Author Topic: First-time buyer  (Read 2975 times)

Skuze

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First-time buyer
« on: May 24, 2015, 08:59:45 AM »
Hi all,

I'm a first-time house buyer and would really appreciate any advice on:
1) Finances
2) Furnishings and maintenance
3) Other stuff I probably haven't thought of.

About

Me - 22, male, single, BA degree, I graduated last summer and started a surprisingly enjoyable management consulting job in September. I converted to Mustachianism about three months ago.

Income - 29k base salary + about 15% bonus. I expect my base to rise to 32k in June and for my total income to increase at 10-15% per year for the next five years. Once I have the house, I am planning on getting a lodger paying 350 per month (tax-free!).

Current spending - I rent a tiny room near work for 230 per month and stay with my parent rent-free most weekends. Other spending - car, food, gym and dates - comes to about 500 per month. I have 22k in student loans, towards which I pay 90 per month.

Savings - I've saved at least 1k every month since September and saved 2k in December and April (when parts of my bonus were paid). I currently have 32k in savings (including deposit).

Mortgage - 25k deposit, 132.5k mortgage. Fixed at 3.49% for the first five years, then to 3.49% + BBR. My goal here was to protect myself against any rate rises until my income has grown significantly.

House - three-bed semi-detached house in the South West, 25 years old and less than a mile from work. The previous owner did not take care of it so there is some work that needs doing e.g. broken guttering, leaky garage roof (plus it is filthy). I am paying 157.5k, which is very cheap for that size of house in my town but more in-line with prices on this particular street, which has a poor reputation. I am hoping to move in at the end of June.

Thanks!

forummm

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Re: First-time buyer
« Reply #1 on: May 24, 2015, 09:03:21 AM »
Why are you buying a house? It seems like it will be more expensive than your current living arrangement. Do you think it's worth a lot more than you're paying for it?

Skuze

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Re: First-time buyer
« Reply #2 on: May 24, 2015, 09:25:41 AM »
Why are you buying a house? It seems like it will be more expensive than your current living arrangement. Do you think it's worth a lot more than you're paying for it?

Fair question, here's my logic (though 3 sways me more than it should!)

1) I do think that it will be worth quite a lot more than I'm paying, especially once I have done the necessary cleaning and repairs. I'd be surprised if I couldn't sell it for more than 200k in five years' time.

2) My current situation is not enjoyable or sustainable. My rent is so cheap because I am one of several official squatters in a building that would otherwise be derelict: we report maintenance issues and deter other squatters in exchange for rent about 50% below the market rate. It's not sustainable because the building is being knocked down this summer. Renting a one-bed apartment would cost 500 plus bills, which is more expensive than having a mortgage and a lodger on a three-bed house.

3) I would get a great deal of personal satisfaction out of having and working on my own property.

forummm

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Re: First-time buyer
« Reply #3 on: May 24, 2015, 09:37:50 AM »
Sounds reasonable. I like the idea of getting a lodger to save on costs. With the fix-up needed, the extra cash could be helpful.

It sounds like you have thought about this a lot, and have been very good about saving. I think it's affordable. I don't know what will happen with interest rates in 5 years. That's something to be wary about. But you'll have time to see whether the jump is going to be huge or small. It will definitely be an increase regardless. In the US, before the housing crisis here in 2007, everyone had adjustable rate mortgages and millions of people had trouble paying because their rates went from say 6% to 12% and they couldn't afford it. I think you're in better shape than they were though.

Skuze

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Re: First-time buyer
« Reply #4 on: May 24, 2015, 09:53:13 AM »
Thanks very much. I have been worried about interest rates - they can only go up! Hopefully, by the time the rises (whatever their magnitude) hit me, I'll be earning more and spending a smaller percentage of my net income on mortgage payments.

Dicey

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Re: First-time buyer
« Reply #5 on: May 24, 2015, 12:23:57 PM »
I vote yes, provided that you promise not to splash out on a bunch of new furnishings. Challenge yourself to buy used and as little as possible. I think at this point in your life, you can afford a little risk. It would be better if you had paid off your SL's, but by the time you do, interest rates will probably be higher as well as property costs. Make sure you understand the consequences of living in "up and coming" area. Your insurance costs may be higher and you might be more vulnerable to theft, so plan accordingly. Also understand that the area might never "up and come", and devise a back-up strategy in case it doesn't.

Be very careful in selecting flatmates, as that might be the greatest risk/reward option you face. Interview carefully and set ground rules prior to move in. Get a lease and as large a deposit as local law/custom allows.

Skuze

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Re: First-time buyer
« Reply #6 on: May 24, 2015, 03:57:11 PM »
Cheers for the advice Diane. I solemnly swear not to splash out on furnishings.

I really like the UK student loans system. I pay 9% of whatever I earn above 17,335, so it's just like another income tax. Plus, the interest rate on my student loans is only 1.5% (it's capped at the lowest of A. inflation or B. 1% above base rate), so I don't have to worry about my debt growing.

I've got a lot more to think about with insurance, theft and property prices though.

Flatmate selection will be an interesting challenge. Should I bring out the bright lights and thumbscrews?

thedayisbrave

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Re: First-time buyer
« Reply #7 on: May 24, 2015, 04:32:37 PM »
I vote yes, provided that you promise not to splash out on a bunch of new furnishings. Challenge yourself to buy used and as little as possible. I think at this point in your life, you can afford a little risk. It would be better if you had paid off your SL's, but by the time you do, interest rates will probably be higher as well as property costs. Make sure you understand the consequences of living in "up and coming" area. Your insurance costs may be higher and you might be more vulnerable to theft, so plan accordingly. Also understand that the area might never "up and come", and devise a back-up strategy in case it doesn't.

Be very careful in selecting flatmates, as that might be the greatest risk/reward option you face. Interview carefully and set ground rules prior to move in. Get a lease and as large a deposit as local law/custom allows.

This is great advice. 

forummm

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Re: First-time buyer
« Reply #8 on: May 24, 2015, 04:35:46 PM »
I vote yes, provided that you promise not to splash out on a bunch of new furnishings. Challenge yourself to buy used and as little as possible. I think at this point in your life, you can afford a little risk. It would be better if you had paid off your SL's, but by the time you do, interest rates will probably be higher as well as property costs. Make sure you understand the consequences of living in "up and coming" area. Your insurance costs may be higher and you might be more vulnerable to theft, so plan accordingly. Also understand that the area might never "up and come", and devise a back-up strategy in case it doesn't.

Be very careful in selecting flatmates, as that might be the greatest risk/reward option you face. Interview carefully and set ground rules prior to move in. Get a lease and as large a deposit as local law/custom allows.

This is great advice.

Yes, people waste a lot of money on furniture and stuff. You can probably find a lot of what you need (which isn't a lot) by getting stuff 2nd hand off Craigslist (or whatever they have in the UK where people give away or sell their used stuff). We saved a ton of money that way.