"Location, Location, Location" or "Cheap as chips"?

The BBC reports today of a three bedroom property in Stockton which will be auctioned off with a starting price of £750. Fair enough, it's a bit of a fixer upper and in dire need of some TLC. After all, it will need new electrics putting in, new plumbing, a new kitchen and a new bathroom (not to mention a total redecoration of every other room), but even the cost of that won't be anywhere near the price of a move-in ready property. Slightly more disconcerting though is the report that it is in an area with "anti-social behavioural problems".

Now I apparently live in an area with a fair amount of crime (according to the Police.uk crime map) but I have never witnessed anything nor had anything happen to me or mine, and so I don't feel too worried. But there is something about the words "anti-social behavioural problem" which gives me the shivers. And so I pose the question: as a first time buyer with limited funds what should I look for? Should I stretch my funds as far as they can go to afford a property in a "nicer" area, or go for something I can comfortably afford in an area which is less desirable? Even if I feel safe in the less des area, the insurance companies won't think so and so my car insurance, property and content insurance will go up. Would all these added costs render the mortgage difference pointless?

What do you think?  

Budget food: Tomato soup with pasta and eggs

We probably have too many tins of soup in the cupboard, but soup on it's own isn't always enough to fill you up. So here is a trick to make tomato soup go further:

Tomato soup with pasta and eggs (2 portions)

2 tins of tomato soup of your choice and brand (pack of 4 Heinz for £2.99)
2 eggs (6 freerange eggs £1.85)
50g of dried Conchiglietti (one 250g bag is £0.49)

(portion cost from Sainsburys: £1.09)

1. Hardboil the eggs and peal them. Cut them into 8 pieces each.
2. Boil the pasta in another pan and strain them.
3. Use the same pan as whatever finished first to heat the tomato soup. I'm a fan of anything which cuts down on washing up.
4. Pour out the soup in bowls and add the half the pasta and eggs to each bowl.

...and that's it. It doesn't matter if the pasta or eggs cool down while the soup is heating. They'll heat back up when they are added to the soup. Add some basil if you want to. We have a basil plant in a bot in the kitchen windowsill so we use fresh basil, but dried will do just as well.

The best part is this meal is that the tins of soup and dried pasta last forever, and the eggs have a fairly long lifespan as well so you don't have to worry about having to throw anything out! 

Buying cinema food

How many of you have been to the cinema in the last 12 months? I know I have.

And how many have bought snacks and drinks that somehow cost more than the cinema ticket? I certainly have!  

Why does it cost so much? Well, a couple of reasons:

1. The cinema/cinema chain has to split the ticket revenue with the distributor  I think the cinema gets to keep about 40%-50% of what they actually get in ticket sales. But they get to keep all of what they earn on food and drink.

2. We are a captive audience. We have to buy it there, because we can’t bring it in. Is that true though?

I've been looking through the Vue, Odeon and Cineworld Terms and Conditions, and only Cineworld states that you can’t bring in any food or drink.

Vue's Guest Admission Policy mentions food and drinks twice:

“3.8   Hot food brought from outside of the cinema may not be consumed on the premises. “

“3.13   No alcohol or illegal substances may be brought into or consumed on the premises – save that alcohol may be purchased from any licensed bars or licensed screens within the cinema (where available).  Alcohol purchased from the licensed bars or screens within the cinema must be consumed within the licensed areas only. Licensing laws shall be strictly enforced.”

So, as long as what you bring in isn't hot or alcoholic, it seems like  they can’t stop you.

Odeon's General AdmissionTerms don’t actually seem to mention food or drinks at all, so it seems like all is fair game here.

Cineworld's however are quite covered. Their Entry Policy states that

“2.2 Alcohol and Food Policy: No alcohol, food or soft drink may be brought onto the premises. Only food and drink bought on the premises may be consumed on the premises. Alcohol may only be purchased and consumed in Cineworld licensed bar areas or in licensed screens and licensing laws will be strictly enforced.”

As my nearest cinema is a Vue, I'm very tempted to bring my own popcorn next time.

