Over the past few years I’ve built up savings via my LISA, ready for when I decide to buy a property. In fact, thanks to starting with a Help to Buy ISA and transferring across once the Lifetime ISAs started, I now have a healthy £26,000 saved!
For more on why opening a Lifetime ISA is a great way to save for first time buyers check out my post here.
Amongst the economic uncertainty I’m lucky to work in an industry where my job isn’t currently at risk. In addition, having spent time building up a good credit rating, this means I would be in a favourable position to get a mortgage.
My boyfriend was also recently offered a six month position, so he’s also in a reasonable position to buy.
However, at the moment this isn’t something we’re actively considering. I wanted to explain a bit more about why that is.
Overview
Location Indecision
One of the main reasons is that I don’t know where I want to live. I grew up in Bristol, but I’ve since lived in the West Midlands, Cardiff and London.
If my boyfriend decides to stay in academia he would be looking for specialist jobs at universities, which are few and far between. We were both keen to move away from London due to the excessive house prices (think £400k for a tiny flat!), but we aren’t sure where to base ourselves long term.
Once his six month position finishes we don’t know where he’s likely to work next. So it doesn’t seem sensible to make a long term decision based on his current job.
I also don’t feel ready to ‘settle down’. Therefore renting or living with my parents gives greater flexibility to up and go as I please.
Travel Plans
At the start of the year I quit my job to go travelling and those plans have since been placed on hold. But I would still like to explore the world once the pandemic is under control.
Those travel plans are therefore a big part of why I’m reluctant to buy somewhere. Let’s dive into some specific factors relating to going travelling which mean I’m not in a rush to buy a property.
Depletion of Funds
Buying a house would have an enormous impact on my funds. I’d still be able to go travelling, but it would certainly make me think twice about some of the pricier destinations. It may also limit how many places I could explore.
Along with the initial costs of buying the property I’d also be faced with ongoing maintenance costs while I was away.
Even if I only took a year’s sabbatical I’d need to leave the property sitting empty for a substantial amount of time. During which period I’d still need to pay bills like council tax and home insurance, along with any potential standing charges for utilities. Council tax alone in the Bristol area could cost nearly £2500 per year.
Unfortunately, under the conditions of a residential mortgage, it’s not automatically acceptable to rent out your property. You must first obtain permission from the lender for a temporary ‘Consent to Let’ or ‘Permission to Let’.
This consent is only valid for a short period of time (e.g. 12 months) and you must have a valid reason for renting. You must also pass checks on how long you’ve lived in the property for and potentially how much equity you own.
All of this means it’s somewhat complicated to rent out your home and that’s before dealing with tenants themselves!
Potential I May Want to Move Abroad Permanently
There’s always a risk that I could fall in love with a destination while travelling and want to live there on a short or long term basis. Having a property in the UK would certainly add extra complications.
Of course, if I eventually choose to buy abroad, I will lose my LISA bonus plus 6.25% of the savings by withdrawing the money. However, that still sounds easier than arranging the sale of a property from overseas.
Psychologically I may also be put off considering a move abroad if I knew I had a large financial tie back in the UK.
Potential Drop in House Prices
As I touched on in this post, the property market has recently been going through a ‘mini-boom’. However, official predictions are forecasting that the property market could drop in value anywhere up to 22% by the second half of 2021.
The current Stamp Duty exemption for all homebuyers also expires in April 2021. This means first-time buyers will once again have an advantage when buying properties up to £300,000.
For those in stable jobs with decent deposits, this could present a once in a generation opportunity. I do suspect the majority of owners will choose to sit tight until the market recovers. This would mean limited properties would be available. It may also be the case that inner city flats see sharp declines, while suburban houses remain the same.
However, it’s definitely worth keeping an eye on. If property prices do decline we’ll reconsider whether it would make sense to buy.
What I’m Doing in the Meantime
Although I’m not currently looking to buy, I’m still putting myself in the best position for when I look to do so.
This involves a few different areas:
Increasing My Savings
I’m continuing to build my savings each month so I can put down a larger deposit and access better interest rates.
I’m also planning to apply for a promotion at work which will help to ensure I pass affordability checks by lenders. Typically banks allow you to borrow up to 4.5x your salary.
Keeping My Expenses Low
For the past six months I’ve been living back at home with my family. That’s helping to increase my savings at a much higher rate than when I was living in London.
Even if I switch to renting again I’ll be keen to choose an option which minimises my expenses. For example renting a flat as opposed to a whole house. I have a separate post covering my experiences living in a houseshare in London:
Making my Money ‘Work’
As time ticks on I’m trying my best to ensure my savings don’t decrease in value due to inflation. A large proportion of my savings are within my cash LISA. I also have some invested in a mixture of government bonds along with stocks and shares.
I also keep a proportion of easy access cash available. Keeping an eye on rates to ensure it’s accruing a small amount of interest.
Learning about the Home Buying Process
I recently joined a Facebook group for first time buyers and it’s been helpful to learn more about the process. It’s useful to get an understanding of all of the costs involved, along with the different hurdles people have faced.
Exploring Areas
I’m keen to learn more about potential areas I may like to buy in. These would need to be well connected with good community vibes. With restrictions on travel overseas it’s a good opportunity to learn more about areas within the UK. Even suburbs within Bristol and Bath themselves.
Are you a prospective first time buyer? When do you hope to buy a property? Let me know in the comments!
