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Buying A Flat in London – Part Three

June 5, 2019
Picture of me sitting on my couch.  Buying a flat in london, a three part series.

This is a three part series about how I bought property including my flat in London. The first post can be found here and the second post is here.

Let’s Talk Completion Dates…

This is where I have two very different experiences buying property.  In Australia a completion date is set between the buyer and seller, contract signed, and you are locked in.  If either party pulls out the buyer loses their deposit, or the seller must pay the buyer the equivalent.  It makes it smooth sailing and the day my first flat purchase went through, 30 days after purchasing(!), I picked up the keys and visited my flat that night.  Then promptly went home to my parents to plan the much-needed redecorating of this smokers flat.  Ew!

In the UK I find everyone gets frustrated.  There is a long gap between having an offer accepted and ensuring an exchange of contracts so that that property is firmly yours.  Even at this point things can fall over and six months down the line you can be a week from moving with no house to go to. 

In chain system in the UK, where your purchase is dependent on the person buying your flat, with multiple parties involved, are hard to avoid and stress inducing.  One of my friend’s chain seemed to be going well, until he arrived at his new home to find that the sellers had yet to pack!  With no real sense that they were leaving anytime soon, my friend started packing up their belongings, eventually advised by his solicitor to put everything out on the lawn.  My friend went to bed at 1am listening to the sellers arguing about how to fit all their possessions from a 3-bed house into a small white van!

To avoid the chain situation, I deliberately chose to purchase from a developer off plan.  This doesn’t get rid of all the problems.  A week prior to moving in I received an email saying that there had been delays and as it was nearly Christmas they didn’t think we would get an update until early February!  I had five days to store my belongings and move out of my rental.  I stayed on some friends couch initially and then between trips for work booked Airbnb’s in lots of different areas of London.  As it was January there were lots of beautiful apartments that were discounted, and I was able to ‘live’ in areas where I could walk to work.  I also learnt from speaking with lots of people that new builds are always delayed typically by two months.  I moved into my flat 3 months after the completion date.  Fortunately, I had a thought to check the flat first before I turned up with all my belongings as the final clean hadn’t been done.  I couldn’t even find a space to rest my handbag let alone move in!

And Now It’s Moving In Time!!!

When you move into your new home you are asset rich and cash poor.  Checking the letterbox will often result in a bill from someone for more money to set up another service.  I remember when I moved into my first flat I was so stressed out as some months I seemed to have money and then the next I didn’t.  One day I sat down and put together a spreadsheet that tracked each payment and it all became clear.  There were bimonthly and quarterly payments, some overlapping which made me a rich human and then a poor human depending on the month.  Now I have a separate bank account for bills, allocating an amount each month and the stress of being overdrawn is over.  I also have a very detailed budget spreadsheet which has helped keep track of all my outgoings.

With all this money angst you will also be looking to furnish your flat as well.  Money was so tight for my UK flat purchase that I couldn’t afford to buy a bed.  I moved into the flat with a dining table, some wooden chairs and a dressing table.  No bed or couch and slept on the floor for six months.  I don’t recommend it!  My hips became so sore from lack of support and the day I got my bed was the best sleep ever!  The thing is I wanted to make sure I didn’t owe anyone any more money and I wanted to get my budget under control first.  Owing money is my most stressful trigger which meant sleeping on the floor made sense!

Now That You Are In…

Congratulations you are a home owner!  The best bit about being a home owner is knowing that there is no one that can kick you out.  You can have the flat how you like, paint the walls, hang up pictures and change the light fitting if you want! 

Living in London I have rented my Australian flat out and am now a dreaded landlord!  I’ve handed the reigns of that over to a real estate agent and am happy to pay the 7% fee.  In the seven years there have been three tenants and only one repair fee for a broken hob.  Touch wood!  There are rumours the current tenant is actually an Airbnb business.  We are yet to find any hard evidence. 

When I first moved into the Australian flat about two months later bailiffs turned up for the previous owner.  I’m glad I had the foresight not to buzz them in and took the contract down as proof of ownership transfer.  They were very nice but also two big burly men which would have felt a bit much in my own flat.  I gave them the details of the previous owner’s solicitor and didn’t hear anything else.  Until over 100 letters turned up in my mail box addressed to him!  Turns out he had a hold on his mail but didn’t collect it, so the post office delivered.  No worries.  I made up a bunch of return to sender labels detailing his move and for two months solid returned no less than three pieces of mail a day.  It worked!

