How do you get onto the property ladder??

[wooliemam]

I don't mean to sound stupid or thick here.

But we are a family of 4/5 (step daughter comes here also) with an annual income of around £50 (I am not working but will be next year so this will rise to around £75k.

Our outgoings are high- rent alone is £1750pm.

We have around £20k in savings.

We find it hard to save if I'm honest!

Around where we live; even if we moved a little further, a 4 bed on average is around £500k. Even if we saved £50k for a 10% deposit, the mortgage calculations are stating our monthly repayments would be £3,500pm!

How is this possible? How can anyone do this? Even with me back at work after tax and outgoings we couldn't do this.

Am I just being naive or stupid here?

Most people don’t start with a four bed house. Round here, people start with a two bed before children, maybe have one child and move to a three bed. Stay there forever and have another child or if they’re lucky or have had career progressions then move to a four bed.

I think your expectations are too high to start on the ladder I’m afraid.

You’re not being stupid, but it’s a ladder for a reason. Very very hard to start with a 4 bed. Normally people have to start with a flat or a 2 bed, increase its value — then instead of rent, you’re paying off the mortgage every month so your equity increases even while you’re increasing the value of the house (hopefully). Then when you sell it, you’ve saved your usual amount AND you have all this equity instead of having paid rent, so you can buy a bigger house. For example, say you had a £15k deposit on a house which cost £200k five years ago. Now it’s worth £325k and the mortgage amount outstanding is £160k. You have equity of £165k so you could buy a £500k house and only need a mortgage of £335k, which is much more doable.

The unfortunate reality is that you either have to move significantly further out to where it is cheaper if feasible with your jobs, or compromise significantly on the type of property you're looking to buy. E.g. fixer-upper in a less desireable area in your bracket. Or earn way more money.

Now is also not necessarily the best time to buy given the interest rates as you're finding out with the high repayments.

Can any of the kids share for 3-5 yrs so you can buy a smaller home with a plan to move into a bigger one?

As others said, most people don't buy a 4-bed as their first house, they buy a small flat or house, and then move once they have built up some equity and therefore have a bigger deposit for their next place. Depending on your kids ages can you buy a 2 or 3 bed for now, and plan to move in 5 years once you have more equity/possibly higher income.

Step daughter and our toddler could possibly share as both girls but we have my son who is 11 here so no sharing with step daughter obviously.

We could potentially buy smaller and rent out for a few years?

As others have said, jumping straight to a 4 bed isn’t doable if you don’t have a significant deposit, possibly from an inheritance. Maybe look at a smaller property that could be extended over time.

Most people start young, before children. They buy a small flat or starter home, or a doer-upper if they have the skills and time. As they get older, earn more money and have equity in the property, they can afford to buy something bigger.

I would think it's extremely rare to go from renting to buying a four-bed house. Almost impossible, especially given your rental costs. When we were renting there was only two of us and we rented fairly rubbish properties so that we could save more. And it took us bloody ages and some help from parents to raise a deposit.

I started in a small 2 bed flat which I bought with a friend, long before any children came along.

We are on the south coast so even the most dire rental is ££! We are in a terrace with no garden and it's this much.

Unfortunately it is a combination of factors, none of which help you.

Buying later in life when you already have a sizable family (and all the expense that goes with it) plus wanting to buy a bigger house without any equity or a large deposit. These things would always have made buying a challenge but in the current climate it makes it very difficult.

As a PP said, it is called a ladder for a reason.

you could try buy to let - although I believe % deposit requirements are usually higher - but it'd probably be far away and you'd need to be prepared to manage it appropriately.

Alternatively any older family you could buddy up with and look for a home with generational support like a granny annex?

how old's the step daughter? Does she stay regularly? Could she be happy with a sofa bed in the lounge/dining room if it is less than 1/2 nights a week?

Definitely need to be creative and know that it isn't forever.

We bought after we had kids, so the only way we could afford the sized home we needed was to move to a cheaper area (very happy with the area and value for money though so wasn't done begrudgingly, we were already away from family).

Find a different area/county.

The price difference for the same three bed semi done to the same standard between two counties we are looking in can be as much as 80k in the nice areas or 120-130k in the slightly less desirable areas

Wait for interest rates to fall. Perhaps within 18-24 months they might be 4%.

Buy with a 5% deposit. If you have decent credit ratings there are currently plenty enough lenders out there doing 95% LTV. This comes with two risks: firstly, the worst the economy gets, the more lenders tighten their belt, the fewer will lend you 95%, so you get less choice and at higher rates. In a recession you might not even get 95%. Secondly, in a falling market, you really want to find a house that you know you won't need to leave for at least five years due to risk of negative equity. The difference between 95 and 90% in terms of mortgage rates being offered at the moment isn't that big.

Reducing your expectations also helps a lot. Looking at terraces instead of detached/semi. Ex LA properties always tend to be cheaper, as do properties with small gardens and no drive or garage.

