First time buyers - Monthly payment seems huge!!

[Walterwhiteswifey]

We currently rent a 3 bed for £1200 a month. We are in the south and trust me this is cheap! We have recently come into money, enough for a decent deposit but houses we want are around 500k.

Right move have mortgage calculators for properties we want, which estimate our monthly mortgage payments will be nearly 2k! Despite a sizeable deposit worth a quarter of the value of the house. Is this right? I'm so confused as I always thought renting was more expensive than owning but we would struggle to pay such a huge amount each month.

I find this all really daunting and annoying as we have such a large deposit but seems we can't afford the house we need.

It really does depend though on where you live/are buying. We bought our four bed detached in the south 7 years ago for around £400k, with around 1/3 deposit. Our mortgage is now around £1k pm, but the rent something similar in our town would be £1.7-2k pm. We do have a very low interest rate though, god knows what it'll be like when we fix a new rate. When we bought, rental prices round here were probably about the same as we would be paying for the mortgage, but our mortgage payments went down when we fixed a new rate, and rents have skyrocketed.

This is a good idea - we started off on a 30 year mortgage and have shortened it by making lump sum overpayments as we’ve gone along. I’d forgotten that!

Offer less on the houses you want to buy. Anyone borrowing has the same problem.

Rightmove used Nationwide rates for estimation, so whilst the final rate might vary a little, the ballpark costs are probably right. I think 2k on 90k joint income is a bit risky.

As other users suggested - buy a smaller house to get on the ladder and trade up once you've gained more equity. Rates will likely go down in 2-3 years as it looks like we are getting inflation under control, so the cost of borrowing will be significantly lower as well.

@Epli it doesn’t really work like that anyone. Houses prices won’t be going up much and stamp duty is much money that moving multiple times isn’t easy like if used to be

the ladder doesn't really exist now, FTBs are older, prices higher, SD

@Nw22 cross post.

I know a few people who bought recently & they went straight to the house stage which made sense to me.

i don't think we will see the ultra low rates for some time

What I meant is that by paying the mortgage you are increasing building the equity, so if they have a deposit of £200k now, then if they decide to buy and trade up in 5 years it is going to be £200k + whatever they manager to pay back. Even if prices do not increase, they LTV will get more favourable.

Sorry if my post was hard to read, I wrote it during a boring zoom meeting and it obviously did not help the grammar :D

They do if they live where we do! And 500k will only get a small 3 bed semi...

Yep, me and DH took out a 40 year mortgage on our first house, and when we moved to our bigger "family home" 8 years later, we extended the mortgage length back up to 40 years, to make our payments lower, knowing that we will inherit money, and earn more in the future to overpay, as and when is more affordable. Would have loved to have taken out a 20 year mortgage and have paid half back already, but in doing so, would have meant we would never have been able to afford to get our foot on the ladder, let alone buy the house were currently in. Instead, approaching 40, we still have 35 years left to pay, but our repayments are low (400pcm) on a large 4 bed house, in a nice area, and we have started overpaying, as we are now in a comfortable position to do so, and plan to pay it off by our 60's with inheritance and regular overpayments. 40 year mortgages if you're in your 20's make perfect sense.

I think you've all hit the nail on the head, we are trying to move into our forever home pehaps too soon and need to work our way up.

Remember too it is because the rates have risen a lot recently. So even this time last year it may have been cheaper for you to pay a mortgage than rent

Rates will likely go down in 2-3 years.

There is absolutely nothing to suggest they will return to the historically low levels we've seen in the past decade. Those were an anomaly, not the norm.

This.
your options are to wait and see if the rates go down, whilst praying the house prices don’t go up. Or to buy what you can now.
I don’t buy into the trading up houses. House prices near us have risen by an eye watering amount. We’re too old to extend our mortgage and won’t be earning anything more. We are probably going to have to stay in our ‘starter home’

I imagine most ppl aren't buying 500k houses as a FTB so that, and a combination of your rent being cheap will be why it feels so much. And unfortunately you are buying at a time when interest rates have just gone up, it would have been a lot more comfortable at say 2%.

It does get easier though hopefully. As long as you know you can find the monthly repayment I'd say it is on balance great having your own property , you can decorate how you say fit etc

In my experience of living down south, most people buy a flat or tiny house then gradually build up. You're wanting to jump straight to a 3 bed house.

I would suggest buying a cheaper doer upper as your first house if you can cope with the work. We've just bought out 2nd house with a 70% deposit so a very manageable mortgage (likely to be a forever home) but that's because we did really well out of our first property- a combination of not over stretching ourselves so paid off the mortgage, and then some cosmetic stuff albeit not too expensive (maybe 20k over 7 years) meant it went up in value.

I was a ftb in 2015 and am in my 30s so we're not talking years ago. We were lucky in thst we bought in an area that has increased in value and low interest rates meant we paid down our mortgage quickly but irrespective of those things we'd still have a pretty decent deposit now but it does mean we have waited to get the house we wanted.

How old are you and what deposit do you have?

With the price of stamp duty, solicitors, estate agents it maybe sensible to jump at the three bedroom semi-detached as we did. BUT be prepared if you like holidays abroad, nice cars, TV streaming, going out, you may struggle. We cut right back, over paid mortgage so that we could start a family. For us it was worth it

How long ago was that?

Plenty of FTBs due to their age are buying 3-4 bedroom homes as they have children or planning to have them very soon.

my sister & her friend both bought houses instead of flats, one for 500k & one for 600k

that's in London there isn't much choice tbh

I would suggest buying a cheaper doer upper as your first house if you can cope with the work.

renovations are very expensive currently unfortunately