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Buying your first Property

Hi all I am sick of tired of the news and people thinking young people can’t buy property. I live in London where a 1 bed flat can be anything up to £2m yet my brother at 24 and me at 25 bought a nice flat each. I’ll start off with the basics and will add further detail below for those who are serious including many money saving tips...the money saving tips I’ll post elsewhere too for all those savvy students who need an extra dollar!

To buy a property you can either pay for it in full (unlikely for most of you) or get a mortgage to borrow money from the bank to buy.

Your deposit the cash you need to put down needs to be atleast 5% of how much you are paying for the property but in most cases you will need 10% the government will give you up to £1,000 a year cash towards your deposit per person (explained below)

The bank will typically lend you 4.5 times your salary e.g say you are on £25,000 you can borrow £112,500 on a mortgage (sometime a bit more sometimes a bit less but 9/10 times this is the rule of thumb)

If more than one person is buying the property you can only borrow 4x times your joint income. So if one person is on £20,000 and one person on £30,000 you can typically borrow £200,000

Mortgage + your deposit = your property budget

Getting up to £1,000 a year towards your deposit. Open a Lifetime ISA not many banks offer this as “they do not make enough money from it” whatever you save in a year the government gives you 25% on top plus you get about 1% interest. You can save up to £4,000 a year per person so you can get £1,000 a year towards your deposit.

I’ll provide further information in the near future but any questions feel free to ask!

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Reply 1
So how did you buy a property? How much did you save for the deposit and legals etc? How much was the flat?
Original post by jalby1992
The bank will typically lend you 4.5 times your salary e.g say you are on £25,000 you can borrow £112,500 on a mortgage (sometime a bit more sometimes a bit less but 9/10 times this is the rule of thumb)

If more than one person is buying the property you can only borrow 4x times your joint income. So if one person is on £20,000 and one person on £30,000 you can typically borrow £200,000

This isn't really correct. It's done now on 'affordability', rather than a simple income multiple. And joint borrowers can borrow up to 5.5x their joint income at some places, like Barclays.
Original post by ajj2000
So how did you buy a property? How much did you save for the deposit and legals etc? How much was the flat?

Yes, exactly - that's what I want to know. Particularly in London.
Reply 3
Flat was £223,000 it was with help to buy(which I’ll explain the ups and downs of later) I had to put down £11,150 minimum and I got about £3,500 towards my deposit from the government from ISA Schemes legal costs were about £900 depending on property and value tend to be £700-£1200 but lots of solicitors let you pay this in instalments. My brothers flat was £125,000 it was not help to buy so he had to put down 10% of this
Reply 4
Original post by Reality Check
This isn't really correct. It's done now on 'affordability', rather than a simple income multiple. And joint borrowers can borrow up to 5.5x their joint income at some places, like Barclays.

Yes, exactly - that's what I want to know. Particularly in London.

Yes and No. Affordability is your income take away any debts etc they use an affordability calculator which give you a maximum multiple of your salary typically 4.5x for the average not rich person.

Typically it’s 4.5x I work with a broker and for an estate agents. Yes 5.5x if you have a £100k cash deposit or 40-60% cash deposit and your on £50k+. But I am giving realistic examples and expectations of students/recent students on here that are likely to be on or soon be on £20-£35k and may not have hefty deposits! I’m not going to go into technicals and confuse the hell out of students. Just the basic dos and dont’s when you have close to a deposit you can then speak to a Broker you never go to a bank directly. According to the news and most young people I speak to they are clueless on how easy it is to buy and end up spending £1500 per month renting when they could get a similiar place for £400pm and own it.

affordability you refer to is typically 90% of the time 4.5x your salary if you have no debt other than student loan again coming to his seperately. Essential it is 4.5x unless you have kids or debt other than a student loan which is what affordability is. If you want further information you can speak to your broker. But I would use my information above to get a pretty accurate estimate of what you could afford before wasting their time and your own :smile:
(edited 4 years ago)
Original post by jalby1992
Typically it’s 4.5x I work with a broker and for an estate agents. Yes 5.5x if you have a £100k cash deposit or 40-60% cash deposit and your on £50k+. But I am giving realistic examples and expectations of students/recent students on here that are likely to be on or soon be on £20-£35k and may not have hefty deposits! I’m not going to go into technicals and confuse the hell out of students. Just the basic dos and dont’s when you have close to a deposit you can then speak to a Broker you never go to a bank directly

