Cherry Healey’s Property Virgins was a two-parter made for BBC Three to help wannabe first-time buyers. I watched this several times before buying my first house so that I could make head and tail of mortgages and the homebuying process.
Maybe it’s a compliment to the producers, but I find both episodes still relevant today. Or perhaps the UK property market is still just as challenging…
They wanted to examine why so many of us still rent or live with family throughout our 20s and beyond. Their feedback said besides travel, a car, and marriage, what young people really want is their own home. (Amen).
They filmed around Leeds, but I wanted to stay near family and work in the South East. The amount I needed for a deposit seemed impossible when comparing prices between north and south.
I still learned plenty from revisiting the show during the long years I was saving for my deposit. I’ve recapped everything below that you need to know today as a property virgin. Sad about renting? Or feel like a bird in a cage living with family? Let’s see if any of this can’t make you a fully-fledged homeowner with your very own not so mouldy space…
Also, hold onto your seats because this blog post is over 8000 words. It’s all Cherry’s fault (thanks for the education, Cherry!) I’d say it’s an ultimate guide, but I have many other blog posts that go into more detail about each of the essential topics for first-time buyers below…Consider this the ultimate foundation then (building pun intended).
If you’re short on time, bookmark this epic and join the other Bear Savers and Earners on my mailing list. I send short and sweet tips there instead to bolster your bank balance.
Here’s what I’ve covered below:
- Ways To Save A Deposit If Your Money Is Magic
- What To Do If Renting Is A Horror Story
- Buying When Your Earnings Are Low
- How To Make Besties With The Banks
- Comparing Different Buying Options
- What The Fudge Is Negative Equity
- The Steps To Actually Buying A Fricking Home
- Alternatives That Make Renting And Buying Cheaper
I’m not a financial advisor or broker. I’ve added anecdotes to the information I gathered, but your money is yours alone. I can’t tell you where to lose it or invest it etc. Please use this as a launchpad for your own research.
In case you missed it…
I recapped How to Live Mortgage Free with Sarah Beeny before this. That show covered the various ways to put a deposit towards alternative living instead. That could be converting a horsebox, shipping containers, or a houseboat among other ideas.
Property Virgins is far more about traditional home ownership. I strongly considered self-building, and tried to imagine living on a double decker bus, but there was actually more incentive for me to buy a cut price house with a mortgage and do it up.
I could have easily diverted another six years or so of my life into a) looking for a teeny tiny parcel of land for my budget. Then b) DIY-ing whatever I put on that land until my fingers bled, but I guess it wasn’t meant to be. I certainly wouldn’t be writing this right now if I was arm deep in sawdust from carving my own worktops out of desperation…
While tiny homes are growing in popularity, there are still way too many barriers to self-building in the UK, so most of you reading will likely buy a house the good old-fashioned way. (It is possible! Just follow the blog!)
Are you in the 95%?
According to Cherry, in a nationwide survey of over 2000 UK adults aged 18-29:
- 95% of respondents said they wanted to own their own home
- 87% thought it would be difficult to actually get onto the property ladder
- 1/3 still lived at home with mum & dad
- 1/4 of those shacking up with parents said it was because they loved home comforts
Regards the first point, across the UK, renting is simply not as secure as in some other countries. Also, as the guests featured below demonstrated, it can also mean paying over the top for some fairly nasty digs.
A lot of renters would pay out less if they had a mortgage. The Powers That Be that decide what we can afford have decreed that it’s somehow more affordable to pay £700 before bills to sleep in a lounge near Earls Court than it is to pay £350 per month towards a mortgage on a one bedroom house in the countryside. Go figure.
87% thought it would be hard to join the property ladder
There are definitely things the majority of us can do though to make ourselves more attractive to mortgage lenders and more likely to sleep under our very own roof sooner than later.
You have to really want it though.
Regards the percentage of respondents that said they still adore the home comforts of chez mum and dad, guess what? When you have your own home, you can create your own home comforts! I’m guessing the respondents were referring to a well-stocked kitchen, dinner or laundry done for you, and a furnished home…I had to furnish my fixer upper slowly over several months. However, I love the freedom of having my own space that I can use on my own schedule and decorate and organise however I want.
Ways To Save A Deposit If Your Money Is Magic
Does your money disappear regularly? Not the kind of magic you want in life.
The first couple they spoke to were Jordan and Charlotte. Their mouldy rental ruined their sofa and the walls; they even found some slugs on the wall inside while filming! The landlord treated it once during the 18 months they lived there, but they were also forking out themselves to fix the mould. Understandably, they would have preferred to spend any maintenance on their own home, if needed at all.
Charlotte spent £400 on gas alone one month, or the same a family could spend in a year. They only had about £300 in savings.
Financial expert Richard Fenton has 15 years experience and he went over their expenses with them.
What’s your financial damage?
