First time buyer in 40s

[Diorinthecountry]

Morning

We currently rent a social house in a very rural area. We like the area we live in its a lovely community with stunning views, lots of lovely walks etc. However it can be isolating over the winter. Our house needs a new bathroom, kitchen and the sitting room re done. We would pay for all this ourselves and have permission to do the work. We have lived here for ten years. There is me, dh and dd 12.

Last week we went to view a show home on a new build estate. The new estate is in a good area and closer to a town. All the three beds are currently sold but they are planning on building more in the future. The three beds sold for £375K I've completely fallen in love with the new build house. It would have so much more space than our current house, we could move in and have no work to do.

However we only have £10k of savings. Dh and I have our own business which had a low net profit over the covid years. We have made significant changes to increase our net profit and could keep saving into our deposit fund.

Is there anyway the new build house could be a possibility?

I've spoken with an independent mortgage advisor. Who said to look at what our net profit is and times it by four.

Dh and I honestly don't know what to do for the best and are in a bit of a pickle. Should we just give up the idea of getting a first time mortgage in our early 40s or is it possible?

Sorry for the rambling on and thanks for any advice.

So it sounds like you’ve only seen this one 3-bed? You don’t have to spend £375k to get a 3-bed house. Maybe view some others.

Agree @grumbleandcustard there could be a plan c which is owning a home that isn't the 375 new build. Keep an open mind as your deposit fund builds.

Good luck, I know it's hard when you're self employed from experience.

Can you buy the house you are renting? Do you have right to buy?

Unless your business is about to take off, then I don’t see how you’d afford a mortgage for £365k.

We earn £86k between us, evenly so just under £5k net a month. We have £200k deposit. I’m not looking above £450k (as our LISAs wouldn’t be eligible). Even £250k mortgage makes me wince at 4% = £1320/month (1% would have been under £1k). Our rent is currently £1325. We have no children, and aren’t planning on having any. We are 35. Just a different example.

@ThankmelaterOkay we have given up our commercial property, sold vehicles and let our staff go. Plus other bits to retain income. We have moved a lot online and added on extra things to our business. Our income has continued to rise whilst our outgoings have reduced considerably. We work from home now.

@Geneticsbunny unfortunately we can't buy this house as they won't sell them.

If it helps from someone who bought a new build many moons ago! Of course the show home is gorgeous, it will have ALL the optional extras plus usually some not available and specially made furniture to make it look extra spacious. For context on my site people usually spent approx £15k on “extras” and the show home had £40k of extras, now you may be able to get a voucher for some of these but realistically if you bought one it would look nothing like the show home you saw. I think you’d be mad to move with such a low rent secure tenancy.

Please don’t get hung up on the one new build development that you’ve seen. The show home and marketing materials are there to reel you in. I’m not saying they’re bad, but just don’t get carried away.

Have you looked at prices of non-new builds? You may find a better property elsewhere. Yes, the decor/kitchen/bathroom might not be to your taste. But the monthly mortgage payment could be more manageable and, in time, you can update the areas that need work.

As long as the roof, walls, etc are sound then you have a secure home.

@CremeEggThief

I bought fir the first time, alone, in my 40's.

im 54 now.

it's not my ideal property, but I can't make the jump up to (my idea of) the next rung.

However, I have affordability & security and for me that means a LOT, I have friends in the 60's and due to divorces (& some crappy decisions) they're renting and are stressing out about the affordability now & are worried how they'll cope when they retire & still have to pay exorbitant rent out if low pensions.

my pension will be utterly crap, but I will be mortgage free, so should be able to cope.

and that's why I'd buy if I could possibly do so.

"Our projected net profit for the next few years will be £100k or over. However the tax man will get a bigger cut of that."

It's not net profit then, is it?

