Reply to: Mortgage before taking a permanent role

[GhostofTarbera]

As others have said avoid high mortgages its not sustainable long term as IT salaries will continue to drop due to increased competition. Would not borrow more than £250-300K max regardless of income once interest rates eventually go up £250-300K mortgage @ anything over 3-4% is excessive!!

But average house price is London is £657,154

You could get a box


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[uk contractor]

As others have said avoid high mortgages its not sustainable long term as IT salaries will continue to drop due to increased competition. Would not borrow more than £250-300K max regardless of income once interest rates eventually go up £250-300K mortgage @ anything over 3-4% is excessive!!

[PCTNN]

Also, think twice before buying in London.

I've not gone into details but I remember recent reports highlighting how property prices have gone up this year everywhere in the uk EXCEPT from London.

If you are still convinced about buying there, then as already suggested buy something more affordable; easier to pay the mortgage, definitely easier to sell in the future compared to a 700k property (which might be valued 550-600k in a year or 2).

[fiisch]

- What is the typical property purchase process timing?
How long is a piece of string... Anywhere from 3-9 months is typical timescale (but has been known to be quicker, and take longer. All depends how long is the chain, any issues come up with property you are buying or elsewhere in the chain. However, if you are reliant on a quick turnaround, you can bet your bottom dollar there will be delays of some nature. Very rare for a purchase to be completely smooth, unless you are a first time buyer purchasing a new build property.

- When does the lender checks for your contract and decides how much you can borrow?
When making the mortgage offer, which is done quite early on in the process.

- What about if the buying process take months and I become permanent before the house purchase occurs?
You would be expected to inform lender of a change in circumstances.

But
That said, we did exactly this. It is all down to your risk tolerance, and whether you think you will be able to complete in time.

In October 2018, I went contracting, with the main aim of boosting our affordability. The contract was a disaster, and was desperate to leave ,but had to wait until May 19 when we eventually completed. £600k house, £45k deposit, HTB, right up to the limits of affordability. Stupidly big house for just 3 of us, but in my early 30s we are in our forever home, and should never have to move again, at least not until retirement.

We managed to get a much bigger house, in a much nicer area, and it's worked for us. Straight after moving, I got a new contract, and if it wasn't for the IR35 mess I'd be pretty relaxed. However, even if I have to go permanent, like you have the option of getting wife to work so is still well within our current affordability.

What you're proposing is risky, especially if you can't get another contract beyond June, at least until you complete your move, but it is feasible.

Yes people will bleat on about credit crunch and question affordability if rates sky-rocket, but those same people likely benefited from historic meteoric property price increases, and comparatively low entry requirements to get on the housing ladder.

[Lance]

So, I should continue saving, put money into pension, and watch how the market evolve for the next years before considering any move.

no. Buy something more affordable. Around the £300k mark. That way you'll have 20% deposit so you'll get better deals. If after 10 years you've saved then you buy somewhere bigger.

SmartMaps view of London property for sale - Houses & flats for sale - Zoopla

[Trinks]

I'm no expert in real estate and I cannot predict the future.

BUT I think:

1) investing in real estate is quite risky at the moment (say it's riskier now than it was 5 years ago)
2) investing in real estate in London is riskier than in other geographical areas of the uk

Given point 1 and 2

3) investing in a £6-700k property in London is a dumb move

So, I should continue saving, put money into pension, and watch how the market evolve for the next years before considering any move.

[PCTNN]

I'm no expert in real estate and I cannot predict the future.

BUT I think:

1) investing in real estate is quite risky at the moment (say it's riskier now than it was 5 years ago)
2) investing in real estate in London is riskier than in other geographical areas of the uk

Given point 1 and 2

3) investing in a £6-700k property in London is a dumb move

[Trinks]

Why not spend the next 20 years enjoying yourself on living the good life and having fun?

Rather than waiting until you are nearly dead and move to France to wait to die with a coffin full of cash

Having my own property would be a way to have a comfortable capital (or income) once I will be retired and not be renting-dependent all the remaining of my life.
I think it is also an inflation protection if I expect to stay long time, whatever if renting cost more and more through the time.
If I plan to stay many years, does it worth to continue renting instead of buying?

Then, when I will be retired (before 60 I hope, I am 36 now), I would have enough to enjoy the rest of my life.
On the same time, I am saving on an private pension to insure a sufficient retirement.

Even if I have a mortgage, I expect to continue to enjoy the life and travel.