- Jordan and Charlotte were earning about £37k all together
- Their rent was £475
- They ran separate cars because Charlotte drove to work 5 days a week whereas Jordan kept his car for social use
- They were spending £400-500 per month on bills(!) because they were on a PAYG metre
When PAYG metres happen to good people
I bought my house full well knowing that the electric was on a PAYG metre. This appeared to be because of bad management previously by a tenant or the landlord that had racked up a load of debt.
The previous tenant was topping up constantly, but she was actually paying off a debt that wasn’t hers. I felt really bad on her behalf that the energy company weren’t honest with her that she didn’t need to pay so much. Existing debt is NOT the responsibility of whoever takes over the lease.
Once my sale completed, I notified the energy supplier that I was the new owner. The debt vanished from my account as it didn’t belong to me. That way I was able to top up the metre with a blank slate.
It’s still kerazy expensive to pay for electric this way though, so I requested my supplier to change me to a credit metre ASAP. This took a few months, partly because their customer service was rubbish! There were no engineers available to do it when scheduled.
Once my supplier sorted that though I asked for the cheapest tariff. Then I switched supplier to the cheapest deal via MSE’s Energy Savings Club. Like me, Charlotte discovered the metre was in debt. This explained why it had been such a money drain. If you find yourself in the same spot, ask for a refund!
The expert’s solutions to magically disappearing money
Richard’s suggestions for Jordan and Charlotte were:
- To sell her car for £1k
- Stop using cash that day
- Track all their spending
- Contact the energy supplier to find out if the metre was in debt
- Switch suppliers for the best price
- Open a savings account specifically for their deposit
Card tracking vs cash budgeting
Richard’s advice to stop using cash gives a record in our accounts of everything we pay for by card. However, I have seen the opposite advice, especially for credit cards.
Handing over plastic to pay with credit that isn’t really ours, or the ease of contactless can lead to mindless spending. It gives the false sense that the transaction only exists in virtual reality… Unfortunately, that’s our very real money slipping repeatedly into the accounts of businesses instead.
If you already pay for everything by card and still have nothing leftover before payday, then try the cash budgeting system. This is where you put cash in separate envelopes for your spending priorities.
Because you decide the budget in advance, if you run out of cash in an envelope, it means you can’t spend anymore in that category on impulse. And if you don’t have the right envelope on you while out and about, it must mean that you didn’t plan that spending in advance. It’s therefore a perfect opportunity to go away and think about whether you really need what you suddenly wanted to buy in the moment.
The right way to use a credit card
Conversely, if you burn through cash because you expect it to magically regenerate, then you can try monitoring with plastic instead. A cashback credit card rewards you for spending you were going to do anyway and can help you build your credit score.
This only works and makes you look hot stuff to mortgage lenders if you manage the card properly though:
- Set up a direct debit to always repay the balance in full so that you don’t incur any interest
- To earn the most collect extra cashback for going through TopCashback first
- Only use it for what you can ordinarily afford
The last might mean you ask for a smaller credit limit than offered.
Richard wanted them to name the savings account something affectionate. I mostly thought of mine as the “Don’t want to freeze to death in a doorway fund”. Let me know in the comments if you’ve clocked up any motivation from naming your accounts something sweet or otherwise…
What are your spending priorities?
As Homer Simpson says, if at first you don’t succeed, the lesson is to never try…Wait.
Charlotte and Jordan didn’t follow all of Richard’s advice, and tracking their £1300 of monthly spending revealed their priorities lay elsewhere.
Charlotte decided to keep the car for the emotional attachment. She joked that she saved £5 whenever Jordan washed it though. Only 6% from the BBC’s survey said they would sell their car for a deposit, so Charlotte is not alone there. I grew up somewhere very rural, so I can partly understand this, especially if there are no other cars in the household. Let me know in the comments if you’d keep your car through hell or high water.
They also had to pay vet bills after a friend’s cat attacked their dog and the insurance fell short. Charlotte was still spending £30 on monthly manicures. Essential to some! My bear paws have never had a manicure, so I don’t know if this is a luxury I’m missing. How about you?
Save for a house or a wedding?
They were also planning a wedding at a venue that had a helipad. Charlotte reckoned between the wedding and legal fees etc, that they couldn’t save for a house.
Jordan told his tattooist (who doesn’t give free tattoos) that Charlotte also wanted to save for a holiday and he expected they’d splash out on another holiday the following year. He would have preferred to get the mortgage before the wedding, but said Charlotte was traditional and wanted to do it the other way round. This meant they took £600 out of savings to book the wedding, leaving £200.
Richard also raised eyebrows over how much Charlotte spent on her sister’s birthday. Why do they say you can choose your friends, but not your family? Richard was frustrated because they had income, but they spent their stash on other shiny things.
The BBC’s survey found that 1/3 of us are put off buying because we think the deposit sizes are too daunting.
