Buying a flat

[heyya99]

I am living in London for 5 years now and would like to buy a flat.

In the last 2 years, I have had unbroken contract stints (the previous 2 years I had 2 breaks, one 3 month and one 4 month).

Can anyone tell me the pro's and con's of buying a flat in London? I am likely to get into negative equity?

Am I right in saying that all I need to be concerned about is paying my mortgage? I have about 50% of a deposit + stamp duty already saved and I'd need to take the remaining 50% from my business.

Is there anything else I need to take into account?

[northernladuk]

Have you worked out exactly how much taking it from the business is going to cost you? I presume you will be going over a tax threshold.

How much war chest will you have left your purchase? War chests are for tiding you over difficult and unforseen hard times, not for dipping in to as savings.

[TykeMerc]

There's a mixed message in his post, talks of a mortgage and also taking the second 50% from his business, those are mutually exclusive positions.

I assume he meant paying the mortgage from business earnings, which of course he could only do via proper draw downs of salary or dividends which are a matter of common sense to manage efficiently.

Can anyone tell me the pro's and con's of buying a flat in London? I am likely to get into negative equity?

Am I right in saying that all I need to be concerned about is paying my mortgage? I have about 50% of a deposit + stamp duty already saved and I'd need to take the remaining 50% from my business.

Is there anything else I need to take into account?

I assume you do have the vaguest idea of what it means to be a home owner, if not then you really do need to step back and think about if you should go out alone let alone buy a flat.

Many flats are leasehold, you need to understand that.....
Many flats have shared areas or responsibilities which need to be funded by all residents....
Negative equity is always a risk as a homeowner, the last time that really bit in the London area was several decades ago, you have to work out for yourself what the risks are now.
There are legal costs involved in a property purchase.
Property maintenance and upkeep is the responsibility of the owner.
You have property insurance to consider in addition to the contents.

This really isn't the ideal forum to ask such basic homebuying questions, there are ones out there specifically aimed at advising first time buyers.

[SueEllen]

I am living in London for 5 years now and would like to buy a flat.

In the last 2 years, I have had unbroken contract stints (the previous 2 years I had 2 breaks, one 3 month and one 4 month).

Can anyone tell me the pro's and con's of buying a flat in London? I am likely to get into negative equity?

How long is a piece of string?

How long is a piece of string?

More seriously I could go into the pros and cons but everything depends on what type of flat you are looking at i.e. block, house conversion, maisonette, the location of the property and who is the freeholder. (I would advise you to look on other non-contractor forums for information about that such as moneysavingexpert.com)

No one knows the future of the housing market so yes you could end up in negative equity but you could not. Ideally you should buy a property 10 minutes walking distance to a transport link like a tube or train station in a part of London lots of people would be happy living in so it could be easily rented out.

Am I right in saying that all I need to be concerned about is paying my mortgage? I have about 50% of a deposit + stamp duty already saved and I'd need to take the remaining 50% from my business.

Is there anything else I need to take into account?

Don't dip into your war chest get a mortgage. Apart from the fact your war chest is your emergency fund if you are unable to work for a period, often when you buy a property some work is needed on it or you want to change it.

The majority of reasonably sized housing including flats in England are older properties that require on-going maintenance. Some of the maintenance is easy to do yourself like yearly vanishing of external woodwork while others you legally have to call someone in to do it for you like fixing the boiler.

[jamesbrown]

There's a mixed message in his post, talks of a mortgage and also taking the second 50% from his business, those are mutually exclusive positions.

The phrasing is perhaps a little confusing, but I read it to mean that the OP has 50% of their deposit and will take a dividend for the remainder of the deposit.

[Scruff]

Smyert Spyonam! 😷

[heyya99]

To clarify:

My flat budget is 400k. I have 20k in personal savings. My business account has 80k. I need a deposit of 40k + 10k stamp duty. I can use the 20k savings as part of the deposit but I need to take the other 20 out of my business. I'll have to take a 25% tax hit if I do that. I have approximately 18k in corporation tax due.

[TykeMerc]

To clarify:

My flat budget is 400k. I have 20k in personal savings. My business account has 80k. I need a deposit of 40k + 12k stamp duty. I can use the 20k savings as part of the deposit but I need to take the other 20 out of my business. I'll have to take a 25% tax hit if I do that. I have approximately 18k in corporation tax due.

I have about 50% of a deposit + stamp duty already saved and I'd need to take the remaining 50% from my business.

20k isn't 50% of 52k (40+12).........

You would need a good deal more than another 20k, you've already stated 12k in stamp duty, add in some for legal expenses, moving, decorating, additional furniture, white goods, curtains and some sundry pots, pans, crockery etc and you're likely to be on the wrong end of another 5k+. If you budget at needing 60k then you're probably safe, to fund that will mean you need to pony up the tax on the drawings of 40k, that's about 10k to HMRC.

[malvolio]

Erm... Isn't the Stamp Duty on £400k £10k now?

[heyya99]

It could be my browser but I amended my stamp duty post to 10k before any subsequent posts.