After, maybe I could target a cheaper property, but ideally I'd like a property in which I feel well.
But I agree, I have to be sure that I could afford for it if things don't happen as I expect.

[GhostofTarbera]

No, it is not me that leaves UK, but my end client ! (I know, it is not common !)
Sorry for the confusion.
I work for a major end client that decided to quit UK, that's why looking for another job, but want to stay to London for long time and then, think I will go back to France for my retirement.
For now, my plans would be to stay approximatively 20 years here.
The houses I target are about 80-100 m², 2-3 rooms.
I have no child. Should be enough for me on long term.
But I know, many things could change on 20 years.

Why not spend the next 20 years enjoying yourself on living the good life and having fun?

Rather than waiting until you are nearly dead and move to France to wait to die with a coffin full of cash


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[Trinks]

I thought you were leaving the UK? That's what you said earlier in the thread at least?

No, it is not me that leaves UK, but my end client ! (I know, it is not common !)
Sorry for the confusion.
I work for a major end client that decided to quit UK, that's why looking for another job, but want to stay to London for long time and then, think I will go back to France for my retirement.
For now, my plans would be to stay approximatively 20 years here.
The houses I target are about 80-100 m², 2-3 rooms.
I have no child. Should be enough for me on long term.
But I know, many things could change on 20 years.

[LondonManc]

I agree, it is lot of money, but it is actual London prices for the kind of property I am looking for.
I expect to stay long term, ideally over a decade or two, but sure we never know, situation may change and it could become not affordable anymore.
In this situation, and to avoid mortgage eventual fraud, it would be wiser to wait and continue to save as much as possible.
I would then have a better eyesight of my future and take less risk if I can borrow less and have a higher deposit.

I thought you were leaving the UK? That's what you said earlier in the thread at least?

[BlasterBates]

I agree, it is lot of money, but it is actual London prices for the kind of property I am looking for.
I expect to stay long term, ideally over a decade or two, but sure we never know, situation may change and it could become not affordable anymore.
In this situation, and to avoid mortgage eventual fraud, it would be wiser to wait and continue to save as much as possible.
I would then have a better eyesight of my future and take less risk if I can borrow less and have a higher deposit.

I would discuss the amount you can borrow from a mortgage lender, because you might well get it based on your current earnings without having to be dishonest about what might happen.

[Trinks]

I agree, it is lot of money, but it is actual London prices for the kind of property I am looking for.
I expect to stay long term, ideally over a decade or two, but sure we never know, situation may change and it could become not affordable anymore.
In this situation, and to avoid mortgage eventual fraud, it would be wiser to wait and continue to save as much as possible.
I would then have a better eyesight of my future and take less risk if I can borrow less and have a higher deposit.

[GhostofTarbera]

my god.

Just read this thread for the first time. It's like the credit crunch never happened.

£700k house. 10% deposit is a £630k mortgage.
At 2% (not sure just 10% depoist will get that good a rate mind) that's £2670 per month. Over 25 years.
Just bump the rate up to 5%, it's now £3682 per month. I can live off that money. Not sure I'd want to tied to a mortgage like that for 25 years though.

Drop it to 10 years, at 5% and the monthly is £6682

Or 25 years at 7.5% (reflects the long term average better I think). £4655 a month.

That is eye-watering. I cannot see that I'd ever want to borrow more than £250k, and for no more than 10 years, and I'm of a similar income bracket to the OP (and have around £300k in equity).

To the OP..... Buy what you can afford long term. Save. And move later when you have the assets to do it with less risk.

£700K is a one bed flat where I live

£250K gets you a 30% house share


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[Lance]

my god.

Just read this thread for the first time. It's like the credit crunch never happened.

£700k house. 10% deposit is a £630k mortgage.
At 2% (not sure just 10% depoist will get that good a rate mind) that's £2670 per month. Over 25 years.
Just bump the rate up to 5%, it's now £3682 per month. I can live off that money. Not sure I'd want to tied to a mortgage like that for 25 years though.

Drop it to 10 years, at 5% and the monthly is £6682

Or 25 years at 7.5% (reflects the long term average better I think). £4655 a month.

That is eye-watering. I cannot see that I'd ever want to borrow more than £250k, and for no more than 10 years, and I'm of a similar income bracket to the OP (and have around £300k in equity).

To the OP..... Buy what you can afford long term. Save. And move later when you have the assets to do it with less risk.