Do I want this or a house?
To save a deposit we need to play a long game. A goal like this requires attention and effort, day by day. Kind of like anything else in life worth achieving.
I kept asking myself “Do I want to buy this thing I’ve just seen today, or do I want my own shelter?” Not being homeless was always the least appealing choice. Charlotte and Jordan obviously had some conflicting spending priorities, but they also seemed to have enough disposable income that they could enjoy a high standard of living while renting.
Although they disliked their rented home, it obviously still wasn’t enough incentive for them to make a house their number one priority. I suspect at a later date that their priorities shifted and there would have come a right time for them to make it their big ambition. Or Charlotte could always sleep in her car…
What do you really want?
What To Do If Renting Is A Horror Story
From the BBC’s survey, 3% of those surveyed had lived with a flatmate who behaved inappropriately sexually.
6% of renters found flatmates boring and 40% of responses had complaints about landlords.
It’s good to be bored then, eh?
One renter Lindsay had no hot water for six weeks because the landlord didn’t fix the boiler and they caught 20 cockroaches in their flat. The landlord’s input? Take them to the local Chinese restaurant for cooking. Charming. He ignored the majority of her text messages, but she eventually got her deposit back.
Their tips to fight dodgy landlords:
Put any conversations in writing
Send any letters by recorded post
Use citizens advice, the council and any tenancy support groups
Renting doesn’t always have to suck though and there are some good tenant-landlord relationships. They just seem of the unicorn variety sadly.
Cherry did visit a group of young dudes having a house party at a high end apartment. For £300pm each, they had a very reliable landlord, and their apartment type isn’t available for rent often. This also meant it was out of their price range if they were buying. I once rented a mansion (with a lot of other people as you might guess), so this argument for renting has legs if you get on well with the landlord. Assuming you think living in a mansion can ever be a good thing. (It was a bit draughty, that’s for sure…)
I’ve weighed up in another post buying versus renting through the sunny and frowny days: Is Buying A House The Worst Financial Decision Ever?
Buying When Your Earnings Are Low
Welcome to how hard is it to save a deposit: Round 2 – Low Earners.
This time they spoke to Craig (aged 25) and Sarah (aged 23). I’ve only included their ages to highlight that they are ambitious. I never worried about whether anyone else was getting on the property ladder before me because we all have to do things at our own pace. There will always be someone younger who got there first; the youngest Oscar winner was 10 years old on movie judgement day, so the only person worth competing with is yourself!
Sarah was working four part time jobs and Craig was a roofer, so they didn’t think they earned enough to save anything, but they also considered their rent dead money. We know that feeling!
However, they HAD saved nearly £2000 previously. Craig then had trouble finding work because roofing is weather dependent, plus Sarah had to pay course fees.
According to the BBC’s survey, less than 5% of respondents in Sarah and Craig’s demographic have £2000 in savings…
…and 16% used their deposit money to pay for something not shaped like a home.
So…they had done really well to save that amount on their income, and if they did it once, then they could do it again. It’s keeping the money aside for a deposit that can be the tricky part. If we’re able to save for a rainy day, then there’s no reason that we can’t rebuild the pot when life wees all over our parade.
Craig and Sarah needed to do the following:
- Rebuild their savings
- Improve their credit score
- Research their buying options
More on these below.
How To Make Besties With The Banks
One of my first blog posts was What You Need To Get The Best Mortgage Offer.
This was all about how we can make our deposit, relationship with the bank, and the property we want all link together in a spangly triangle. [If you’re not into spangles, have an insipid triangle if you prefer]. One thang you’ll want to see eye to eye on is your credit score.
As Cherry says, this is simply a way for the bank to estimate whether you will pay them back. They use your history with things like contract mobile phone payments and credit cards to noodle whether you’re reliable, or an almighty financial flake.
The show found that only 1/3 of those surveyed knew their credit rating.
We can check credit scores easily for free. MSE’s Credit Club is very simple and doesn’t involve free trials that charge you later. (Although if you sign up to TopCashback, you can also get cashback for checking your credit score with other agencies for free. Cancel before any subscriptions start if you don’t want their other features).
Richard classed Craig and Sarah’s “fair” score on Experian as average. (But don’t dwell on this. Most of us would benefit from running away from the average). They weren’t using a credit card. Richard said even just buying one thing monthly on the card and paying it off in full would build up their credit history.
Tips to improve our credit score
Apply for one credit card, not several
Make sure all financial correspondence is going to one address
Register on the electoral roll (lenders use it to determine where we live)
Make any payments you owe on time every time
As I mentioned earlier, the easiest way to pay a credit card balance in full every time to avoid late fees or interest is to set up a direct debit. I’m going to recommend Money Saving Expert yet again(!) because they list the best deals weekly. They also explain 0% cards versus cashback cards, versus balance transfer cards if you have existing debt.