My flat in London was a new build which means I was the first to live in it.  So nice!  It also comes with a two-year warranty so anything that goes wrong must be addressed by the builder.  Make sure if you have a new build you report everything as once that two years is up you have to make you own way.  Also read the maintenance guide carefully.  I wasn’t able to paint any walls for the first 18months or it would void the plaster warranty.

What’s next?  I love my flat and it has a lovely view of a park that barely anyone goes into.  My day to day life is quite central London and I would like to move closer in.  My dream would be to live in Kings Cross, as it is the home to the Eurostar and trains that go to my favourite areas in Kent.  I’d also love a bath and a bit more outdoor space.  So, my goal is to get my finances in order this year, make some more money through Instagram coaching and celebrant ceremonies, providing me with the cash to move next year.

This is a three part series. If you have any questions about home ownership or anything I have spoken about here I am more then happy to discuss. Write a comment or contact me in my DM’s on instagram.

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Life

Buying A Flat In London – Part Two

May 29, 2019
Picture of me in front of real estate agents looking at property.  Buying A Flat In London - Part 2.

This is a three part series about how I bought property including my flat in London. The first post can be found here.

Getting My Deposit Together…

The first deposit I saved was in 2005.  I was living in London earning £25,000 and saving £400 a month.  By the years end I had my deposit and an expired visa!  I blew all the money on a last minute European tour..  I hadn’t travelled like I had intended and panicked that I would never be able to return.  Ever.  20 countries in 30 days seemed smart! 

I didn’t know about the Excess Baggage company and rocked up to the airport 20kgs over. Depressed to be leaving, and in hindsight physically ill from too much wheat and dairy, I paid £500 to the airline without blinking.  I returned to Australia with £43 and absolute fear that my Dad would find out!

I saved essentially 25% of my take home salary by doing everything that was free in London.  There is so much if you look for it and more now that museums are free.  I didn’t eat out much and always made my own lunches.  After I paid my rent and bills, bought some food and my travel card I had £50 a week to play with.  I quickly learnt that a night out or an extravagant lunch with bill splitting friends wasn’t for me.  I didn’t have the internet and only rang home every three months.  I had my hair cut at the Toni and Guy training academies and beauty appointments in Old Street, which was extremely dodgy at the time!

This first time I bought I had lived at home for a year and a half saving.  I was studying my masters with the plan of qualifying for a visa to return to the UK.  My parents have always made my sister and I pay rent unless we were studying.  I took advantage of the low terms, $100 a week.  I freelanced in the advertising industry, earning a full-time wage for three actual work days.  Those days pre GFC were fantastic!  I had no social life, made few friends and the money built up in the bank.  I knew I would need it to return to the UK and my biggest expense at the time was a personal trainer.  I was keen to lose the 20kgs I had put on whilst previously living in London!

Then the GFC happened, all my UK friends advised me not to come and it made sense to use the money towards a flat.  My parents were moving cities and I was able to take advantage of a small wobble in the Australian market.

For my third deposit, in London, I rented a three bedroom flat in SE London, where the subrent for two rooms more than covered the total flat rent and bills.  I found that most rooms rent for £800 each and the flats monthly rent was £1250.  My landlady knew that I was subletting and didn’t mind provided it didn’t impact her.  I used a legal contract found online to cover myself. 

It was one of the best flats I’ve seen in London, ex council meaning the proportions were great, split level with bedrooms upstairs and living downstairs.  All double glazed and insulated, we rarely had to run the heating for long.  I would sleep with the window open through winter!  It was a good life and at one stage my sister was able to live with me too and I covered her rent. 

The UK government promotes saving through an ISA and this is a great scheme.  If you can take advantage and get free money, why wouldn’t you?  I’d give you the same advice about pensions!  The government will not allow new ISA after 30 November 2019 so get started.  You can deposit as little as you like as long as it is under £200 a month.

On top of your loan deposit there are other costs to consider.  My UK flat required me to pay £2500 in advance for the service charge and ground rent.  Legal fees were another £1000 and for some strange reason here you also pay the sellers legal fees, another £1000.  Go figure!

As I was buying a new build the developer also wanted various deposits at certain times throughout the build.  I secured the flat with £2500 and they wanted another £5000 12 months before completion.  I spoke with the developer a few days before it was due, who agreed to waive the need for this deposit.  They would get the money from me later when we completed the exchange.  I didn’t see the benefit in them having £5000 of my money sitting there when I could be earning interest from it.

All up I needed £30,000 to secure the loan and pay all the upfront costs to be handed the keys.  Wow!  That is a lot and I am sitting here quite proud that I did this for myself!

