Two months ago, I would not have thought I would be writing a blog post about how to afford to buy a house in London. I didn’t have a blog then and I most certainly wasn’t thinking about buying a house, let alone in London. I was focusing on doing my exams, graduating and getting a job. Since then, I got a job for after university which is in London, and then Coronavirus hit. Now the job is a little uncertain on when it is going to start and I moved home to be with my family during this period.
So now I am not paying for food and expenses for a little while, it seemed to me to be the perfect opportunity to save some money up. But then I was unsure on what to save for, I am moving to London and starting an entry level job, it’s unlikely that I will have enough for a house deposit anytime soon, especially in London, and even then, I wouldn’t be able to get a particularly large mortgage anytime soon. At this point I started looking into different government schemes to help people like myself get on the housing ladder. One that peaked my interest was the shared ownership scheme.
This scheme allows first time buyers to buy a percentage of a property in cities where buying a £400,000 2 bedroom flat is unachievable for most people. So you own, say 25% of a property and then you pay rent on the other part of this. It means you pay rent alongside a mortgage at the same time, it can be a little more expensive but you are owning a home and, if you had a two bedroom flat, some housing associations will let you rent out the room to a lodger. You can also combine this with the government help to buy loan which, in London, allows the government to lend you 40% of the cost of your house and you get a mortgage on the other 60%. This makes you more attractive to mortgage lenders as you are borrowing less money so you are less of a risk.
Let’s put some figures on this to visualise it. Let’s say I want to buy a house in London. But as a recent graduate on a single income, I can only afford a smaller mortgage so I am instead going to buy 25% of this flat for £100,000. For these schemes, you need a 5% deposit so I would need to save £5000 and then get a loan for the remaining £95,000. Thanks to the government Help to Buy loans, I can get 40% of this from them with no interest for the first 5 years meaning I borrow £38,000 from the government and I need a mortgage of £57,000.
This means I need to pay the mortgage off monthly alongside the rent payments for the other 75% of the flat. If I have a lodger however, I can use their rent payments to pay the rent for the flat and my income can pay the mortgage. This allows me to get onto the property ladder without spending all of my money on mortgage and monthly rent payments. Of course this depends a lot on having the ability to get a lodger and being comfortable with this and the housing association being okay with it as well, alongside all the other hurdles involved with buying a house however this is an achievable way of buying a house in London and one that I am hoping to do!
One of my goals in lockdown and during the Coronavirus period is to side hustle and save money to start me on my way to saving that £5000 deposit. I am going to document this journey on this blog with you and tell you about the different ways I am saving which include using Plum to save money automatically and investing my saved money into the stock market with Tickr! I think I will do a monthly round up of my savings to hold myself to account so let me know if you would be interested in following that!