How is anyone affording life?

[Ellsee1995]

I’m 28, my partner is 30, we both work full time and both earn around £40,000. For me, this is around £2,200 a month, his is slightly higher take home monthly (self-employed).

we will hopefully be buying our first home really soon, we’ll have a deposit of about 27k and we’re in the south so property prices are horrible lol, but will be looking for a 2 bed around the 300k mark.

when we’ve spoken with our broker, he’s given the numbers of between £1600-£2000 for monthly mortgage payments. I know the interest rates are high, but this seems really REALLY high. I know some of my friends certainly aren’t paying this monthly, and are paying under £1,000, and really I’m just trying to get a better understanding of what I should be expecting to pay out.

at the moment, our combined bills are £1,400. £1,000 on private rent and £400 on all utilities and a few subscriptions. I’m really frightened to leave this comfort blanket that we can afford, and are able to save too, to looking at £2,500+ every month.

any other first time buyers scared too?!

Hi,

2k does seem really high. What kind of interest rate is your broker expecting you to get?

A 270k mortgage at 6% with a 25 year term (pretty short!) should cost you £1740 pcm. Increasing the term to 35 years lowers the cost to £1540 pcm.
Remember, you'll be able to remortgage in a few years and hopefully get a more favourable rate.

Play around with a mortgage calculator. It may be that you'd be better off saving for a few more years and borrowing less.

Bear in mind that those you know who are paying less than £1000k a month may still be locked into a low-interest rate and have yet to re-mortgage onto the new higher rates.

And they also may have bought their houses when properties were cheaper so have less to mortgage.

In terms of a £300k+ house with the current interest rates, yes between £1.6k - £2k a month sounds about right.

It used to be sustainable, it's worse now and I have noticed that the property market in my area has pretty much stalled.

You also need to remember that just because you're paying cheap rent now - doesn't mean that'll last as your landlord could put the rent up in line with their rate increase at any time.

I would consider that the 300k properties your looking at now - may be priced more around the 250k mark at some point next year and therefore much more affordable. Don't buy in this falling market unless you have to. Its only just starting to reset. Keep building that deposit. Opinions may vary of course.

I think right now it’s a buyers market so I would be going in with low bids and trying to get the best/cheapest house you can to keep the mortgage as low as possible. If you can get a doer upper and just DIY it as much as possible I think you’ll make some money.

That does seem high, we are currently remortgaging and owe around £270k with a LTV of around 60-70% and our payments will be around £1400-£1500 when our current fix ends and we move onto the new "deal"

Your friends paying £1000 pm are probably fixed on a much lower interest rate if they have similar valued homes or have a lot more equity

If your rent is affordable you may be better to stay in renting and continue to save for a while?

Who knows though as interest rates are unlikely to fall as low as they were so it may not make a huge difference waiting either

It is scary when you take out a mortgage. I get scared every time I remortgage or move!

If you extend your term your monthly payments will be lower. Then you can overpay as much as possible but if you need to you can go back to the standard amount.

However I agree that now is maybe not a great time to buy - interest rates are hopefully going to drop a little. It's all a gamble though, I'm only going on what I've read, who knows!

Where are you getting your mortgage rates from and how many brokers have you spoken to?

Back in April or May, we managed to get the rate down by almost 11% by calling from one broker to the next to the next (or maybe 9%, I am not certain). Five brokers in total.

The answer to affordability is extending the term. You really don't want to do that long term though, it means the banks get a huge chunk whilst you pay off very little equity. A good strategy is to get a 35 year term on a 2 year fix then when you come to remortgage, shorten it as much as you can, assuming interest rates are lowered.

We have been looking at trackers. However we are looking to buy quite a lot under our means - it's a risky strategy if you won't be left with too much disposable income.

I share @DrySherry's view that houses will be cheaper next year. By how much is anyone's guess though.

Do your own calculations using online mortgage calculators and looking at best rates tables .
Remember you will need to qllow ££ for maintenance furniture decorating insurances etc

Its the new normal or return to the real normal after the failed ZIRP/QE experiment of the last 15 years.

I would imagine a lot of your friends are on fixed rates which will be coming to an end soon x

If you can only comfortably afford a mortgage by taking a term greater than 25 years then I feel that you are over-stretching. You should wait for prices and conditions to come to you rather than stretch yourself to give more money to your vendor.

In your circumstances I'd be targeting a £250K property next year (worth £300K now) with a £50K deposit (you're half-way there). Then you'll be looking at a 80% LTV and will have better mortgage options available to you.

Good advice, that 300k house could easily be a 200k house of the future.

That’s not even what DrySherry said, DeadHouseBounce

Hi OP,

I disagree about buying in a falling market - it really makes no difference because when you sell, you're just transferring the equity you've paid in. It only matters when you get out of the market. You buy a £300k house now, £30k deposit. In 5 years time, you've paid in £30k off the mortgage. When you buy your next house, you're transferring £60k. It doesn't matter if the house sells for £250k.

Given your incomes I'd think about giving it another 6 months, plugging away at that deposit (you should be putting away at least £1.5k a month at the moment surely?)- so you'll be almost £10k off on the deposit, house prices will probably have fallen another few percent, so your mortgage will then be less. You should be getting a return on that deposit money at last too so you'll have gone up another couple of k just for it sitting there. I think interest rates are roughly stable so that's a gamble I'd be taking.

Has their been a HPC forum invasion today?

I keep meaning to have a look for it, but thinking about it makes me feel a bit dirty.

I disagree about buying in a falling market - it really makes no difference because when you sell, you're just transferring the equity you've paid in. It only matters when you get out of the market. You buy a £300k house now, £30k deposit. In 5 years time, you've paid in £30k off the mortgage. When you buy your next house, you're transferring £60k. It doesn't matter if the house sells for £250k

What sort of crazy ass dystopian society are you living in?

If the op buys a £300k house now, pays a £30k deposit and pays £30k off the mortgage capital over the next 5 years - but in 5 years time the house is valued at £250k - then no, she won't be 'transferring' £60k to a next house. And yes, a £50k drop in the house price absolutely would make a huge difference. In that scenario, the op would have £10k equity to put towards her next house, not £60k!

Sorry you are kind of right I put this all a bit wrong - end-of-day muddle, but the point still stands that falling house prices aid people moving up the ladder. So, your 300k house today dips to £250k - you've 'lost' £50k. But your next house which would have been 400k today - dipping by the same % - is now 333k. When you are upgrading, and the other home has dipped by the same % - you win. You only don't win when you're at the end of the chain.

You need to buy something cheaper first

Could it be because your deposit is under 10%? Rates drop at certain % as you are less risky.

I mean, 27k isn't 10% of 300k. Maybe take a look and see whether that impacts things.

Unlikely. The rate difference between 95% and basically 60% LTV these days is barely worth handing over the extra cash for.

We looked at 90 and 95% and it just wasn't worth it. It's nothing like in bygone years where savers were rewarded for big deposits.

Why are people who are first time buyers not buying houses that are first time houses?

We recently had ours up for sale. It's our third home. I lost count of the number of first time buyers interested and was somewhat bemused.

I blame instagram making everyone want a decent home first time round!

Buy something cheaper, do it up and then move.

£300k is a first time buyer house in the south east. It's my 55sqm identikit two bed at the wrong end of the 2nd cheapest town in the county. It's a one bed flat in the better towns nearby. It's a studio apartment in London.

Agreed. Unless you have some very pressing reason to buy right now.

The OP is a FTB so this is not relevant to her. Your earlier post doesn't make any sense.