First time buyer advice

[LovelyBitOfHam]

Inspired by an AIBU thread…

Im single, early 30s and living with parents. I currently earn around 35k, so not much, but that’s not a ceiling and can rise if I pull my finger out.

I have around 150k saved up but still feel I can’t afford a house due to my low salary.

I’d be happy to put 120k-130k down as a deposit and would be looking for a small two bedroom house in a nice area.

Is there anywhere in the Manchester or East Cheshire area that could see me buy? Ultimately somewhere that isn’t Oldham, Wigan etc.

When I say I can’t afford it people look at me like I’m mad, but truly I don’t see how I can.

Have you done a mortgage calculator to see how much you are able to borrow? Once you know your budget you can have a search on RightMove.

I haven’t but I assume it’s 3-4x so 100k seems reasonable.

You'll be able to borrow at least 4x if no credit issues so that's £140k and your deposit, so a budget of £260k

You could have a nice flat in Didsbury or Chorlton for that or a terrace out in the Heatons

Mortgage calculators take minutes online so worth doing to get a number to work towards.

Generally you can borrow around 4.25 - 4.5 times your income. I assume as you have £150k in savings you dont have any major debts. So I reckon you'd be able to borrow at least £150k. That & £120k should get you a 2 or even 3 bed property in the areas you mention.

No need to still be living at home. Time to fly the nest

Does it have to be a house?

A maisonette or conversion with a garden would be the same size and cheaper.

I suppose it depends.

I’m not interested in flats because of the service charge and ground rent costs, and the noisy neighbours.

Perhaps my maths is wrong but at 5%, over 25 years a 150k mortgage would be around £870 per month. My take home is a little above £2000 so that seems like a huge proportion. Factor in potential future hikes in interest rates, council tax, bills and commuting costs and it’s difficult to see how I end the month with anything left over.

Historically, and taken over the term of a mortgage, the proportion of your income that you have to pay into your mortgage goes down over the year due to inflation- that is, prices and wages going up, provided mortgage rates don''t go up as well. Mortgage rates tend to go up and down over the years. Back in the 70s and 80s people were advised to mortgage to the hilt, and it worked pretty well except for the years where mortgage rates got stupid (12% or more, but not for very long), but low inflation in the 90s and 00s meant that old mantra stopped working.
Compared with renting, where rents will always keep going up, often faster than inflation, buying is usually the best option. But you're not comparing it with renting in your case.
I think you need to have a chat with an independent financial advisor, and have the pros and cons explained to you better than I can.

Look around Monton or Swinton in Salford, or Stockport, I think it’s doable. Have you looked at shared ownership options? That could make it more affordable.

I agree with you on avoiding flats, by the time you take service charges into account you may as well pay that extra on a mortgage, and so many blocks have cladding issues too, not worth the hassle.

You can do a quick mortgage calculation on Right Move - this is very affordable :)

https://www.rightmove.co.uk/properties/150079904#/?channel=RES_BUY

is there a reason you don’t want to move out of your parents’ house? Are you paying any rent currently? If not then perhaps suddenly adding this in to your monthly expenses feels scary.

if you get a 3 bed place you could rent out one of the spare rooms to offset the cost of your mortgage. You could even buy an entire flat to rent out and carry on living with your parents, if you wanted to. (Although being a buy to let landlord is my idea of hell)

You have a huge deposit of course you can afford it.

Yes your maths is wrong based on the quick mortgage calculator on Right Move, just do a search in the areas you’re interested in and you can add in what your deposit is and it gives an approx mortgage payment.

With deposit you'll likely to get a rate of 4.5% (or less) which would be £835pm. You could put it over 30 years and pay £760pm

Aldo, interest rates are starting to come down & in 3 or 4 years time will likely to be nearer to 3% - which over 25 years would be £710pm. With council tax, gas, electric & water your main outgoings will be around £1k per month, leaving you plenty for food, phone & other spends.

Thanks. I worked this out from first principles with an annuity formula, and just checked the Rightmove calculator and they both roughly agree so not sure where my maths is wrong.

Thank you very much.

When you buy a house you live differently - have friends round for drinks. Skip expensive meals out, few drinks after work, share holidays with friends etc.

You'll build up equity.

It also gives you the push to find a better paying job, we’ve all been there.

I lived on £50 a week to cover food and travel and nights out. annual pay rises and better paying jobs helped.

The first time you take out a mortgage is a big step. I know my OH and I felt really scared when the day came - but honestly, after a while we adapted our budgeting and all was well. And having that asset behind us proved invaluable as time went on.

Take a deep breath, hold your nose and take the plunge.

Just realised I did my calculations on a lower valued house on the link above, which is well under your top budget so much more affordable.

You can get something for much less than the top of your budget if you want your monthly payment to be lower, and not max yourself out.

I have flown the nest before but there was a huge rental crisis a while ago and I returned home as I couldn’t find a new place. I currently don’t pay rent as such but I do contribute (a small amount) and I work away for half the week, which incurs significant costs as it is.

Yes, I’m worried about maxing myself out as that just doesn’t seem sensible. But as others have said, it’s nothing to really worry about.

Very sensible of you OP.

Yes, I agree.

I know I’m not a high earner but I’m comfortable enough that I don’t really have to think about money. I can take out subscriptions or buy a pair of trainers once in a while and the only outcome is maybe I save a little less.

I just dread being in a situation where I have to count the pennies or cancel some of my subscriptions because I “can’t afford it”.

I will say I save around (at least) 50% of my take home and pay a generous amount into a generous pension. I’m not particularly frivolous with money and these subscriptions tend to be around £25pcm.

I posted this after some conversations with colleagues earlier this week.

I think my eyes have now been opened to the fact that I probably can afford to buy, and the sensible thing to do would be to take the plunge as soon as I can.

I think the only issue I have now is deciding where to buy! Many of the places with more affordable housing are places I haven’t even visited before, so I have some thinking to do.