Comparing Different Buying Options
Mortgage maths UGH AGH UGH AGH.
Speak to a broker if mortgage maths brings you out in hives.
Sarah did a reccy at the bank instead to find out what they might lend hypothetically to her and Craig. I’d say it’s really important with this kind of research that you don’t make any formal applications until you’re ready. This is because if the lender rejects you, it will show on your credit file for several months, and prejudice the next lender against you.
The least risky way to find out all your options and then move forward is through a broker. I called London and Country and got my agreement in principle off the end of a 15 minute chat. Meanwhile, the BBC found that 6% of respondents had been refused a mortgage. I wonder how many of these were due to computer says no type errors, or simply applying without the aid of a broker.
Speak to a broker, not just your bank
The bank offered Sarah and Craig £63000 over 20 years at 5.9% interest. Their monthly payment would be around £422 per month. The monthly payment doesn’t sound that high, but I thought the interest rate was fairly staggering (and Craig agreed).
Interest rates follow trends depending on the economy. However, the bank seemed to want to charge Sarah and Craig double the interest compared to competitive first-time buyer mortgages.
The interest rate offered and the monthly payment can depend also on how many years the mortgage is going to last. Use L&C’s mortgage calculators to play around with mortgage terms (e.g. 20-35 years), and borrowing amounts to see how much the mortgage would cost over a lifetime.
Something might look reasonable upfront if you can afford say £400 per month. Paying £400 per month over 35 years is quite different with interest to paying the same over 25 years. In reality, you would remortgage regularly to keep your interest low, so the payment would never be £400 forever anyway. The point is that a low monthly payment is meaningless if you could get a mortgage product elsewhere that charges you less interest overall.
The bank offered shared ownership to Sarah and another option which sounded like the Help to Buy government equity loan, but she got a bit muddled. I’m not surprised the bank had Sarah in knots. This is also why I think it’s good to research and chat to a broker before attempting any applications.
To demonstrate shared ownership, they spoke to a dude named JJ He rented two thirds of his home from the Housing Association locally, and his deposit and mortgage covered the other third. He can increase his ownership by purchasing more of the property from the Housing Assocation (ie by remortgaging). Or if he sells, he would hope that the price has gone up. This way the HA would get the proportion from the sale that matches the percentage they own.
These schemes usually come with at least 2 caveats:
- He can’t rent it out because he doesn’t own his home 100%
- Who can apply is restricted
However, because the government backs shared ownership, it is generally considered a safe purchase option.
I’ve written a post that explains in more detail the difference between choosing Help to Buy schemes over Shared Ownership (or neither):
Help To Buy Vs Shared Ownership Vs A Fleetwood Mac Song.
Help to Buy
Alternatively, Richard explained that on their income they might be able to borrow £100k over 25-30 years, if they invented a deposit of £10k.
One thing that’s dated in the programme: Richard said 30 years is the maximum mortgage term available. However, there are now 35 year mortgages on the market. This doesn’t mean that you have to keep the mortgage for 35 years necessarily as there are ways to overpay a mortgage and reduce the term as life goes on. I’m not sure why he didn’t recommend they go to a broker, although he did tell them to shop around for the interest rates and fees.
Richard said there is only ONE question needed to compare different mortgages:
What will it cost over the lifetime of the mortgage?
Is Help to Buy worth it?
Because Sarah and Craig were earners without big savings, Richard pointed them towards Help to Buy schemes for first-time buyers. They viewed a new build available for £121k if they supplied a 5% deposit, or £6000. They still thought saving £6k is a lot, I suppose because they had used the £2000 they stacked previously. I don’t think they gave themselves enough credit for saving that amount despite their respective careers.
Often when we get a setback, we view it as starting from scratch. You’re not really starting from scratch though. If you’ve done something once before, you’ll likely find it easier second time around (or the third or fourth time). Be persistent because no one else is going to fight for your future as hard as you.
Sarah and Craig didn’t buy before filming ended, but they had far more information and choices than at the start of the process.
Richard explained the Help to Buy equity loan using £100 to represent £100k:
£20 comes from the government
£5 comes from the buyers
The rest comes from the bank as a mortgage
The caveat here is the property prices. I didn’t qualify for Help to Buy in my part of the country because the cheapest new builds were somewhere in the region of £300000. Although I could handle the 5% deposit (and then some), my salary was still too low for the remaining 75% mortgage. They also didn’t talk about what they would do if they didn’t repay the government’s part of the loan within five years, as this has interest implications.
So ask again: what will it cost over the lifetime of the mortgage?
Also ask: would it be worth saving for longer and not taking the equity loan? Especially if this means buying an existing property priced lower than a new build anyway.
What The Fudge Is Negative Equity?
Negative equity in property is when a home’s value drops after securing the mortgage, so that the outstanding balance becomes higher than the property’s new value.
