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ph4t

First Time Buyer - London

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I have been renting in London for the last three years and I'm thinking now is time to buy.

I have saved up a £25k deposit. I called my bank, Lloyds, and they said if I used the Help to Buy scheme the Government will lend me £100k and they will lend me a further £375k, giving me £500k in total.

I work near St Pauls so I was thinking of looking at 2 bed apartments in either Islington or Aldgate.

Has anyone done anything similar and have you any tips for me?

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I have been renting in London for the last three years and I'm thinking now is time to buy.

I have saved up a £25k deposit. I called my bank, Lloyds, and they said if I used the Help to Buy scheme the Government will lend me £100k and they will lend me a further £375k, giving me £500k in total.

I work near St Pauls so I was thinking of looking at 2 bed apartments in either Islington or Aldgate.

Has anyone done anything similar and have you any tips for me?

will cost you at least 20k to move inc.15k stamp duty and be careful about cost of ground rent and doing up the place. electrics and heating can cost a few grand easily. as for the actual place, well, hard to go wrong in those areas really, not much can add, have lived in islington, not many bargins there any more. highgate a bit cheaper...stoke newington if you are a bit daring etc... try south london, much better :)

Edited by dnjc

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will cost you at least 20k to move inc.15k stamp duty and be careful about cost of ground rent and doing up the place. electrics and heating can cost a few grand easily. as for the actual place, well, hard to go wrong in those areas really, not much can add, have lived in islington, not many bargins there any more. highgate a bit cheaper...stoke newington if you are a bit daring etc... try south london, much better :)

Thanks dnjc.

When you say £20k to move do you mean another £20k on top of the £25k I have saved or can that be included in the mortgage?

Where in South London do you think is better in that price bracket?

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It's a great time to buy, you could double your money in the next few years. All you have to do is buy in the right area and sit back.

Happy days.

What is your point Gone to Ireland? Are you saying it's better to keep paying rent than to buy?

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Thanks dnjc.

When you say £20k to move do you mean another £20k on top of the £25k I have saved or can that be included in the mortgage?

Where in South London do you think is better in that price bracket?

Yes, you would have save for all the tax and associated fees as well as your deposit. Gone are the days of 120% mortgages to have some extra cash to do the place up! Although some mortgages still allow the mortgage fee to be added.

You have a bare 5%, and you have nothing for stamp duty, which is going to be 15000 to 25000, and you won't be able to borrow any more than 95%. So, as far as I can see you are going to have to save for a wee bit longer.

Also, why do you think it is a good time to buy? Do you think if you wait 6 months or a year when you are in a better financial position, it will be any worse of a time to buy? Surely unless you are buying a BTL the timing is more down to personal need.

How much is your rent compared to the mortgage? What rate can you get and How long is it fixed for? Do you have job security or perhaps a profession where work is pretty much guaranteed?

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Yes, you would have save for all the tax and associated fees as well as your deposit. Gone are the days of 120% mortgages to have some extra cash to do the place up! Although some mortgages still allow the mortgage fee to be added.

You have a bare 5%, and you have nothing for stamp duty, which is going to be 15000 to 25000, and you won't be able to borrow any more than 95%. So, as far as I can see you are going to have to save for a wee bit longer.

Also, why do you think it is a good time to buy? Do you think if you wait 6 months or a year when you are in a better financial position, it will be any worse of a time to buy? Surely unless you are buying a BTL the timing is more down to personal need.

How much is your rent compared to the mortgage? What rate can you get and How long is it fixed for? Do you have job security or perhaps a profession where work is pretty much guaranteed?

Oh right, I assumed you could borrow the money for the stamp duty.

I don't particularly think its a good time to buy, I am just sick of renting and would like my own place.

Rent is currently £1100 pm whereas mortgage would be £1700 pm.

When I called Lloyds they said the rate was fixed for the first two years.

Job security is not guaranteed.

On the Help to Buy scheme can you sub let a room if you want/need to?

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Another lamb to the slaughter - if a relatively wealthy one.

OP - it sounds to me like you need to do a bit more digging into the cost of moving as well as anticipating how you'd manage if interest rates rose and/or you or your other half got sick or lost their job (if you have a partner of course). Also bear in mind, that just because the bank will lend you the money, it doesn't mean it's necessarily a good idea to take it (all). They have hardly shown themselves to be prudent in the last decade - so you need to look after number one ie are you happy with the repayments or would you struggle?

That is a hell of a loan. Still, for all I know you might be on £150K+/year + bonuses so perhaps it doesn't seem so bad from where you're standing.

Age and your personal circumstances might also be a factor. Are you planning to stay there at least ten years? ie it would accommodate any possible offspring etc. Generally speaking the costs of moving - especially with stamp duty - mean you want to avoid moving too often.

Both areas are at least relatively good ones - and favoured by city/media peeps. If things did go wrong, and providing the London bubble doesn't burst, you'd probably get out OK.

