feel like I'm at a loss.

With a mortgage of about 90k, factoring in rent, service charge & ground rent my accommodation costs would be the same or less than if I were to rent a property in the same place.

Obviously I just need to earn more money, though where I work (public sector) there is a slim chance of this happening any time soon and if it does it will be minimal. I do majority of childcare so can't pick up a weekend job or anything like that. Have been looking at an evening wfh job to see if that can boost my income but no luck there.

In terms of the nursery costs - I feel a bit annoyed that that is being used as the big red flag, especially due to the fact that they won't be forever. Can a 25 year mortgage term really be denied for the sake of a year or two of nursery fees. Is there a lender that doesn't factor in childcare fees for this reason? Or do I just wait until 30h free kicks in & fees reduce?

I feel like I'm at a loss here and am massively rambling but am just wondering where to go from here as it just seems as if I'll be stuck at home forever!

Extra annoying as I have a decent chunk of deposit available and it is mainly my income and bloody nursery fees that are causing the issue. So I am left wondering

1. Do I just give up hope and wait a year or 2, hope for a payrise & reduced nursery fees to kick in

1. Do I lower my standards and get a 1 bed flat not 2? My main issue with this is not really sharing with DD but a lack of storage, having to cram all of our things into a 1 bed flat just seems like ill be in the same situation I'm in now.

1. Shop around find a good broker and hope that they can assist in finding a lender that looks at long term costs over the life of the mortgage rather than childcare costs that will be gone soon?

My mind just feels scrambled.

1…. But try 3.

She can’t be far off free hours?

Definitely speak to a mortgage advisor. An independent one.

as above though, surely your little one is not far off 15/30 free hours? Will make a big difference, even ‘stretched’ as some nurseries do. And are you currently using the govt tax-free childcare to get 20% off fees in the meantime?

Mortgage broker definitely. Also ensure you are including all your income (child benefit for example). Does anyone else contribute to your childcare bills? If so make your broker aware of that too.

I think in your position I would maybe rent for a couple of years then buy, potentially riding out the high inflation at the moment. But then again inflation could remain high for longer!

Yes definitely speak to a mortgage broker as they will be able to advise/ find something if it is available. I used to work for a broker and I must say that all of the main lenders did take into account childcare costs, I'm not aware of any who won't take them into consideration but I haven't worked in the industry for a while so things may well have changed. Lenders change their criteria and affordability calculations very frequently though so your best bet is to speak to an advisor, if not I think you may have to wait for your costs to reduce/ pay rise. Good luck!

Looks like mortgage broker is definitely the first port of call then.

In my OP I meant to say is almost 2 - has a December birthday so almost might be being used to loosely here, so still quite a way off the 30 free hours, don't qualify for 15 free unfortunately/fortunately, whichever way you want to look at it.

Yes, partner pays half of childcare fee & my share of 760 takes into account the top up money from tax free childcare. It's just extortionate.

I'll be a first time buyer so not 100% sure on how a broker works, but would it help my case if I can show that even once I put down a deposit, I will still have savings left over that would cover childcare costs should I find myself struggling? Or do things like that not matter & are the calculations solely done on expenses vs income, rather than accounting for additional savings.

Apologies if you've already mentioned but does your ex pay you any child maintenance at all? Lots of lenders used to take that into account as income and probably still do.

From memory most lenders unfortunately don't really take savings into account when working out what you can borrow, it's usually just based on income, outgoings and term. You may find that you can borrow more with some lenders if you increase the term to the max they will allow based on your age. It's not ideal but you can always make overpayments if you wish and then ask bring the term down when your product transfer is due.

I haven't worked for a broker for about 3 years now though so my information may well be incorrect and out of date. If you find a good broker they will likely know quite quickly if there's anything that can be done to increase what you can borrow.

Make her Dad have the whole nursery fee coming out of his account, give him your half in cash. Don’t tell the broker you have a huge childcare bill. If they ask about the cash withdrawals (very unlikely) say it’s to buy food etc. Make sure you’ve got at least 3 months bank statements without the nursery fees showing as a direct debit/standing order/back transfer.