This is what happened when Gillian bought a three bed apartment in Belfast in 2009. (She bought aged 24, so sometimes being a slow tortoise wins the race…) On the one hand she had a lovely flat and lots of space, even using one bedroom as a dressing room. On the other hand, she was in negative equity. If she needed to move for any reason, she would be worse off financially than when she started.
- Gillian’s flat cost £245000 in a strong market
- Six years later the valuation was £130000
- The valuer said realistically it would sell for £120000 because apartments had stopped selling
- Gillian paid a £50000 deposit
- Selling the flat while in negative equity would have meant owing the bank £75000 after
Northern Ireland scores highly for wellbeing though according to another recap of mine: The UK’s Best Place To Live.
The show estimated over 350000 first-time buyers were in the same position as Gillian. This is one of the big down-sides of buying when the property market is strong. They didn’t go into ways to avoid this. Here’s what I thought about when buying:
- Choosing a property that was vastly reduced in price compared to similar houses that were in better condition.
- Saving at least a 40% deposit versus the often advertised 5 or 10%.
Choose a discounted property
Let’s look at #1. My hunch is that it’s more likely (but not guaranteed) that refurbishing a house might increase the value. I haven’t worked out the statistical probability on this.
This doesn’t necessarily mean buying a house that’s falling down either. It’s possible to haggle if:
- The seller hasn’t decorated for many years
- The house has been on the market a long time
- The seller is fed up of waiting for a buyer
- Or they need to move urgently
When scanning Zoopla and the like, I noted that newly decorated houses were often marked up by £20000 for the same square footage as houses that needed TLC. If these houses drop by £20k after, then you’ve made a loss. But if you improve a property, and it goes up £20k more than you paid, then fabulous.
If I improved my property on a restricted budget and the market dropped overall, then the value might not increase at that time, or might only increase marginally.
£1000 over several years to decorate is a sunk cost from the perspective that it’s your home and you might have spent that money likely anyway. Adding value to a home is just a bonus. (And spending £1000 to refurb the way you want it is almost a no-brainer compared to paying some else £20000 for kindly decorating the house you want to buy at their time and expense…But also to their taste). In this scenario I would lose less than someone trying to charge a premium to sell their house with fresh paint on the walls.
Conversely, there are some improvements that cost more than the value they add, so it’s crucial to get estate agent’s opinions on modifications. Certain house sizes locally might have a ceiling price, so that no matter how fantastisch you makeover the interior, you won’t fetch above a certain asking price. Basically, don’t put marble floor to ceiling in a one bedroom house (as if you would!).
Saving a bigger deposit isn’t just about interest
Regards the second solution to avoiding negative equity, a 40% deposit sounds huge. I couldn’t get a mortgage with a small deposit anyway because my salary was too low. Even if I had qualified for a 5 or 10% deposit, I think I might have rented for longer.
I personally wouldn’t be comfortable owing 95% or 90% of my home to the bank. I can’t think of anything else in life where I would agree to such an unequal ratio. Saving a bigger deposit means borrowing less from the bank, and cushioning yourself slightly better against any drop in value.
In the show, Gillian obviously wasn’t expecting her flat to drop by over £100000 and this is perhaps an extreme example. Even with a 40% deposit, she still might have been in negative equity depending on what she paid off during the six years in between.
It seemed more likely to me though that if the mortgage covered most of the house at the start and the house slid in value that this would cause more of a problem then taking a smaller mortgage from day one.
I can’t emphasise strongly enough that I’m not a financial advisor or broker. What you do with your moolah is up to you. These were just the things that I took into account after research while saving for a deposit.
The Steps To Actually Buying A Fricking Home
The programme also followed Ailsa (23) and Lauren for five months who were ready to buy. Again, I’d like to point out that Ailsa was super young compared to some first-time buyers.
Even the show’s research found the average age to buy a first house at the time of filming was 37.
Crucially, those surveyed guessed the average age at 27 which goes to show our tendency to underestimate how long it takes to reach life’s milestones.
In 2018, a government survey aged the average first-time buyer at 33. I expect this statistic bounces around the 30 to 40-something boundary from year to year.
Pick a financial goal instead of an age-related goal and move on.
Here were the basic steps to buying:
- Arranging finance
- Viewing properties
- Making an offer
- Arranging a survey
Ailsa and Lauren were renting a two-up two-down terrace in a less than ideal neighbourhood. Ailsa was left part of her deposit by her grandmother (£45000) and her parents were supplying the rest (£80000). This made her a cash buyer which meant proving nothing to the bank. It could also have made her look more favourable to sellers as they don’t have to wait for the buyer’s mortgage to be approved.
Lauren was going to pay Ailsa rent, but Richard queried the family money. Was it a loan that her mum and dad expected interest on top? Or was it a gift?
