Owning my own home was something I never thought was possible. As a fully paid-up member of generation rent I was fully of the belief that home ownership was simply out of reach. I left university smack bang in the middle of a recession, interned for free and worked hard in an industry renowned for not paying that well (fashion). All while paying extortionate London rents. I never had a penny of savings, never had any money at the end of the month, and frequently got my card declined at the supermarket (until I realised that any transaction under £20 wouldn’t register with my bank and proceeded to get lots of overdraft fees).
This sounds all doom and gloom… but there’s a happy ending! You can buy a house as a single woman. This month I had my offer on a house accepted and a mortgage accepted with a good lender. So how did I do it? Read on…
Widen your options for where you want to live
I have lived in London for almost a decade and I knew I would never be able to afford a home there by myself. Unless it was a studio in zone 4. Which, let’s face it, what’s the point of almost killing yourself for that? There wasn’t really anywhere else I saw myself living until I visited Margate on the Kent coast a few years ago. After a weekend visit, I knew I wanted to live there. A lot of young Londoners and creatives priced out of the city have done the same, earning Margate the nickname ‘Shoreditch on Sea’. But this was a place I could see myself living and more importantly, afford to buy there.
And now that many people are remote working it gives you options as to where you want to buy. You don’t need to be in the heart of a big city. Working from home means spending more time in your space, so you need just that.. space. A garden wouldn’t go amiss either.
Get serious about owning your first home
Okay, so you’ve looked at more options for location. Now it’s time to get serious as it’s still not easy for millennials to get on the housing ladder. The first thing I did was pay off all my debt. I did this by taking on a second job, there’s no point saving if you have high interest debt hanging over you. With bonuses to help I paid off roughly £7k of debt in 6 months.
Then you have to SAVE. Literally that’s all you have to do, just save, save, save, as much as you can. Take it seriously and always have that goal in your mind. My second job helped, as did doing lots of eBaying, and I made sure a 30% of my wage went straight to savings each month. In a year I had saved about £10k (I’d had a few holidays so could have saved more but you gotta live).
Now around this point it’s time to start getting strategic and working out your affordability. How much deposit do you need to save? How much money can you borrow?
How to work out how much money you can borrow and how much deposit you’ll need for a mortgage
The most important figure you need to know is your salary. As, unless you have a huge helping hand from mum or dad, then this is what banks look at most. You can borrow 3-4 times your annual salary usually. So if you earned £10k a year, a bank might lend you £30k-40k.
Let’s say you see a house or flat you love for £100k. And you’e saved up a 10% deposit (£10k). That means the bank would have to lend you £90k.
If your annual salary is £20k then thats 4.5x your salary and you probably wouldn’t get a mortgage for that much. So you might have to save up more deposit to bring the LTV (loan to value) amount down.
A 10% deposit is a 90% LTV. But if you had a £20k deposit that would bring it down to an 80% LTV and the loan would only be 4x your salary.
How much can you actually afford to pay for a house and a mortgage?
Be realistic. Banks look at affordability to make sure you can pay back the loan, and you don’t want to overstretch yourself. To be honest if you are paying rent in a big city, it’s highly likely that your mortgage would be less than your monthly rent. A common rule is that mortgage, bills and utilities should be no more than a third of your take home pay.
This is what it has cost me to buy my first house
Full transparency. My house will cost £207k, it’s a 2 bed, 1 bath, 2 reception room house with a big garden, ten minutes walk from the sea. I will put down a 15% deposit which comes to just under £32k and take on a mortgage of £175k which is roughly 3x my salary.
My mortgage payments per month will be approx £690 a month, which is only £40 more than I paid for a room in a shared flat (and that was mates’ rates tbf). My bills will add another couple of hundred onto that amount – whereas before splitting between 3 in a house share it was around £90 a month.
So for less than £200 extra a month I will be paying money towards my future rather than someone else’s. Rather than one small room, I’ll have a whole house. For the first time I’ll have a garden. And for the first time I can do what I want, change windows, paint and even have the pink front door of my dreams!
UPDATE/DISCALIMER: This sale fell through sadly (which I’ll write about later). I have had an offer accepted on another property and this information is still relevant and, having read it back, super great advice. Haha.
UPDATE 2: I am in my new house as of 25th Feb 2022. Wow. What a long journey. This article still holds though, but updated figures are as follows. House cost £261k, monthly payments about the same as the interest rates dipped at the time, and deposit was £39.5k
Is buying better than renting?
It depends… for me, yes. I want the security and freedom in terms of making my home my own. But it’s a big debt to take on and a whole lot of responsibility. At least with renting, boiler problems aren’t your own. Ultimately I wanted to live alone and in London to rent a 1 bed was too expensive even on a relatively good wage. It would have cost at least £1800 including bills to rent anywhere with a window in London, which just isn’t worth it to me. And would make saving impossible.
Millennials can buy homes
I hope my experience fills you with hope. In about 3 years I’ve gone from no savings to being about to move into my first home, well in a few months, homebuying is loooong. But it’s possible, just not in London. Good luck fellow millennials!