Has anyone actually tried this? What happened? Please let me know.

What is an Interest Only Mortgage?

In short terms, an interest only mortgage is exactly what is says on the tin. It is a mortgage where your monthly payments are only the interest of your mortgage and not the mortgage itself. It means that your monthly payments are much smaller than if you were to pay back part of the mortgage and the interest each month.

Here is the catch though: when your mortgage ends, you have to pay back the full amount you borrowed. So if you've borrowed £150,000 over 25 years, during those 25 years you only have to pay back whatever the interest on your mortgage is. But at the end of those 25 years, you've got to somehow find that £150,000 you borrowed in the first place.  Remember, you haven’t actually been paying back the money you borrowed 25 years ago, just the money the bank is charging you for lending you the money.

For some people, this may be a good idea. One of my old co-workers has an interest only mortgage and as she is a contract worker, it seems to work out for her. That means that the months she’s out of work, she only has to pay back the interest, and the months she is working, she has the money to pay back more. She also rents out one of her rooms, so that contributes towards the mortgage as well. Her parents gave her the money for the deposit though, and in 2012, you need a rather large deposit to even get an interest only mortgage.

Understandably, the banks are really reluctant to grant them. Most of them will only give them to people who can prove that they can afford to make monthly repayments of mortgage and interest anyway.

Nationwide and Co-op have now completely stopped now. They are not granting interest only mortgages to any new mortgage applicants. Santander and HSBC are only granting them to borrowers who have minimum 50% deposit.

Source: www.bbc.co.uk

I think most other banks still have them, but they are difficult to come by and for a reason. Check with the bank you’re going with, if they still have them.

Personally, I wouldn't touch interest only mortgages with a bargepole.

Ed Balls Calls for Stamp Duty Holiday

Ed Balls called for a stamp duty holiday for first time buyers during his speech at the Labour party conference in Manchester today. He also called for 100,000 new, affordable homes to kick-start the construction industry.

"Let's commit that money from the 4G sale and build over the next two years: 100,000 new homes - affordable homes to rent and to buy - creating hundreds of thousands of jobs and getting the construction industry moving again.

"Add to that a stamp duty holiday for first-time buyers, and we can deliver real help for people aspiring to get on the property ladder."

www.BBC.co.uk

Considering that stamp duty is up to 3% of the property value on top of the property price itself, it would certainly help first time buyers who are struggling to not only find money for deposits, but the extra thousands of pounds for fees and expenses as well. A stamp duty holiday would be very welcome indeed. 

Strange Ebay sales nr.1

It's amazing what you can sell on Ebay.

We've just sold DVD of Withnail and I for £0.99 (plus £0.90 postage). Bargain, you'd think, but this is a free DVD which we got in the Sunday Times... You know the ones which come in a cardboard sleeve? I used to throw them away. Not anymore! And because it was listed and sold at £0.99 we didn't pay an insertion fee either.

So, to whoever bought it: Thank you! Another £0.99 towards the house fund!

Credit ratings

Banks only want to lend money to people who are highly likely to pay it back. But how do you know if they will count you as one of these people?

One way they judge you (and they do) is to look at your income and expences and your previous addresses (see previous blog post). Another way they judge you is to look at your credit rating and the cool thing about this is that you can check on it before they do and make sure your rating is as good as it can be.

There are three main companies to check your credit rating with: Equifax, Experian and CallCredit/Noddle. Different lenders check different credit rating companies, so it's worth you checking how you come accross with all three companies. Setting up your account with them can take some time, but it is worth it. Equifax and Experian charge you £2 for your file, but CallCredit/Noddle will get it to you for free. Something as simple as not being on the electoral roll can count against you, but by checking your credit rating, you can see anything that isn't in your favour and change it.

Find out more about Credit Ratings on Money Saving Expert.

What do the banks want?

So, say you have a deposit ready and now you are ready to deal with the banks. What will they actually want from you (apart from your money)?

