When I moved to London in 2011, I wanted to buy a house but my base salary of £22,000 made it impossible. I stayed at the same company and worked my way up, qualifying as an accountant in 2014. Three years on and I have bought my first home! On this journey, I learnt a lot but mainly how to budget and how to search for the right property.
Alison, founder of StartupRight, shares her story and tips on how to begin your own property journey.
Deciding between a fun London life and a home
In 2015, I could only afford to buy a £250,000 home. So, there was no way I could buy in South West London close to my pals. I was down heartened that I had to choose between having a life or owning a home. I chose having a life and put my dream on ice whilst I focused on increasing my salary and saving money.
One-bed or Two-bed?
By 2017, I had saved enough to afford a £340,000 property and decided to begin search for a two-bed. I chose a two-bed over a one-bed because if interest rates were to rise (making my mortgage more expensive) then I could easily let a room for at least £500 per month which is tax free income up to £7,500 a year under the governments rent-a-room scheme.
Going it alone
I love that I have bought on my own, it is my biggest achievement so far. But it was and is hard. You have to deal with everything - the annoying estate agents, viewings, picking an area, researching the area and deciding if you can handle a project alone. And then when you do find one you like you have to decide how much to offer, eek!!
Starting the search
In January 2017 I had the borrowing capacity – I could borrow 4-5 times my salary from the bank - but I hadn’t yet saved enough for the deposit plus all the buying fees. I started to look at South West London to get a feel for what I could afford. I looked at one beds even (although I didn’t want one), ex council and various locations. The only way to narrow it down is to keep looking and try to find a good estate agent who understands what you want.
Top tip: Set up Rightmove and Zoopla alerts for the areas you are interested in. Do this early, it will give you a good idea of property prices and what you can get. Also, try not to put pressure on yourself. If you get annoyed or stressed take a week off.
How did you work out your budget?
1. I had a mortgage advisor on hand. Whilst they charge a fee they don’t charge until you agree on a mortgage. I asked so many questions and got an offer in principle - which tells you how much you can borrow - before I paid a penny! You don’t even have to go ahead and use them. But if you do, they are regulated and the fee is set so they don’t have the ‘sales’ mentality that drives most people nuts.
2. I researched what I would need to pay in deposit, stamp duty and other fees. This helped me to visualise what I needed to save and what I could spend!
Tips on saving for a deposit
I was given some advice by a friend in 2011, to put 10% of my salary into savings. I didn’t necessarily stick to that but it is a good foundation. Although my sushi addiction did not help in any way!! If your work offers some kind of share save or other programme it is worth looking into, better to take your savings directly from your salary so you can’t spend them.
Don’t be fooled into thinking once you have saved your deposit you have enough. There is a long list of fees which can add thousands to your costs. Here’s what I paid and my tips:
Mortgage Fee - £999 - Shop around, your mortgage advisor will help you. Also pay this upfront if possible because if you add it to your mortgage you will pay 30 years of interest on it!
Basic Valuation - £200 – I took a small risk here, but the property I bought was a leasehold so all walls etc are covered by the freeholder.
Mortgage Advisor Fee - £399 – For me this was worth the money, but is not 100% necessary. They are still giving me advice now on over paying my mortgage and I will probably re-use them when I come to re-mortgage in two years.
Solicitor Fee - £1,140 – Shop around, if you are buying in London do not use a solicitor in London, you won’t need to see them and everything can be done by email.
Stamp Duty – £1,500 – The new government stamp duty on homes up to £500,000 saved me £5,000!
Other fees: Same Day Transfer Fee - £48, Land Registry Fee - £135, Solicitor searches (e.g. to check if there is planning permission) - £280 and Lease Fees - £300
All in, I paid £5,000 in fees alone!
Be careful what credit cards you have outstanding within three months of applying for your mortgage. I had work expenses that was paid off immediately but it messed-up my original mortgage offer. This again was where my advisor came in handy, they can tell you how much you can have outstanding on a credit card when you apply to borrow.
Read through your documents and ask questions, I found a fundamental mistake on the lease that no one had noticed.
When you move in, sign-up to a cashback site like Quidco to get money back on switching your home bills. I made £85 on my internet alone.
It's not only personal finance where Alison knows her stuff. She also assists new or smaller businesses to start-up right with accounting and other finance needs.