getting on the ladder

[milly143]

I am 21 really want to get on the property ladder before it is too late. Due to circumstances at home I cant really move out and pay about �300 in rent every month plus some bills. I earn around �18000 a year and have quite a few out goings everymonth which leavs me with very little. Does anyone have any advice on what would be the best way to go about it, I don't want to get too old and end up having a huge mortgage when I'm due to retire.

[WoWo]

Far from being to late your too early, give it 3 years.

[Westminster]

Let's spell it out more clearly. Build up a war chest of cash in the next couple of years or so. Wait until after house prices have fallen (perhaps by 20 per cent), and the pundits in the Sunday papers are all saying that house prices might stay in the doldrums for a decade. When everyone else is saying that it's a completely mad time to buy, go out and buy.

[Banker]

Thisa is the wrong time to buy property. Whichever way the economy goes property will loose out I feel. If the economy grows, inflation is likely to rise, leading to interest rate rises. With many homeowners coming out of cheap 2 year fixed deals, these people will see their mortgages increase by perhaps as much as 30% according to independent economists. The increased cost of servicing a mortgage will lead to a rise in reposessions and ensure that property is even further out of reach for first time buyers. Even if the economy stagnates and interest rates are cut, I feel that sentiment on property is changing. Nobody wants to buy at the top of the market. Just as sentiment drove the market up, it can also drive the market down. First time buyers are required to come in at the bottom of the ladder for the market to stay stable. But they are now at their lowest percentage of the new mortgage market since early 90's. Without them nobody can trade up. This lack of acitivty is reflected in the large reduction in  mortgage approvals in recent months. Best to save as hard as you can and stick it in a high interest account. You're still young and if you want to own your house on retirement I;d say wait and see what happens. You certainly won't see prices rise as thery have done in the last 8 years or so - what do you have to loose. In most major towns it is now cheaper to rent a property than buy it. So why buy?

[SGKelloe32]

It depends on a lot of factors really, first one being, where do you live? I only live in a small mining village, and  its unusual to find a basic house cheaper than �65,000. I was lucky, I bought my house when I was 18 for �24,700, just before the prices rocketed. A mortgage may be a bit cheaper for you than rent, but even basing it on your basic 25 year mortgage, your gonna be looking at at least �350 a month for a house valued at say �65,000. Most companies will only offer you a mortgage, which is only equivalent to three times your salary, in your case, it would be �54,000.

It doesn’t look like your in a good position to buy at the moment, and I would wait a while, I live by myself now, as my partner left, and can only afford to do so as I get tax credits because my daughter lives with me (Im  21 incase you are wondering) and my mortgage is only for �40,000. It’s the hidden extras that total up, council tax, water, gas, electric, etc as well as any other monthly commitments you may have. You will more than likely be absolutely skint if you even attempt to move out. It’s a lot to take on, so I would stay put until your in a better situation to do so.

[milly143]

Thanks SG, I live in buckinghamshire and house prices are huge down here, your looking at around �120,000 for a 1 bed flat. I was thinking of buying to let, somewhere up north as I know property prices are slightly cheaper then they are down here. I also know that a lot of my out goings are unnecessary and I would have more 'available' money then I think if i cut back on some personal luxuries. I don't know what kind of big financial risks involved in buying to let??

[Miss Zippy]

Milly, assuming you have no other income and you have no significant savings at the moment, I�d say that buy to let is too risky and costly for you at the moment. This is for several reasons, mainly (1) buy to let mortgages require much larger deposits that normal residential mortgages � typically between 10% and  15% of the purchase price (2) if your buy to let property is empty for any period of time, you have to cover the mortgage costs yourself (because you�re not getting rent to cover it) and if you have your own rent and other living costs to cover, this will cripple you financially based on your current circumstances (3) you will have to pay for maintenance and repairs on your buy to let property. Tenants do look after properties as well as owner-occupiers so maintenance is a real issue.  If you do the sums, you might find that a property you could purchase would not even command enough rent to cover the mortgage, plus service charges etc so you would be funding quite a bit out of your own pocket. For instance, if you bought a �120k flat and put down a �20k deposit, this would leave you with a �100k mortgage, which would cost around �600 each month on a repayment mortgage.  Add another c�200 a month to cover maintenance costs,  agents� fees with a bit left over to build up a contingency fund and you would need to be sure that your one bed flat could command �800 in rent in order to cover all your costs.  I very much doubt that a �120k flat would command that sort of rent (my two bed buy-to-let flat in Hampshire doesn�t). 

[milly143]

thanks for all the advice, been really helpful and made me realise i really need to think about making some significant savings before getting myself a mortgage.

[Miss Zippy]

Hi Milly, that sounds sensible.  You have time on your side; many people these days aren't managing to get on the property ladder until their late 20s or early 30s, especially in the more expensive parts of the country.  You have a good income for your age and if  that rises and you save what you can in the next 4 years or so, you should be in an ideal position to buy.

[The Tiggster]

It had on the news today that the average 1st time buyer is now something near 37 years old. Wow! You do have a few years yet but I appreciate that it is tough to get on the ladder. I would invest wisely, tie your savings (and save regularly) away for a year or so at a time. Some of the banks & building societys have accounts that you have to put into each month, say somewhere between �50 - �250 & they take it off your account so your not tempted to not take the money to the bank & spend it in the shops on the way! The money is locked away for a year or so & the interest rates are usually good at around 6% as appossed to 3-4% on in other accounts.

If you save a good deposit this will always stand you in good stead when you take on a mortgage & allow for the hidden extras like getting the phone connected & legal fees/stamp duty.

Save hard & you'll get there! :-)

[ianess]

Milly......if you want to join the real world get the h*ll out of Buckinghamshire.  Look into UP_MY_STREET or similar sites.....there are lots of properties for �70K or less......possibly friendlier and with a less frantic way of life. [only one guy`s opinion].  In my area you can get a 2-bedroom semi with gardens and a garage for a lot less than you`re paying in rent so don`t believe half the nonsense spouted by so-called experts.

Best of luck to you and yours.