Just like being prepared for a job interview, it is worth being prepared for a meeting with the bank. This includes bringing details of:
 

• Your last three years address history. No gaps please. If there are gaps, f.ex if you were living and working abroad, then bring any paperwork you have for that. The more the merrier. Banks value stability so staying in one address shows that you are a reliable tenant, so are likely to be a reliable home-owner. Moving around too much doesn't look too good, so see if you can get references from your landlord to show that you are reliable. If you have moved around for work purposes, make sure you bring employment contracts to show this.


• Your last three months payslips (it may be wise to bring more) and your last P60. If you are a contract worker or self employed, they are likely to want to see three years worth of accounts so start saving them up now. The bank will want to know that they can expect their money back so you'll need to show that your income can support the repayments.


• Your last three months bank statements. If you are applying for a morgage at the same bank where your bank accounts are, then they will be able to dig them out, but if the morgage and your accounts are with different banks, then you have to bring them. Many people (me included) have opted out of paper statements, so that means having to print out statements from my online banking account. Again, this so the bank can check your income vs your outgoings so they can make sure you can afford the repayments to them.


• Details of any loans of credit cards you have. Having loans or credit cards won't automatically disqualify you from getting a mortgage, but the bank will want to see that they will get their money back so make sure the repayments are up to date and that you haven't missed any of them. 

It may sound a bit belt and braces, but think about it. Would you lend houndreds of thousands of pounds to someone who moved address every few months for no apparent reason and who might not be able to pay you back?  Everyone has different circumstances so if you have moved around a lot or your income varies from month to month, be prepared to explain everything and back it up with more documentation. 

In this case, less is definitely not more.

Local Lend a Hand!

Most first time buyers who struggle to save up for a deposit (if this includes you, then welcome to the club!) will know that some lenders offer a 95% mortgage. Sounds great but it does mean that the repayments will be something like 6% pr month. Not so great...

However, in May 2012 Oldham Council struck a deal with Lloyds TSB to provide up to 95% mortgages on similar terms as a 75% mortgage! So the council will provide an indemnity of up to you to get up to a 75% mortgage even if you only have a 5% deposit! That way you don't have to worry if you can't save up a huge deposit and not have to worry about the monthly repayments being too much to handle. Both Oldham Council and Lloyds TSB have strict credit requirements and criteria so check out the Oldham Council website for more information and if you live in Oldham you can pop by your local Lloyds TSB branch.

And Oldham are not the only one! The other councils involved in this scheme at the time of writing are:

• Blaby District Council
• Blackpool Council
• Bristol City Council
• Broadland District Council
• Conwy County Borough Council
• Hastings Borough Council
• Luton Borough Council
• Northumberland County Council
• Nuneaton & Bedworth Borough Council
• Peterborough City Council
• Stafford Borough Council
• Warrington Borough Council

Check the Lloyds TSB website regularly to see if your local council has joined the list. I certainly will!

The wonders of Ebay

So, we've got an Ebay account. I can't believe we haven't thought about this before! We've got lots of stuff we don't want or use so why not sell it? So far we've sold DVD's, clothes and a shoulder bag.
After moving in together, we realised we had doubles of so many DVD's we might as well sell them. Oddly, that includes DVD's that were free in magazines and newspapers... And people will buy then off you! I'm almost sad I threw away all my old Glamour magazines now. Maybe someone would have bought them too!
I've also sold some clothes that were given to me in birthday and christmas presents. They are too small and not really my style anyway. I've got a big bag of them and they are just taking up space in the boiler cupboard.
So far we have almost £50 in the kitty from stuff we don't want.

Let's do the maths.

So, lets get started on the maths, shall we?
We are looking for a 2 bed flat or house with outside space. We want cats (yes, we're one of those couples) and having lived in a second floor flat for a while, we miss being able to go outside somewhere when it's sunny. Also, having the clothes dryer in the hall makes it kinda cramped to get from the bathroom to the bedroom. And the second bedroom is for guests/home office/hobby room. Although as him indoors is a model maker extraordinaire (airplanes) and I hord anything that can't run away fast enough, the second room is more to make sure that we have space to live in the rest of the flat. Which means that in our part of the world we're looking at £175 000 - £200 000. Thank god we're not looking inside the M25! I though we should be able to get a decent place for that. £200 000 is not far off a quarter of a mill after all. So typing in "up to £200 000" in property sites and having to go past pages of retirement flats was a bit of a shock to the system!

