I wanted to share my experience of buying my first home in London, which I did back in 2016. Below are my top five tips for first-time buyers looking to get on the property ladder in the capital on a budget.
To give context, at the time I purchased my property, my financial situation was as follows:
- £10,000 saved as a deposit
- Earning £30,000 / year
1. Team up
Full disclosure: I didn’t buy my house on my own! I bought with my cousin because I couldn’t afford to otherwise. Two-bedroom properties are obviously more expensive than one-beds but they’re certainly not double the price. For most people, buying in London is about compromise. Yes, you might prefer to live on your own but can you really afford to? A good rule of thumb for affordability is a minimum 10% of the asking price for a deposit, and 4x your salary for your maximum mortgage. So, for a property worth £100k, you’d need £10k as a deposit, and be earning an annual of £22.5k, as a minimum.
2. Don’t be a postcode snob
According to Zoopla, the cheapest area in London in which to buy a property is currently Belvedere, in the borough of Bexley. Here, the average property sold for £283k over the last 12 months. That makes it affordable for any pair earning a combined salary of £64k or more. “Where’s Bexley?” I hear you ask. Actually, it’s not far from where we bought our property (Thamesmead), in South-East London. No, not on the tube network, but zone 4, and 38 minutes into London Cannon Street by train. Bexley’s far from the nicest part of town to buy a home but it’s not awful! If you’re looking to get a foot on the ladder whilst working in central London then Bexley’s definitely worth looking at!
3. Pick the right mortgage
As a first time buyer, the mortgage process can seem daunting. There are plenty of comprehensive guides out there that can guide you through the process so I won’t bother with that here. What I would advise is using a mortgage broker, such as London&Country who can find you the best deal across a wide range of lenders and don’t charge a commission.
Another tip: whilst fixed-rate mortgages offer you consistent monthly payments, know that if you decide to sell your property during this fixed rate period you’ll usually incur a huge fee for this. Since the base rate set by the Bank of England does not look set to move much over the next few years, I imagine you’ll be fine with a variable rate mortgage.
4. Buy a doer upper
With a typical mortgage term in the UK being between 25- 30 years, the first few years of mortgage repayments will not chip much off the actual principal (the loan itself). Rather, most will go towards paying the interest. With this in mind, if your plan is to simply “get on the ladder” with a view to buying a bigger / nicer house in a few years, you are better off focusing on increasing the value of your home.
To this end, as someone with limited DIY skills, the key here is to purchase a property that is perfectly “livable” but requires decorating and bringing up to date. Homes previously owned by old people are perfect for this. Stripping wallpaper and paintwork can all be done by oneself. New carpets aren’t expensive either. The only rooms you might need to fork out for are the bathrooms and kitchen. For this, I would highly recommend sourcing quality tradesmen via Checkatrade.com.
5. Consider buying from a housing association
The property we purchased was partly owned by Hyde Housing Association. Whilst I am not personally a big advocate of new build properties in the UK, I believe properties developed by Housing Associations can offer good value. They tend to be supported by the government-backed Help to Buy scheme too, which is good for those without much saved for a deposit. They also tend to offer a variety of Shared Ownership options.
Saving for a deposit? Download a free deposit tracker courtesy of Charlotte Musha and read her tips on how to save for one.