Fair 'nuff.
Reply 6
Next part. For every £1 on your credit the bank typically deducts the 4.5x what you can borrow so if you have £1,000 on your credit card then that is £4,500 less you can borrow! So best to pay it off first! If you have a loan it is slightly better than a credit card for how much they will lend you for the mortgage. But again as reality check was saying this will change your affordability so they will lend you less! If anyone has any questions or is thinking about buying feel free to ask :smile: my flat is a help to buy flat I pay £338pm and live 20mins from central london with a tube and train station minute from my flat. My neighbour as an identical flat and pays £1000pm to rent it!
Reply 7
Also the longer the mortgage the more you can borrow unless you are on alot of money your first mortgage will typically 35-40 years initially (unless you have a large % deposit) but you can repay it sooner if you have the funds by making overpayments
How much ground rent and service charge do you pay?
Congrats on getting onto the London property ladder! :clap2:
:party:
Presumably your brothers flat is not in London? Assuming two 25 olds buying a joint property, where do you find a new build flat in London for £225k which is big enough for two people to live in?
Original post by ajj2000
Presumably your brothers flat is not in London? Assuming two 25 olds buying a joint property, where do you find a new build flat in London for £225k which is big enough for two people to live in?

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@jalby1992 - just bants.
Original post by Reality Check
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Those aren’t new build so you would need a bigger deposit!
Original post by ajj2000
Those aren’t new build so you would need a bigger deposit!

:rofl:
Original post by jalby1992
Hi all I am sick of tired of the news and people thinking young people can’t buy property. I live in London where a 1 bed flat can be anything up to £2m yet my brother at 24 and me at 25 bought a nice flat each.

It's tough for people entering the property market now. With that said, they all seem to sell, and recent changes, making buy to let less attractive, should help.

We bought our first property in 1997, for £74k, with a 15% deposit. Our joint income was a little under £50k. Interest rates were higher, but we'd paid the mortgage off in 3 years. We found larger propertie sin the same area too expensive, so eventually moved to an area with higher salaries and lower house prices. Then we moved to California, and got another house price shock ..

That same flat is now ~£340k. At the same stage in our careers, I'd guess that we'd be earning ~£90k now. Lower interest rates help, but you have a lot more capital (relative to income) to pay off, and no inflation to help.

From my experience, housing looks a lot more expensive in terms of debt to income ratios, than when I first bought. I could still buy, but wouldn't have a chance of paying off the mortgage anywhere near as quickly.
Original post by RogerOxon
It's tough for people entering the property market now. With that said, they all seem to sell, and recent changes, making buy to let less attractive, should help.

We bought our first property in 1997, for £74k, with a 15% deposit. Our joint income was a little under £50k. Interest rates were higher, but we'd paid the mortgage off in 3 years. We found larger propertie sin the same area too expensive, so eventually moved to an area with higher salaries and lower house prices. Then we moved to California, and got another house price shock ..

That same flat is now ~£340k. At the same stage in our careers, I'd guess that we'd be earning ~£90k now. Lower interest rates help, but you have a lot more capital (relative to income) to pay off, and no inflation to help.

From my experience, housing looks a lot more expensive in terms of debt to income ratios, than when I first bought. I could still buy, but wouldn't have a chance of paying off the mortgage anywhere near as quickly.

Are prices in California silly money?
Original post by Reality Check
Are prices in California silly money?

Yes, in Silicon Valley areas with good state schools, but so are compensation packages :smile:

Prices have fallen recently, but your typical 3 bed, 2 bath, 1950s bungalow is still $3M in my area. That's basically all land value - people buy them to demolish and rebuild (or "remodel").
Original post by jalby1992
Typically it’s 4.5x I work with a broker and for an estate agents. Yes 5.5x if you have a £100k cash deposit or 40-60% cash deposit and your on £50k+. But I am giving realistic examples and expectations of students/recent students on here that are likely to be on or soon be on £20-£35k and may not have hefty deposits! I’m not going to go into technicals and confuse the hell out of students. Just the basic dos and dont’s when you have close to a deposit you can then speak to a Broker you never go to a bank directly. According to the news and most young people I speak to they are clueless on how easy it is to buy and end up spending £1500 per month renting when they could get a similiar place for £400pm and own it.

Get independent mortgage advice, never go through an estate agent or broker affiliated/recommended by an estate agent. They often have a vested interest in recommending products which pay the broker and/or estate agent commission - one of the oldest tricks in the book!

Money Saving Expert has a free mortgage comparison tool and list of free independent brokers.

It is worth pointing out that you don't need to use a broker. If you're financially literate, have a good credit history and aren't buying an unusual property (eg; auction, buy to let, ex commercial property, etc) it is relatively easy to find a cheap deal via somewhere like MoneySavingExpert, and then approaching a lender direct (which is exactly what I did saving a couple of hundred quid in the process).
which area in london did you buy your flat?

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