If it was a loan, then they would need to discuss how the money would be repaid. Otherwise parents can act as guarantors to help secure a mortgage. This means that if you fail to pay your mortgage, they become liable for the money owed though. The point isn’t for them to end up paying the mortgage, but to make the bank more comfortable about lending to you.
Ailsa and Lauren still needed to budget to pay for the surveyor, solicitor and the household itself.
The BBC found that 1/4 of those surveyed expected good ole mum and pop to put some quids towards their first house purchase.
Ailsa and Lauren browsed at the top of her budget, but her parents told her to buy something for sub £100k and use the rest of the money for legal fees etc.
They viewed houses galore and chose a three bed terrace in Pudsey listed for £100000. Lauren would pay £197.50 rent (oddly specific! They chose this because it was the same as their current rent). Ailsa was going to pay the same again back to her parents, but with no interest. So in 11.5 years, they would have repaid her parents. Not bad!
I’d like to take a moment here to pray for every first-time buyer in the South…I’ve never seen any house listed for £100000, let alone a three bedroom property!
Making an offer
With her parents advice, Ailsa had an offer of £94750 accepted. Her parents reduced the amount they lent her to £60k, so presumably a small mortgage funded the rest.
Richard’s tips on making an offer:
- Check the sold prices on similar properties
- Start your 1st offer 10% below the asking price and expect rejection
- Continue to haggle after rejection
- Don’t get emotional
They didn’t offer any tips on how not to get emotional about one of the biggest life decisions you will ever make… To make an offer, we obviously need to be able to picture living in the property.
I think the key though is not to daydream too much and start planning where the furniture will go. Try not to talk as if it’s a done deal already, and don’t buy anything for the house until after an offer’s accepted. Even then, sales can still fall through before completion, so it’s best to stay as detached as possible.
Arranging a survey
With her offer accepted, Ailsa could now organise a property survey. She thought this had already happened, but she had mistaken the solicitor’s searches for a survey. Ailsa also discovered that the surveyors don’t interpret any of the technical information for you.
She also accidentally asked for a quote for an industrial survey which is for commercial buildings, so make sure to book a residential survey instead. Expect to pay £250+ for the experts to check the drains and for signs of damp.
The property sale had no chain attached which means that Ailsa wasn’t dependent on the seller successfully buying another property. If the seller is willing to move ASAP then this makes everything a lot quicker.
Chains are problematic if the seller has a problem with buying their new house, or the seller of that house can’t move as planned (and so on until the chain ends!) That means then that the whole purchase can collapse.
In a chain that survives it might mean waiting longer than expected to move in while everyone waits for each other to get to the same stage with their mortgage lender.
Ailsa’s rented street was so rough that she initially thought no chain meant the house for sale didn’t need a chain on the door for security. #lifegoals
They didn’t cover the exchange before completion in detail. This is possibly because there likely wasn’t a large gap between the two, or because Ailsa’s purchase was so smooth at the end generally. Let me know in the comments if you want to know more about these final stages and I will get to typing.
What’s included in house prices?
The seller sold all their furniture to Ailsa for £2250. There’s no reason why buyers and sellers can’t negotiate over furniture; the only thing I found odd about this was that they haggled in person.
Normally this is formally negotiated. The solicitor puts it into the contracts and makes the payment part of the overall purchase. Solicitors usually recommend buying any additions this way. It ensures you get what you agreed as part of the sale and ensures the money for the furniture goes through the safest channels.
Ailsa and Lauren’s seller also left them a new mattress, towels, and bedding which is a tad more generous than anyone should expect! If Ailsa was planning to buy new furniture and homewares, then this is a bargain.
Sites and apps like Freegle, Freecycle, Olio, local carboots, or Facebook groups have free or secondhand furniture. This requires patience and usually some transport, but there are no furniture police that will arrest you if your house isn’t fully furnished on moving in day. The savings can be well worth the wait therefore. Plus it’s better than anything ending up on a trash heap needlessly.
My seller left me a mirror, an ironing board, all the large appliances, an extra blind, random bits of wood(!), a hanging rail for the wardrobe, and…a colouring book. Whoop whoop.
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How do you actually buy a fricking home part 2: the reckoning
Don’t be scared if you don’t have the Bank of Mum and Dad chipping in.
They also followed Shree, a renter from Harrogate. He wanted to buy in Leeds because the population is younger. He wanted to offer £20-25k under the asking price in the hopes of stumbling across a desperate seller.
They followed Shree for roughly the same steps of arranging his finance, viewing properties, and making an offer. They didn’t stick with him through any surveying, or the exchange and completion.
Shree had a deposit of £20-30k. For the sake of mortgage maths (ugh! agh!), let’s say he had £30000 and see how that would affect the mortgage he would need.
Arranging finance round two
- Shree was looking at flats listed for £140-150k
- This would require a mortgage of £110-120k, or a LTV of around 80%
- Shree wanted to offer £120-130k
The LTV is the loan to value ratio i.e. what percentage the mortgage covers of the property’s value. The smaller the mortgage, usually the better interest rate for you.
