Is it viable to buy an apartment in Central London at such a young age?

Hi,

I'm currently in university but I am hoping I will secure a training contract with a commercial law firm in the City this summer, meaning I would be moving to London around September 2016.

Most commercial firms start trainees at around £39.5k p/a, rising to anywhere between £65-75k p/a upon qualification (after 2 years).

My question is whether it is viable to obtain a mortgage for an apartment in Central London off of this salary, taking into account tax, transport, student loan repayments, bills etc.?

I feel like renting may as well be throwing money away if it is viable to pay off a mortgage on this salary (assuming I could get one at a decent rate).

If it makes a difference I will probably have around £40k-£50k in savings by the time I finish university and move down to London.

Thanks in advance for any help.

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Reply 1

Reue

Banks will lend you around 4x salary. So 160k plus your 40k deposit.

I don't think you'd be able to buy much with that in central London.

Reply 2

Iqbal007

Original post by mcrlawstudent

Possible...............that said. Have you even looked into prices?

Try Zoopla, it will give you an idea of the asking prices you can expect.
Most people now tend to live more towards the suburbs of London and commute in.

Balancing the travel time to work and location of the house is something you should consider.

Reply 3

queen-bee

Original post by mcrlawstudent

Not everyone is privileged enough to do so at such a young age but if you have the financial support it is very possible. I too am looking to buy an apartment in the nottinghill area

Reply 4

Goods

Original post by Reue

Banks will lend you around 4x salary. So 160k plus your 40k deposit.

I don't think you'd be able to buy much with that in central London.

You could buy a studio flat on the barbican for 250k a few months ago and so you could definitely find somewhere for that much just it would be small.

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Reply 5

poohat

Extremely unlikely. You can realistically borrow up to 4.5x your salary for your mortgage. On a £60k salary that would be £270k. Throw in (say) £60k of savings for a deposit and your budget is £330k.

There is almost no chance of finding a place you'd want to live for less than £400k in central london. You could probably find a 1 bed flat in a decent area of Zone 2 for £400k if you didnt mind living in a tower block.

(edited 9 years ago)

Reply 6

mcrlawstudent

Thanks for your quick responses, I have looked briefly on Zoopla, I just thought I would get some basic opinions before I do some more digging! It seems like the suburbs are the way to go, as a few of you have mentioned. Then I could possibly look into Central London later in my career when my salary is a bit higher.

Reply 7

poohat

Original post by mcrlawstudent

Check out zone 3 places like Streatham, Leytonstone, Penge, etc - they are more realistically priced and arent that far to central london, although the downside is they dont have much going on locally and are pretty grubby.

You could also look at the cheaper parts of Zone 2 (Shepherd's Bush, Bow, Whitechapel, etc) which are more trendy and vibrant. However the problem is that even these places are now incredibly expensive and if your budget is less than £400k you are probably looking at tower blocks, and mortgage lenders can be a bit iffy about lending on these.

Zone 1 just isnt going to happen, and by the time you are older your needs will have chanegd and you will need a 2 bed flat at minimum, which is going to be £600k+ and pretty much off-limits. Even bankers tend to buy in Zone 2/3 these days.

(edited 9 years ago)

Reply 8

poohat

Although if you are new to London then you should really just rent in zone 1 for your first couple of years. Yeah in some sense its throwing money away (although not really), but its better for socialising, and sharing a flat with other people is a good way to make friends. Worry about buying after youve been there a couple of years and have a better idea about which areas you like

Reply 9

mcrlawstudent

Original post by poohat

Thanks poohat for both of your helpful responses, I see what you mean about renting for a few years. I will certainly look into it. I appreciate your help.

Reply 10

effofex

Original post by mcrlawstudent

Depends how much you save and what salary multiple they're willing to lend. I'm in the process of buying a 3-bedroom house on a freehold basis in Plaistow for £350k. The bank in question are willing to lend 5x base salary (mainly because I am a single, childless man with no debt excluding RPI-tagged student loan) over a 30 year period. This property is in Zone 3 in an area which is on the 'fringe' of gentrification (it's already happened in Bow and Stratford - mainly flats targeted at foreign buyers - mainly Malaysian, Singaporean and Chinese in these parts).