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OP - it sounds to me like you need to do a bit more digging into the cost of moving as well as anticipating how you'd manage if interest rates rose and/or you or your other half got sick or lost their job (if you have a partner of course). Also bear in mind, that just because the bank will lend you the money, it doesn't mean it's necessarily a good idea to take it (all). They have hardly shown themselves to be prudent in the last decade - so you need to look after number one ie are you happy with the repayments or would you struggle?

Yeah I'm Irish so I have seen a property crash already. But you can't keep your powder dry forever.

Age and your personal circumstances might also be a factor. Are you planning to stay there at least ten years? ie it would accommodate any possible offspring etc. Generally speaking the costs of moving - especially with stamp duty - mean you want to avoid moving too often.

I would think I would stay there 5 years at least.

It wouldn't accommodate any possible offspring.

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Yeah I'm Irish so I have seen a property crash already. But you can't keep your powder dry forever.

I would think I would stay there 5 years at least.

It wouldn't accommodate any possible offspring.

Rent is £1100pcm or £13,200 per year..

Stamp duty + costs is 'about' £20k

The interest on £375k @ 4.8% (95%LTV) borrowings per year 1500pcm

Looks like your rent at £1100 is a bargain! Buying will cost you and extra £400pcm in interest + £333pcm in stamp duty and other fees if you stay 5 years.

Then after 5 years and you stay you will have to start paying back the governments £100k at silly interest rates.

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Rent is £1100pcm or £13,200 per year..

Stamp duty + costs is 'about' £20k

The interest on £375k @ 4.8% (95%LTV) borrowings per year 1500pcm

Looks like your rent at £1100 is a bargain! Buying will cost you and extra £400pcm in interest + £333pcm in stamp duty and other fees if you stay 5 years.

Then after 5 years and you stay you will have to start paying back the governments £100k at silly interest rates.

It does seem like the system in the UK is rigged to inflate house prices, i.e. QE and artificially low rates. So being a renter in that environment isn't a great option.

Although stamp duty does does complicate the issue. It's like the Government gives with one hand with the Help to Buy scheme but takes away with the other with 3% stamp duty.

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It does seem like the system in the UK is rigged to inflate house prices, i.e. QE and artificially low rates. So being a renter in that environment isn't a great option.

Although stamp duty does does complicate the issue. It's like the Government gives with one hand with the Help to Buy scheme but takes away with the other with 3% stamp duty.

A loan is not a gift. It has to be paid back. The purpose of this HTB loan is to enable you to buy something you can't afford in a bid to keep prices rising until the 2015 election. I can't imagine any tricks that could keep prices rising beyond 2015, but they have surprised me before so who knows?

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A loan is not a gift. It has to be paid back. The purpose of this HTB loan is to enable you to buy something you can't afford in a bid to keep prices rising until the 2015 election. I can't imagine any tricks that could keep prices rising beyond 2015, but they have surprised me before so who knows?

A gift in that the HTB loan is interest free for 5 years.

Actually, will the bank see this as lending to me 75% LTV or 95% LTV?

Will I be penalised with a much higher interest rate compared to having a higher deposit?

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A gift in that the HTB loan is interest free for 5 years. Correct, although it is more complicated in that the capital gain on the govt's part of the loan is lost on the sale of the property and after the interest-free period the amount you pay on the govt loan will increase significantly (from 1.75% to perhaps 1.86% in the second year - this could add up over the years).

Actually, will the bank see this as lending to me 75% LTV or 95% LTV?I think the former

Will I be penalised with a much higher interest rate compared to having a higher deposit? The HTB rates are marginally less competitive and have more fees attached, it seems.

Edited by bearwithasorehead

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Regarding the areas, I'd be wary of using the term "Aldgate" unless you mean the ward that is part of the City in which you are unlikely to find anything other than a studio for 500k. A lot of young people have moved in recent years to the area near Aldgate East station which is in Banglatown and Whitechapel and is certainly not Aldgate. This confusion has led to some suggesting renaming the station "Brick Lane" but with "Whitechapel" being less sellable than "aldgate" a lot of estate and letting agents have exploited this confusion and sometimes refer to an area called "Aldgate East" which simply does not exist.

However if you are referring to the western part of E1 that has seen ridiculous increases in recent years, it seems a bit overheated in my opinion. It may suddenly become desirable but one beds going for 600k in an area that hardly any white middle class family would ever consider living seems stupid. The area is definitely changing but I'd say the prices are anticipating that change far too early.

I would consider further east if I were you and maybe not go for such a huge loan. I think that you won't go wrong with Whitechapel or further towards Canary Wharf. These areas are bound to change with Crossrail even if prices don't increase much further. But of course they need to suit your taste. I've lived here for close to a decade and know that the inner-city feel of it all is not everyone's cup of tea.

As you are working in St Paul's, along bus route 15 is probably a good place to look.

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