Getting A Mortgage

Ask around and find out who your friends have used for mortgage broking.  Mortgage brokers use a system that shows all banks offers and can sort by your requirements. I found it quite fascinating to look at the different variables.  The banks will be paying the mortgage broker once you have signed.  Some brokers charge an additional fee especially if they are based in London.  I found one outside of London as they tend not to charge a fee.

Stop.  Consider the mortgage amount that is being offered and the monthly repayment amounts.  This is the time to put a budget together if you don’t have one to understand your monthly costs.  My London flat costs me £1600 a month for my mortgage, service charge, ground rent and utilities/internet/tv licence.  Ask the mortgage broker to advise you how much the repayment will increase each month if there is a 0.25% interest rate increase.  For my mortgage each increase in rate of 0.25% is another £40 a month.  Knowing these figures will help you understand what your maximum payment threshold is.  You can lock in your mortgage and repayments, typically for two years.  However, it is good to be prepared in case rates go up during this time and when you renegotiate your mortgage repayment is higher.

Don’t feel like you must take all the money on offer.  My parent’s first mortgage offer would have meant nearly all their monthly income went to the mortgage.  What about food, bills, fun?  The banks at the time didn’t consider this.  Now, post crash, the banks are meant to be more responsible.  I was offered £320,000 for a mortgage in London but I didn’t want to spend over $300k and brought my flat for £286k.  The difference in repayment amounts was £150 or my grocery budget for the month! Typically, banks will offer 4-5 times your annual income.  Your % deposit will then influence the interest rate you are allocated. The higher percentage deposit you have, the smaller the interest rate.  This is a result of the bank viewing you as a lower risk and rewards you as such.

Another trick that will shorten your mortgage is to request a shorter term.  Most first home owners will be offered loans of 25 or 30 years.  You can ask for shorter terms of 10 and 15 years.  This means you are paying less interest overall and paying it off a lot earlier.  Your mortgage broker can adjust the term quickly on their software, to determine what works best.  Again, understanding how much you can really afford on your repayment each month will help you make this decision.

Weird part – you don’t get a mortgage offer until you have made an offer on a property. This can be a little confusing and there is a small risk that things will change. This happened to me. I was still able to borrow the amount I needed for the property overall, but the banks had decided within a space of a week to ask for a higher deposit amount. Initially the ask went from 5% to 20%. No one has that laying around let alone me. Fortunately, my mortgage broker was able to negotiate to 10%. Quite stressful as I had put down my £2000 deposit for the property and was at risk of losing this.

Finding My Flat…

Everyone has an idea of the type of house or flat they are interested in.  For my first purchase I really wanted a 1 bedroom flat, that was modern, and I was happy to do some repainting but wasn’t really interested in new bathrooms or kitchens.  Once I knew my budget I started looking around and location was dictated by availability.  In Australia most people live in houses and the stock of flats are typically in the very inner city.  Housing doesn’t move that fast which meant I could see a property online, view it on the weekend and it was still available a few weeks later!  This allowed a lot of time to compare and really hone in my requirements.  My budget was proving difficult and I had conceded I would have to purchase a studio; the upside of this was that they were all brand new!

For the London purchase I was completely open minded about location.  I had been renting in Blackheath for four years, loved the openness and tree lined streets of SE, but was happy to go where my budget allow.  Once I had confirmation of how much I could spend, I took a tube map and used Zoopla to help me figure out where I could afford.  After a few quick searches for 1-bedroom flat prices, in Zone 3 appeared affordable and one spot in Zone 2.  London is like Doctor Who, always regenerating!  Knowing this I researched the areas to understand future planning and how this might increase the value of my purchase.  At the time I also read this article about small living and it inspired me to consider a smaller flat further in. 

Understanding your mortgage limit is key before you start even looking at home porn.  I implore that you have this information before you start looking.  I have two lots of friends feel heartache having set their sights on living where their budget doesn’t allow.  I chose to purchase off plan in London to avoid being gazumped by another’s offer or have the seller pull out.  This also meant I was able to secure the flat a year before it was ready, saving more of a deposit.

This is a three part series. Part 3, publishing next week, talks about completion dates and the realities of moving in. Asset rich, cash poor! If you have any questions about home ownership or anything I have spoken about here I am more then happy to discuss. Write a comment or contact me in my DM’s on instagram.

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Life

Buying A Flat In London – A Three Part Series…

May 22, 2019
Picture of me in front of a for sale sign for a flat.  Buying a flat in london post.