So an 80% LTV means you are stumping up a 20% deposit. If Shree could make an offer for £120, that would increase his deposit percentage to roughly 30% so that he could access mortgages around a 70% LTV band. This might greatly improve the interest rate available. He’d also be borrowing a smaller sum overall and saving himself interest that way.
Shree was happy to repeat the process as many times as possible until he found someone willing to sell that low. His reasoning was because at the time he was liable for stamp duty on any property worth over £125k. He was trying to limit his liability.
The stamp duty rules have changed and the government can continue to change them for better or worse. The best place to get the most up to date information is on the government’s website.
Shree had to reevaluate his budget though from £125k to £95k. Keep in mind that Ailsa also dropped her budget when viewing…As did I…
While some buyers will find themselves increasing their offers, especially if there are other bidders, this is often not possible unless you’ve started out underbudget in the first place.
Viewing properties and making an offer round two
After viewing three flats at the same price point, Shree found one bigger and better laid out than the others. He wanted to offer £80,500 on a £95k flat. Richard and the estate agent tried to persuade him to put in a reasonable offer i.e. a serious offer.
If you remember many moons ago earlier in this post, I noted that Richard suggested pitching our first offer 10% below asking price. This is with the expectation that we’ll need to negotiate up from there.
£80500 is rather a steep discount on £95000, especially when a flat is in good condition. The seller said the price was £95k, or nothing.
Shree made another offer of £85k on a £90k flat that was identical to the previous rejection. This is when it pays to take the time to view properties on and offline, so that you build an accurate picture of what to challenge, and what to expect for your budget.
Something that surprised me about this is that Shree made the offer while still in the flat at the viewing. This is not really the definition of playing it cool! The seller was obviously in some kind of hurry though. After a few days waiting, Shree chased the estate agent and found his offer accepted. This offer was also below the list price (but not 10% or more below! So this was a better pitch).
If this all still sounds confusing, then I recommend the Open University’s course on Understanding Mortgages. It’s free, online, and covers all the basics. It took me less than an hour. I already had my mortgage when it was launched though, so allow yourself a bit more time if this is brand new to you. (Or perhaps you’ll fly through it!)
Alternatives That Make Renting And Buying Cheaper
They also covered six other ways to rent or buy cheaper:
- Property guardianship
- Homeshare exchanges
- Go “rural”
- Ex-council property
- Buy with friends
If after all this, renting is still very much on the cards for longer, then it pays to get our rent down as low as possible. They spoke to Sam, property guardian of a 35 bedroom Victorian mansion in Helensburgh. It was an ex-care home with definite creepy potential, but all kinds of properties need guardians.
Some properties have several guardians so that you’re not camped out in a disused school or house all alone. All in he was paying £180 (per month, I think). Rules included no parties and he had to patrol to make sure the grounds were secure. He would also have to move if the property was sold obviously, and it was up for sale. He had saved £3k.
Or you could home share like Naomi who was living in a four bed in North London for £25pw including bills. (Yes, that’s £25, not £250.) In exchange she helped her host 97 year old Anne for 10 hours weekly by cooking and just being there in case Anne had a fall. This way Anne got to keep her independence. Naomi presumably wasn’t having wild parties either, but at least her elderly friend was not a ghost…
Co-presenter Tina Daheley spoke to a couple that snagged a two double bedroom flat with balcony in London for £550pm. There’s nothing gained in comparing this to the Chelsea townhouse she visited beforehand worth £11m, but there are big savings just a few miles farther out.
In Croydon, £550pm rent could get you a whole house with a massive garden and lounge. Paul and Laura wanted to be more central, and Croydon is about a 45 minute journey.
The point is that there are vast differences in price for moving six or seven miles out of central London. I lived in one of the outerzones when I rented in London because the saving compared to renting in zone 1-4 outweighed any travel costs to the centre.
To get the best value rent, organise your finances and references, and accept that it’s stressful to hunt for the best digs while working full time. The stress should be temporary though!
I covered £1 ex-council homes in episode two of my How to Live Mortgage Free recap, but this is a bit different.
They found that ex-council homes were roughly 20% cheaper than non ex-council homes for sale. Selina (another youngun at 24) bought an ex-council two bedroom flat in Battersea for £196k in 2010.
These properties can carry a stigma. Tina wanted to know if it bothered her that the flat overlooks a council estate. Selina liked being able to see the playground and the park. It was also the only way for her to afford living in that zone, and very close to work and her social life.
Over one third of tower blocks have been demolished since the 60s because of their bad image, but Tina said that crime rates aren’t higher on the council estates. She met a couple who had an antisocial neighbour, but this could happen anywhere.