It sounds like you'd do well to speak to an accountant, not a mortgage broker. Understanding your tax liabilities will have a huge impact on your affordability - for instance are you and DH paying yourselves a salary through PAYE, or taking your profit as dividends? How are you funding your pension contributions? You say that you improved profits by reducing costs (by cutting staff and selling vehicles) - but how will you sustain your business over the entire length of a mortgage term if you are shrinking its balance sheet? Are you making enough provision for depreciation? Please don't say you treated the proceeds of the vehicle sales as income?

You mention your business is low profitable due to Covid and you are in your 40s, so I would recommend renovating your existing place rather than buying another. However, your decision is the last one.

Unfortunately if they have easily sold the current phase at 375k the next phase will likely be more. New build is such a premium though. Work out what you can afford and see what that will get you elsewhere.

Round here, developers are desperate to sell houses and are offering all sorts of incentives to make it do-able.

They have their own broker with access to mortgages not necessarily available on the open market, and can pay a 'deposit contribution' that brings your deposit up to 10%.

I'm not suggesting that any of this is wise. If you are happy where you are, paying low monthly rent for a secure tenancy, then I'd stay put myself.

But the developer will be able to 'help' if it secures them a sale.

Your rental payments are tiny compared to what you’d pay on a mortgage to buy somewhere at £375k, even if you had a 10% deposit. I don’t think it’s doable right now with your low savings, but might be in the future.

I’d do some research into mortgage rates and see what you might pay on a 90% mortgage, then calculate the monthly repayments. Then save the monthly difference between that and your rent to make sure it’s affordable and hopefully you will a deposit + costs within a year or two. You can then look at buying something and take the time to research properties.

If I were you I would look into shared ownership however, you will still have to be able to pay the mortgage and the rent.

With such a low rent you are really going to notice the difference paying a mortgage on that sum if you do not have a significant deposit. A 10% deposit may be enough to secure the mortgage but not on your current salary. There are also issues with having a mortgage sometimes with a new build.

If you can continue saving house prices are coming down so you may be able to get somewhere cheaper. Probably not a new build though.

For example, my new mortgage is £150k and I will be paying nearly £1k a month (and that's with a significant deposit). Unless mortgage rates drop.

@SpringHasSprung23 - that's my concern. I've been renting briefly to have a fire break but I need to have my own home. I am like you and want security of a home.

I agree compared to private rental, Spring, but not necessarily for a secure social tenancy, which is what both the OP and I are fortunate enough to have. I also have health issues which may well impact on my ability to work full-time, so for me taking on a mortgage would be a bigger risk than staying where I am...

@grumbleandcustard

I wish!! Around here that would buy you a 3bed that should be condemned!! & I'm not joking.

@CremeEggThief

if it's a lifetime tenancy then there's more to consider, for sure.

However, my Aunt & Uncle in their late 60's have a beautiful 'Council House' on a lovely street (mostly owner occupied), with a large garden they have made absolutely gorgeous, they paid to put a new kitchen in & decorate, re carpet at their own cost and have been happy to do so. Their rent is reasonable compared to renting privately.

so it's absolutely beautiful bungalow, in a fabulous location, I'd swap in a heart beat, BUT, they're having to keep working longer because they'll always have rent to pay.

id rather not have that worry. Maybe they'd get some housing benefit (I don't know) but whose to say that will still be the case in years to come anyway?!

it's all a balance isn't it. <sigh>

I would suggest you get some long term advice.

Rent at 480 per month - this is great for now - but what happens when you are no longer earning? Are you paying into pension funds that will sustain this rent after retirement? How long is your business likely to sustain this increased level of income - is it something that you can carry on doing until you are 65 or even longer?

Paying a mortgage at 1,900 as someone above quoted - is that sustainable for 25 years - you will then have a house to live in or somewhere to downsize from when you retire. Again - can you fund a decent pension on what is left from your income - remembering that this will decrease your tax liabilities.

Is the difference between a 2 bed and a 3 bed worth it for the number of times that your older son will visit - versus renting an airbnb nearby for visits? At some time in the future your 12 year old will move out.