I love living in the vibrant city of London with all the hustle, events to go to and new friends to be made.  It’s not unusual for me to hear comments that buying a flat in London is hard, impossible and not achievable.  I’ve piped up enough times now to dispel this media myth and encourage others to purchase London property.  There are lots of tips online, but people don’t always go into the details.  I’m sharing my experience of purchasing in London and Australia.  An international property owner as my Dad proudly tells people! He just doesn’t mention the banks own 95%!

The Nerves are going to hit hard!

There is a lot of weighing on your mind when buying a property and I felt that too when I purchased my first flat in Melbourne, Australia.  The fear of buying a flat, buying the wrong flat, buying a disaster flat, making the worst decision of your life suddenly became all I could think of!  There is always someone who knows someone who it all went pear shaped for fanning your terrified flames.  It’s awful that this happens to a few, but also know these stories are rare, despite receiving the most media coverage.

Even when I told some people I was writing this blog post series I was told ‘good luck with that’ in a quite sarcastic tone!  No, I replied, I’ve done it. Twice.  That’s what I am writing about.  Oh really?  Well the whole thing is horrendous and…and actually, I am not going to give them any more of this space!  Life fares better when you are armed with information and this post series will give you that.

Australia and the UK both have a cultural pressure to purchase quite young and I’ve seen friends rush into it with the wrong partners.  Honestly, if we are all going to work until we are 75 and live until we are 120 there is time!  My parents didn’t purchase their first house until they were in their 40s, not because they didn’t want to due to circumstance.  They saved three deposits before they got there. The cut off age for a mortgage is 75 so a 25 year mortgage can be taken out by a 50 year old. Just consider if you can pay the mortgage when you are that old and might be on a reduced income.

I bought my first flat at auction, standard in Australia, and this adds the fear of accidental bidding.  From experiance I will say it can’t happen!  I had already made an offer on this property to try and take it off the market before the auction.  The sellers were going through a divorce and Mr Seller was not happy about the separation. 

I’m pretty sure during the auction I stopped breathing at one point!  I stared down my opponent to the very end, countering his bids immediately, never breaking eye contact.   Determination came over me and it was a red bull to a flag when my competition was told by his mother, ‘Keep going, I will win you more money at the casino.’  No, you won’t honey, this is my flat!  Top tip – people do not like to be stared at and if you make quick confident $500 bids, near the end, they think you have more money than you do! 

I won!  Always a weird statement because I won a mortgage!  Paying $20,000 more than my first offer, a total of $230,000, for a one bedroom flat in the heart of Melbourne.  The state of the flat meant I was buying it for $100,000 less then market value.  My Dad was quite angry on my behalf for having to go to auction and took a walk around the block, but I was happy!  To be fair to my Dad it was obvious in the process that Mr Seller had planted a bidder in the crowd who jumped up the price by $30,000.  The guy didn’t even try to hide it.  He bid and then walked away!

The whole auction also had this air of urgency to get Mr Seller to sign the paperwork.  He had refused and disappeared three times over the past two years.  Throughout the auction there were so many near miss car accidents outside the building.  Mr Seller had parked his car literally in the middle of the main road.  I waited, signing after Mr Seller and then we waited for Mrs Seller to turn up.  She was at the local café, waiting as not to cross paths with her ex.  The whole thing is comical in hindsight but at the time this just added to my nerves!

Purchasing my London flat was a much smoother process.  Remember the first time you booked a holiday by yourself?  Or signed a rental agreement for a flat?  These are all just as scary but once you have done it you are a pro!  You will have done your research and buying a property is when you must trust yourself.  I bought off plan for this second purchase to remove all the quirks that come with buying privately in the UK.  I worked out where I was purchasing, rang up the company, reviewed a price list and picked from the floor plan.  Done! 

Don’t Get Emotional!

Don’t get emotional everyone says.  What utter bullocks!  You will, as I did, need to navigate new areas and decide if the commute works for you.  Part of this will be understanding if the local Sainsbury’s can deliver and suss out the Deliveroo options.  There will be emotions every time you even look at a flat online. 

Both times I have bought my flat I have felt drained by this part of the process and felt very low when an offer fell through.  You must keep on keeping on, acknowledging the ones that get away and the one that is meant to be.

Estatesdirect.com commissioned research and the number one most stressful experience in modern life was buying or selling property.  This trumped divorce and losing your job!  It is a complete time suck and even harder if you are doing it by yourself.  But the end goal is worth it I promise!

This is a three part series. Part 2, publishing next week, talks about saving for a deposit, getting a mortgage and finding my flat. If you have any questions about home ownership or anything I have spoken about here I am more then happy to talk. Write a comment or contact me in my DM’s on instagram.

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