FTB, large deposit but on low salary

[FTBldn]

Hi all, I currently live in zone 2 London where I have been moving regularly because the rent gets raised yet again. I hate the stress of moving so often, living with strangers, never feeling secure, and also spending so much on rent. I’ve been paying 1400 each month (when factoring in bills and council tax) for a double bedroom with en-suite in zone 2 east London.

My issue is I’m single and on a low salary (34.5k) however I have since inherited 225k. Using mortgage calculator it has been estimated I might be able to borrow around 150k (can’t guarantee that just an estimate).
I don’t know if my maths is wrong here but when using a mortgage repayments calculator it’s estimated my monthly repayments would be around £700ish for a £375,000 property so much less than what I’m paying in rent and eventually leads to something.

I would be looking to buy a 2 bed in zone 2 or zone 3.

Would I be foolish to try and buy on my low salary or should I prioritise getting higher paid job first
I have been trying for better paid job this past year but not much luck and I just don’t know how long it will take, plus then worried being in probationary period may further delay buying.

apologies, I’m very ignorant about buying a house and don’t have many to turn to.

You are on a pretty average , not low, salary although I guess London might often be a bit higher

I would buy in your situation

I suppose the main question is, can you actually get 2 bed anything for £375 in London Zone 2? Would you need to look at zone 3/4 maybe? I didn't see much for that budget when we were looking earlier this year, everything at that price looked to have either a very short lease or serious mortgageability issues (lots of issues make flats unmortgageable to various lenders e.g. if it's near a pub or an off licence) which can leave you stuck with either no lender or a lender with a silly high interest rate.

Also have you double checked your ballpark interest rates are correct when calculating repayments? That payment seems a bit low for £150k on current interest rates? If you're single, have you thought about buying a 1 bed flat with a proper living room and kitchen, getting your expenses right down, and saving up so you can upsize on your next move? You'd still gain space compared to renting a room.

Have a browse on Rightmove and see what comes up, but FWIW I got a mortgage on £22k with a big deposit back in 2016 and it was definitely a good plan for me.

Sounds like a very sensible plan to me.
Choose your property carefully! No dodgy leases, huge service charges etc. You will likely need to compromise on something - location, size, etc.
Maybe call Phil n Kirsty!

I think he might have to compromise on location because I am buying in zone 4 for £280k and it's double.
My mortgage will be less than your rent

£150k is 4.3 times your annual salary so that's high if you're buying on a sole income, and repayments on that amount are close to £800 at 4% over 25years (4% is currently quite low by mortgage interest rate standards). You also need to factor in stamp duty and legal fees which you'll need to take out of your inheritance if you don't have savings. But if you're used to paying £1400 a month in rent and bills (although you'll still have bills in your own house and council tax is likely to be higher than in a shared property) then it should be affordable!

don't underestimate how much maintenance of your own home costs also. new boilers, gutters being cleaned, replacing shower unit, a new lawnmower, curtains / blinds etc etc etc are all things i've forked out for recently. you need to account for a fund for things like that

Lots of options to buy. For example:

https://www.rightmove.co.uk/properties/152971226#/?channel=RES_BUY

https://www.rightmove.co.uk/properties/149048024#/?channel=RES_BUY

With your budget, you would be looking at leasehold flats. Watch out for annual service charges and the length of leases. Don't touch anything with a short lease (90 years or shorter). In your position, I would absolutely buy. Do you have a friend who has bought and sold before, and is interested in property, who would look at places with you?

If you've been trying to move jobs for a year or so then I'd personally stay put in the role and focus on trying to buy somewhere, assuming you've done the maths properly and can afford it and you like your current job. In your position I'd get a mortgage appointment at the bank where the inheritance money is (simply because it is easier as they will know you have a large deposit) even if you then end up going elsewhere for the actual mortgage. If you haven't ever owned a property then you do not have to pay stamp duty on a property below 425k, so you'd "just" have to pay legal fees as a first time buyer.

Do you like where you live in East London? As in, does the location work for your job, social life etc and can you afford to buy there? Or do you just live there because that's where you ended up? I don't mean this is in a negative way at all, just in terms of working out whether you can be flexible with location as like others have pointed out 375k isn't that much for zone 2, but you will likely know the area where you currently rent better than a random area of London so I'd start my search there if you can afford to buy something there.

@MiddleAgedDread could well have £300 a month service charge though- people buying leasehold flats often forget to factor this in. I would ideally be looking for one with shared freehold so it's under yours ( and usually 1 or 2 others) control a bit more

You might want to stay in London and that's fine particularly if you have a job that can only be done there but have you seen what you could buy for that money further out?

This might be the perfect time to look outside of Ondon and massively improve your standard of living. Somewhere like Norwich which is a couple of hours from London on the train commutable a couple of times a week (but I wouldnt want to do everyday) you could have a fully renovated house for that. Or anywhere along that train route, is much cheaper than going South. Manningtree and Colchester all commutable.

@Singleandproud Thanks I agree there is better standard of living but truthfully as a single person I’d worry I’d feel too lonely living far out alone. Of course I could try and build a new network but I think it’s harder outside of cities, and harder still as you get older and can’t relate to having kids.

Despite the stereotype of Londoners being unfriendly I have had the opposite experience, and feel less of an outcast if you’re single and childless.

@dotdotdotdash They're Z3 though. She wanted Z2. 🤷‍♀️

I think it sounds like a good plan @FTBldn

How about buying this studio for £175k cash in Belsize Park?

Obviously it’s ridiculously small, but the lease length and service charge are okay. It would be better use of your money than another five years renting. And if you’re out a lot you can pretend to be a rich Hampstead type:

www.rightmove.co.uk/properties/154080200#/?channel=RES_BUY

Actually it looks grim - directly above a takeaway, and with five neighbouring studios all coming up the same staircase.

‘And if you’re out a lot you can pretend to be a rich Hampstead type’ 😂 haha great @threeunrelatedwords

That's a flipping brilliant deposit!
Buy 2 and rent 1 out.

ps don't buy a studio flat, they don't go up in value as quickly.
I'd try and buy a freehold somewhere or share of freehold.