Like any other flat, expect to pay service charges, otherwise the property should be similar to any other leasehold apartment. I think this is another one to run past a broker though as some lenders are awkward about leasehold and ex-council (again, because of value perceptions).
21 year old barman Will had seen a three bed terrace in Newport, Wales up for auction. He viewed it twice before it went under the hammer. Cherry could smell that a male cat had sprayed indoors. Will thought it was dead cat smell, so I’m not sure if this was good or bad news??
The house had a crack in the wall, a massive hole in the kitchen ceiling, masking tape over the bedroom ceiling, and the doorways were too low for his height. A neighbour also had prison bars on the window.
The guide price was £30k, but bids can obviously spiral at an auction, so he budgeted £45k to buy and less than £20k to renovate. Cherry said expect to do a lot of work to the cheapest auction properties. She could only find one house in the auction booklet with a guide price of £100k, so some auctions are more bargainous than others. There were also some new builds in the auction guide. Any port in a storm, I guess?
The Newport house went for £50k, so Will had to drop out of the bidding even after going overbudget up to £46500. He didn’t think he’d try again just because the auction itself was so nervewracking…I reckon Homes Under the Hammer gives a more balanced view of what can be snapped up and the work involved.
Auctioneer Paul Fosh’s tips:
- Don’t buy anything you haven’t viewed in person
- Always read the legal pack
- Don’t buy if you don’t know the area or haven’t researched the home
- When the hammer falls, you can’t back out
Buy with friends
Only one third of the people the BBC quizzed would consider buying with a friend.
Nearly 1/2 of respondents were renting with a friend already though (perhaps that’s why!). The biggest gripe from the survey was over chores.
Nick, Josh and Ilan paid £375k for a house together in London. They had to look outside their chosen area and only got the house because after a year it hadn’t sold, so the price had dropped. (This. Combining this with everything else in this post is how you get on the property ladder).
They put in £20k each for a 15% deposit. They drew up a contract with the solicitors that said no one could move out during the first two years to avoid having to relist hastily. Girlfriends were not allowed their own key. For anything not in the contract, they could vote 2-1.
Their tips for buying with friends:
- Establish your ground rules in the contract
- Don’t rush
- Communicate your expectations
How To Lose Your Property Virginity When The Time Is Right For You
Let’s wrap this up like a regifted present.
So here’s what we can do depending on what stage we’re at in our homebuying journey:
- Reduce rent through alternatives like property guardianship, homeshare exchanges, or relocating
- Slay expenditure on big money sucks like energy
- Reduce expenditure on disposable income by monitoring spending with a cash only or cards only method
- Give yourself a windfall by selling assets like cars
- Improve credit scores through savvy credit card management
- Compare buying options like Help to Buy, Shared Ownership, auctions, buying with others, and ex-council
- Consider negative equity and your borrowing comfort level
- Get an AIP, start viewing, and offer at 10% below asking price
- If at first you don’t succeed, rinse and repeat
My other recommendations that they didn’t talk about:
- Reduce rent by haggling with landlords
- Slay expenditure on a big money suck like food (I’ll serve up a blog post, never fear)
- Reduce expenses across all categories by giving yourself access to tips galore (basically, subscribe to this blog at the bottom of this post)
- Increase income by asking for a payrise, switching jobs, or starting a side hustle
- Consider buying a preloved house in need of a lot of love at a lower asking price than a pristine palace
- Consider going mortgage free with a houseboat, tiny home, or self-build
Let me know in the comments if you want more detail on the steps to buying a home.
Stick a fork in me, I’m done – wait, one last thing
I warned you that it wasn’t a short blog post. Homebuying can be rather like a Kate Bush song, but you just have to keep running up that hill. It’s not a hill unless there’s a slope downwards on the other side…
One thing that struck me the most from this was when survey respondents said saving a deposit was their biggest obstacle. Sometimes this is down to circumstances. Sometimes it’s down to rip offs. Or marketing seduction. Or pressure from friends because everyone’s earning plenty, but making plans so that their money marches out their bank account like Buffy the Vampire Slayer on a mission.
I’ve always found it relatively easy to find reasons NOT to spend, but I understand this is not second nature. I viewed saving my deposit as tricky from the other side: banks really didn’t want to lend me much on my salary, hence it made the deposit I needed huge.
The upside of this was that I don’t feel like I’ve signed my life over to my mortgage provider. I’m happier borrowing less and owning more of my property outright from day dot. If you earn enough that you would qualify for a 90 or 95% mortgage on a £300000 house, then it’s very possible to save a 5 or 10% deposit, or more. It takes time, and determination, and the right mindset, but it is doable.
If you don’t earn that kind of money, I hope this opus has given you some ideas to keep going no matter what.
Are your dwindling finances a mystery to you? Or are you just always looking for ways to save? I send quick tips in my weekly emails, so join your fellow bears on the mailing list, and you’ll always know what’s going on around here.