A SINGLE first-time buyer who couldn’t get a mortgage despite £20,000 deposit, clubbed together with a pal she’d only known for 18 months to buy £425,000 London flat.
Emma Phillips, 30, spent three years saving £20,000 to put towards buying a home, and even though it was enough for a five per cent deposit, no one would lend to her based on her salary alone.
This is because most lenders won’t payout more than four and a half times your salary which for most single buyers isn’t enough.
Sick of paying £900 a month on renting a room in a shared house, Emma, who works at an investment firm, asked pal Dominique Sivak, 28, if she wanted in on the mortgage.
Dom jumped at the idea, and despite having only met through a mutual friend a year and a half previously, the pair took the plunge and bought their two-bed flat in Whitechapel.
Emma was also gifted £40,000 by her parents which meant the friends could put down a 10 per cent deposit and get a better mortgage rate.
She also covered the legal fees and stamp duty, as well as paying for most of the furniture in the flat.
As Emma put in most of the cash, the friends have it written in their agreement that she owns 10 per cent more of the property value.
They also made sure to buy as “tenants in common” which means that their share of the house can pass on to their next of kin if something was ever to happen to one of them.
Now, they split the £1,650 monthly mortgage payments equally between the two of them.
We spoke to Emma to find out what it’s like buying with a friend for this week in My First Home.
What is your place like and when did you buy it?
We live in a flat in Whitechapel in London which we bought in June 2016.
It’s across two floors and it’s an upside down flat – the bedrooms are on the top floor and you have to go downstairs to the kitchen and living room.
I think it’s an ex-council flat so it’s a bit dated and the block isn’t the best looking.
But it’s the most affordable flat for us in central London.
We’ve also got a little balcony and there’s a communal garden, which you can see from the flat.
Why did you decide to buy somewhere with a pal?
At the time, I was renting a room in a shared house with friends but I’d already saved £20,000 for a deposit, so was keen to get on the property ladder.
But even though I had enough for a five per cent deposit I couldn’t get a mortgage on my own because my salary wasn’t enough on its own.
I had been looking at moving out of London but I just didn’t want to do the commute – I run to work now.
A friend of mine bought with his mate so I thought I could do that too.
It didn’t even occur to me to wait to be in a couple before buying, I just didn’t want to rent any more.
I’d known Dom for about a year and a half before we bought somewhere, and we’d met through a mutual friend.
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A few years back she introduced me to the guy who’s now my boss so I decided to return the favour and asked if she wanted to buy somewhere with me.
She was up for it straight away, even though she’d never even really thought about buying somewhere.
Let’s talk money. How much did you pay for it and how does it work between two friends?
Okay, so we bought the flat for £425,000 with a 10 per cent deposit – which was £42,500.
I was lucky because my mum and step-dad said they wanted to gift me £40,000 towards buying which meant we had enough to put down a bigger deposit and get a better mortgage rate.
I used my money for the deposit, stamp duty and legal fees – we just made sure that we had our lawyers drafted the mortgage to say that I own 10 per cent more of the flat than Dom.
So when we come to sell it, she’ll get 45 per cent of the value while I’ll get 55 per cent.
It’s a leasehold flat, so we pay £1,000 a year in ground rent.
How did you save the £20,000 of the deposit?
After uni, I worked for an investment fund who sent me out to Australia for four years to work in a mining town.
I was earning a decent salary but the company paid for my accommodation, my car and they gave me fuel vouchers too.
That meant I could save most of my cash so by the time I moved back to London, I had £20,000 in savings.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan – The Government will lend you up to 20 per cent of the home’s value – or 40 per cent in London – after you’ve put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25 per cent on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
In London I rented for a year, paying £900 a month to rent a room in a shared house in Wapping.
I still managed to save £300 a month because I wasn’t commuting into work and cutting back here and there but I just wanted to get on and buy a place.
If my parents hadn’t given me the extra cash I’d have been savings for years.
Now, our mortgage is £1,650 a month which we split equally between the two of us.
How did you decide on location?
At first, I was looking in Streatham but I didn’t really want to move out that far.
We did look at a few new build flats further out but when we weighed up the local amenities, the aesthetics and what the flats were like inside we decided that location was the most important thing for us.
They don’t look as nice as a converted house out in zone four but they’re massive inside and far bigger than anything we could get further out.
How did you split buying the furniture?
I bought the furniture for my room and the communal areas and Dom bought the furniture for her room.
We decided that we wouldn’t buy it together because it made it so much more complicated if one of us wanted to move out.
Was it difficult to get a mortgage with a friend?
It wasn’t hard at all. People always say how stressful it is but ours was super straight forward.
We used Trussle, which is an online broker, and it was so simple to get a mortgage in principle.
I’d met with one of their advisers to do the paperwork but it was so convenient and it no trouble at all that we were mates and not a couple.
Have you decided what you’ll do when you come to sell?
Neither of us have any plans to move yet as we’re happy here for now.
But before we agreed to move in together we did make a deal that we’d keep the flat for at least two years to make it worth the money.
When one of us does want to move out, we’ll probably sell it together and go our separate ways unless one of us wants to buy the other out.
Would you recommend becoming a homeowner with your friend?
Definitely. It’s not that I didn’t have the deposit on my own but I didn’t physically earn enough to get the mortgage by myself.
I’m really anal about the paperwork so I get on with the bills and payments. It would bug me if they weren’t done right!
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