So a 20% deposit is £35 000 - £40 000... We are already paying rent! How are we meant to save £40 000! So that's a no then. We sort of want to get on the housing ladder before we're 40.
A 10% deposit is £17 5000 - £20 000... We're still paying rent, so no. That is still unlikely to happen.
Last option, a 5% deposit. Some banks are actually offering 5% deposits for first time buyers! 5% is £8750 - £10 000. Still a lot, but definitely more achievable. Ok, so the rate at ca 6% is extortionate, but at least it's an offer!

We have gone with Nationwide's Save to Buy scheme, which means that we pay money into an ISA every month and hopefully get offered a 95% mortage at the end of it. You can put money aside for 6 months - 3 years and then you've got to use it. At least it removes the temptation to use the money for something else, right? I've set up a direct debit from my account into the S2B ISA the day after pay day, so I can't spend it. So far £100 is moving across, but I need to get into a position where I can transfer more! You can put £5,640 into a cash ISA pr year, so it would be a shame not to use it!

The one off costs

As if getting the money for a deposit wasn't enough, there are also the one off extra costs to consider. And they're not cheap. What do you think the extras are for a first time buyer? £1 000? Higher. 2 000? Higher. £5 000? Try again.
Home.co.uk and Find Law have guides to the extra costs we are likely to come across when we actually get around to getting a mortgage. I highly recommend that you visit both these Home.co.uk and Find Law as I found them invaluable for our savings calculations.

Here is a  break-down of what we can expect (let's work off the cheaper property price for us: £175 000):

Arrangement Fee
This is charged by the banks to cover the cost of setting up the mortgage. Some lenders waive this fee but Find Law says £500 - £1000. Also, it seems like the smaller your deposit is, the higher the fee is.

Lender's Valuation (Basic Valuation)
All banks require a valuation of the property to check that it is actually worth the price it was sold for but the cost of the valuation completely depends on the value of the property. For example, Home.co.uk allows ca £125 for a property worth £50,000, £165 for a £100,000 house and so on. Find Law suggests £100 - £300 dependent on the property.

Homebuyer's Report
The Homebuyer's Report is a property survey which costs between £100 and £500.

Building Survey/Structural Survey
The more comprehensive Building Survey/Structural Survey can cost anything up to £1,000 plus VAT, depending on the value and size of the property.

Legal/Conveyancing Fees
Yup, you need a solicitor. There doesn't seem to be a standard fee but but Find Law seems to suggest that it could be anywhere from £200 - £1500 and Home.co.uk are suggesting 0.5% of the property price. You also need to pay for the bank's solicitor. So you are paying for 2 solicitors and their paperwork...

MIG Fees (mortgage indemnity guarantee)
Some banks charge an insurance premium if you are borrowing more than 75% of the propert price. Others don't charge one at all, and some charge if you borrow more than 80-90%.
This is in case you default on your mortgage repayments and the bank can't recover its money.
Costs vary between banks but Home.co.uk reckons typical MIG premiums are:

• 4 per cent of the amount borrowed above 75 per cent on a loan of up to 90 per cent of the purchase price
• 6 per cent of the amount borrowed above 75 per cent on a loan of up to 90-95 per cent of the purchase price
• 8 per cent of the amount borrowed above 75 per cent on a loan of up to 95-100 per cent of the purchase price

Find Law reckons you should expect £1 500 per £100 000 of the property value.
Stamp Duty
Stamp duty is a tax charged for properties above £125,000, and few properties in this area fall below that magic amount. Up until 24th March 2012 first time buyers didn't have to pay stamp duty, but now we do and it's not cheap:

Propery Price (£)	Stamp Duty (% of property price)
up to £125 000	0%
£125 000 - £250 000	1%
£250 000 - £500 000	3%
over £500 000	4%

Stamp Duty Land Tax Exemption in 'Disadvantaged Areas'
If the government has designated the area you want to move to as 'disadvantaged', you don't pay any Stamp Duty Land Tax if the property price is less than £150,000. Both the 'disadvantaged' consept and the price pretty much rules out most of the south-east.