If 40-50-k is your deposit it's likely to be insufficient for central London (Zone 1) unless you get lucky with finding a studio. If you're looking for rental yield in Zones 1 or 2 it's just not worth it anymore. In the place I'm buying even with paying 40% tax on rental income from leasing the 3 bedrooms and converting the living room into a bedroom for myself, the rental income just about covers my monthly mortgage payment.

Reply 11

Iqbal007

Original post by mcrlawstudent

Zone 1 is extremely expensive.........like extremely.
Zone 2 could be more realistic, however prices are shooting up. My parents house is worth three times what they paid for it about 10 years back and its leasehold.

For around £300,000 you can pick something up in the borough of Camden which has a lot of transport links. But you'll get a 1 bedroom house at best.

Hence why I suggest getting a place in the suburbs, more for your money, unless you plan to rent the other place out and then buy a second place.

(edited 9 years ago)

Reply 12

unfathomablee

depends which part of central, as prices vary quite significantly, my cousin was in essence the same position as you and these estate agents in Central sorted it out for him, if you want I can PM you their details and you cancontact them and they'll advise you, but in all honesty you should consider your future financial stability etc you don't want to end up losing the mortgage, I suggest you rent out a property for a bit till everything becomes certain eg your job, if you like the area

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Reply 13

poohat

Original post by effofex

(it's already happened in Bow and Stratford - mainly flats targeted at foreign buyers - mainly Malaysian, Singaporean and Chinese in these parts)..

IIn the place I'm buying even with paying 40% tax on rental income from leasing the 3 bedrooms and converting the living room into a bedroom for myself, the rental income just about covers my monthly mortgage payment.

You know that you can either take the first £4000 tax free (https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme) or write off your mortgaeg interest (which will be the vast majority of your mortgage payments) against the tax, right? You shouldnt be paying anywhere near 40% of the total rental income as tax, after all the deductions.

(edited 9 years ago)

Reply 14

lilymoran

Relative and boyfriend bought 3 bed maisonette in SW8 for £315,000 in November - needed some work. Saving a fortune in rent though - 2 bed flat Victorian terrace Handforth Road SW8 £1,700 a month!

They walk/run into work so save another fortune in fares.

Reply 15

poohat

Original post by Iqbal007

For around £300,000 you can pick something up in the borough of Camden.

Unlikely unless its either a studio flat, or ex local authority (which is difficult to get a mortgage on). £400-500k is more realistic and even that is going to be a very small flat.

http://tinyurl.com/pj9ft23

(edited 9 years ago)

Reply 16

effofex

Original post by poohat

The problem is that noone seems to actually live in many of these flats . Walk around Stratford City in the evening - its a ghosttown with almost no people on the streets, and very few lights on in the windows. Yeah, these areas are arguably undergoing slow gentrification, but they have a long, long way to go until they are comparable to Hackney or Brixton (and Plaistow has even further to go, without the benefits of good transport links and easy access to the City).

You know that you can either take the first £4000 tax free (https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme) or write off your mortgaeg interest (which will be the vast majority of your mortgage payments) against the tax, right? You shouldnt be paying anywhere near 40% of the total rental income as tax, after all the deductions.

Yes. Checked the latter.

I'd disagree with East London having poor transport links to the City. From the place in Plaistow it is 35 minutes from the door to my desk near Bank/St. Pauls, which is shorter than many commutes from places like Streatham, Putney and Ealing, all of which have undergone gentrification. In the case of Plaistow/Stratford those links to Canary Wharf and City Airport are even quicker.

Reply 17

poohat

Sorry, I meant Plaistow has poor transport links compared to Stratford (which has central line direct to the city, and crossrail coming). Plaistow is only district line I think?

But fair enough, 35 minutes is less than I thought it would be.

(edited 9 years ago)

Reply 18

Iqbal007

Original post by poohat

You can, but it'll be leasehold rather than freehold......but a longterm leasehold is good enough for the price for a decent 1 bedroom place. As long as he sells it in the future or rents it out and gets a larger place further out.