Final and least favourite options: get a mortgage broker and look for a longer term, i.e. 35 years instead of 25. It's what a lot of people are doing at the moment but you really do pay for it through the ear. It might bring monthly repayments down but the amount you repay over 35 years instead of 25 is eye watering. However, if you know your salaries are likely to increase a lot over time, it's not the worst idea to stretch the term and overpay your mortgage in the future to reduce the term.

Oh, I forgot one final one. Problem houses are always loads cheaper. Again you have to think about how long you will be there because they might not resell easily. Examples:

Very near a railway line

Very near a hospital (sirens)

Strange shaped rooms - I have even seen new builds with hexagonal shaped turret parts! People want their lounges rectangular

Nice houses on roads where most properties sell for half the price

Nice houses with miniscule kitchens

Big family houses with only one bathroom and no space to put a second one in

Houses that have been extended to be big family homes but now have hardly any outside space

Houses on narrow streets with no drive where parking will be pot luck

Even houses next to graveyards!

There's loads of them on the market right now.

I think the trick for most people is to buy their first property before having kids. And of course to buy in an area you can afford which isn't necessarily the same thing as the area you would prefer to live in.

I can't offer you a Time Machine but as PP's have said. Buying smaller when younger with no children. We went from DH (sensibly) buying a flat in his early 20s and living there for 7 years to a 3 bed terrace for 6/7 years to a 4 bed detached. We've been lucky to build up equity but we also moved to a cheaper area for our final house.

Gifted deposits from parents or grandparents.
Inheritances.

Echoing what others have said. I got on the ladder by buying a shitehole of a flat in the most rundown council estate, moved in and slept in the living room, taught myself how to wallpaper and sand wood and fit flooring etc over the course of about 6 months then sold it on for 50% more than I paid to a lady from London who wanted to get on the property ladder by getting herself a couple of buy to lets.

Obviously things have changed a bit now as prices don't seem to be going up so fast, but up until very recently the best way to get on the property ladder is to start at the bottom and half climb, half be carried, up. I guess right now it's a little less being carried but trying to save up so you can skip to the top is counterintuitive when your savings should grow by buying now (as long as you're smart about it). Buy the worst house in the best area you can afford and all that.

You start at the very bottom, and buy a small place, which then increases in value and you take the profit to buy a bigger place. And so on.

Some people get a boost up the ladder because either:

a. They live with parents for years and save up
or
b. They get an inheritance/cash gift

There’s also a huge element of luck. Some people bought at the wrong time/the house ended up needing lots of work, and end up in negative equity. For some people it’s the opposite - just a lick of paint and 5 years later they’ve made £100k.

My friend bought a small house for £110k six years ago in cash, it’s just been valued for £210k. She’s not done anything to it, and she’s made £100k profit.

Yep like a previous poster said, most people start before they have kids. I bought my first flat in 2006 when I was 26, I met my husband who had done the same. The flats went up in value, sold it and bought a 3 bed house, had 2 babies in my 30s and wanted a four bed, the 3 bed house double in price in 7 years (bought for 270k sold for 500k). Then bought a 4 bed. It doesn’t help you in your situation, but that’s how people do it. My current house is worth around 1 million, but the mortgage is far far less than your rent. It’s bonkers and I feel for you, but saving and earning well early on, is how people do it.

Unfortunately you're in a very expensive area, so a jump to a 4 bed as a first home is going to be pretty much impossible.
You'll need to do one of the following:

• Find a big lump sum from somewhere (usually inheritance or a lottery win, so neither is something to rely on)
• Move to somewhere much cheaper (my 4 bed was half of the amount you mention a bit further North)
• Accept a smaller house and be 'creative' with the bed situation (sofa bed in front room, that kind of thing - not ideal).

Unfortunately the south coast is just not a place a lot of people can afford to live anymore - so moving may be the only viable option if you're set on buying.

I bought my first house after renting with a growing family, in a dive of an area back in 2016 when 5% mortgage deposits were easier to get, and the house for its size was a low price at 158k. 6 bed end terrace, in the northwest. But again, I compromised on the area. I have a large family, so it made sense at the time to get the large house, but if I could do it again I would have gone smaller in the better area and had people share bedrooms. I now have about 100k equity (well, it's all theory until I come to sell it) and would never have been able to save that much in the past 7 years if still renting.

It's an unfair situation for long-term renters.

I don't think you're naive or stupid but the reality is you need to get on the ladder before you have children, start with a 2 bed, and hope that you can get up the ladder thanks to combination of rising market and increased earnings.

however neither my dp nor I would have got on the ladder in the first place without generous help from both sets of parents. I think this is the reality for many, or perhaps having to live with parents for a very long time to save up.

I definitely look at three bed and cheaper areas or wait and see what interest rates do. Three years ago you could have probably afforded it but less so now

I'm older and bought my first house pre-children in 2019, just after the housing crash. From what I see of younger collegues, they bought their first place on their own or with a partner pre children. Neither they or us bought 3 or 4 bedroom houses. We started with 1 or 2 bedroom places.