Land Registry Fee
The Land Registry charges a fee for transferring the register to the new property owner. How much this fee is depends on the property price. From 22 October 2012 the fees are as follows:

Price	Fee	Reduced Fee(for a voluntery first registration)
up to £50,000	£40	£30
£50,001 - £80,000	£60	£50
£80,001 - £100,000	£120	£90
£100,001 - £200,000	£190	£140
£200,001 - £500,000	£270	£200
£500,001 - £1,000,000	£540	£400
£1,000,001 and over	£910	£680

You can find documentation and forms at the Land Registry website.  

Local Authority Search Fees
Your solicitor will do local searches to check that there are no future problems or issues like planning permission on neighbouring properties or plans for new roads nearby. Allow at least £60, or more in London boroughs.

More Fees and Disbursements
Then there is index map, commons, the coal authority, land charge, company searches, bank transfer fees. Home.co.uk reckons about £70 for an average house purchase.

House-hunting Expenses
House hunting can be expensive, expesially if you are planning to move far. You may need to grab food while you are out, pay petrol or other travel costs, hotels and phone bills. Of course, if you want to move down the road, the costs will be minimal. We've calculated that the petrol to get us to from home to the area we want to move to will cost us about £20 for three return journeys, so we're guessing £100.

Removal Fees
Ah, yes. Then there is the moving itself. Remember, that by the time you get to this point you will already have shelled out a fair bit of cash, so it's worth putting on the list in case you forget about it. Of course, you may be able to do all the moving in your own or friends cars, in which case: yay! But if you can't that you have two options available: Rent a van (and pay for van hire, insurance and petrol) or get someone to do it all for you which will cost more, but be easier. Check with some companies to find the best deal. Money Saving Expert has some good ideas about how much is can be and looking at the quotes in their posts (£220 - £1100!) we're probably going to hire a van and do it ourselves. 

All in all a property costing £175 000 with a 95% mortgage is going to cost about £6500. That's on top of the deposit. That's almost the same as the deposit!

And then there is:

• Buildings and contents insurance
• Disconnection and reconnection of water, gas, electricity, telephone, etc.
• Mail redirection
• Change of address notice
• Furniture
• and so on, and so on, and so on...

Chapter 1: The Chronicles Begin

"Once upon a time there was a guy and a gal who wanted a place of their own. Although they were very happy in their little rented flat, they were getting tired of paying someone else's mortgage and decided to buy a little flat of their own and pay their own mortgage...." and that's where the fairytale abruptly ended and our chronicles begin...

How on earth are you supposed to save up a deposit? The guy and gal in our story have resonably paid jobs, but live in the not so resonably priced south-east of England. No children to pay for, but no bank of mum & dad either. And no rich relatives who are likely to drop off this mortal coil and leave them enough for a decent deposit either.

But what about the internet I hear you cry! There are lots of advice on living on a budget, cooking from scratch, things to do for free, and yes there are. Having read most of them I think there are lots of help and advice, but most of them seem to be aimed at families or singletons. Also, most of the first time buyer blogs mostly seem to be by people who have already got a house deposit together and are now looking for the perfect first time purchase. Good luck to them, but this one is all about how to get those elusive but highly important K's in the first place.

At the moment we are living in a rented two bed flat outside Slough (yup, it is excactely how The Office describes it) which makes sense as it is equally situated between where we both work but we're hoping to move south of Heathrow. I'm a suburbanite and he's a country boy, so we're trying to find something which suits us both. Suburban countryside? 

"So this is the story all about how"... we try to save up enough for a deposit for a property. I hope to hear from all of you who have made it through your chronicles and all of you who are in the same boat as us. Any advice is welcome and any questions likewise.