@WestIsWest I have thought about this as a get around, but I feel like I have heard of stories (who knows if they're true) of lenders asking for further statements etc to verify things.

Also I think something like that may work if it were a smaller amount but I'm sure withdrawals of almost 1k a month would raise eyebrows.

@PeanutCat1 not officially an ex, still together but want am wanting to do this on my own, if possible as relationship is more or less dead and has become more of a friendship.

I will get on discussing with a broker!

Look for a flat with a garage for storage.

if applying for a mortgage you do need to give accurate information as otherwise it could constitute mortgage fraud so please be careful.

In your position I would consider renting a 2 bed for a few years and then look to buy once DC starts school.

I would not buy a one bed home as very limiting both in terms of living there and when selling. If the economy enters a protracted period of recession then you do not want to be stuck in a one bed you cannot sell.

if renting is unappealing then an alternative is to relocate with your job if it permits this as your salary would be sufficient for a 2 or even 3 bed in other parts of the country. My parents did this when they outgrew their London flat and could not afford to upgrade in the South East.

I would go for option 1 and stay put for a few months. We're about to enter a national economic crisis and so holding tight might be the wisest option.

-Economy is about to enter recession
-Huge energy bills coming this winter
-Rents are being increased
-Interest rates are going up and up

You're in a unique position living rent free with your parents over this winter. You could actually save even more money. Then look at the housing market next spring when we've got through the worst of it.

Also if your daughter is about to hit the terrible twos it might be v useful to have grandparents on hand?!

Is the problem that banks will not lend you the amount you need because they're factoring nursery fees into your affordability calculations? Or that you actually can't afford the monthly payments because of nursery fees?

I'm reading that it's the former. During our conversations with our broker and bank, we made it clear that nursery fees should be EXCLUDED from their calculations, as we had accrued enough childcare vouchers to see our children through to school. Both parties accepted this without asking to see proof. Our broker said this was normal, and that other applicants will say they have family support and that's fine too. Can you not just say one of these two things, if you feel certain it's just an administrative hurdle rather than an actual affordability issue?

@Hodgewell1 yes, I had previously thought about 1 beds but am of the view that it doesn't make sense to buy somewhere I know I will need to leave very soon, though when asking for advice that's something that's often mentioned just to get myself on the ladder.

@Gasnamechanger good point about the support & terrible twos. I agree that I am in a fortunate situation & staying out would allow me to save more over this winter. Perhaps it does just make sense to revisit this next year..

@millefeuille2 you're correct - I wasn't aware that you could dictate that nursery fees should be excluded. At the moment, she is in an inner London nursery which is 1.7k and some change a month. I have near enough, enough savings (separate from what I would be putting down as a deposit) to cover my share of the nursery fees until she would be starting school, have family support if needed etc etc. Additionally, the houses I am looking at are outside of London, so nursery fees would drop anyway, so when that is factored in, plus the fact that when she turns 3 I would get the 30 free hours & the next step after that is no nursery fees, but wraparound childcare etc which would be less, I just feel annoyed that the current nursery fees seem to be such a big hurdle when they are subject to significant change!

That and the fact that I have nothing else on finance, excellent credit, all other outgoings are low. Just annoying.

You can dictate in the sense that you tell them you have made other provisions for the fees (which may not be entirely truthful). You can't just tell them not to worry about it. So it depends on what you're comfortable with.

If you are public sector would you qualify for intermediate rent? That way you could choose to buy the property you rent later. Or there is a similar London affordable rent scheme for non keyworkers.

I would speak to a good broker and then start researching. Different lenders have different criteria concerning what they will/won’t include as income. As your DC will be 3 in December 2023 then you will qualify for the 30 hours funded from 1st Jan 2024. It might be worth starting to look for a flat in Summer 2023 as it may take you 6 months or longer to complete, especially if you are in a chain. I’ve bought two houses and each time it’s take me 3 months to complete the purchase and that is being chain free with no property to sell and I was also buying an empty property.