House hunting, part 1: A tale of three houses

We view three properties with an estate agent for the first time, here’s how it went.

As I mentioned last week, we lined up a few viewings last Friday.  We were looking within a town about half an hour drive from my husband’s family.  We quite like this town as it has all the amenities that you need but the town centre still looks delightfully traditional and isn’t too busy to walk around (as much as I love London, the sheer amount of people can occasionally be overwhelming).  My father-in-law came along too for moral and practical support.

It was a beautiful, sunny day, perfect for a day out. We viewed three properties that all cost the same, but were vastly different from each other.

House One

This property had been owned by a couple for nearly 50 years until the husband had passed away and the wife had moved into a care home.  As soon as you walked in, you could tell it had been a cherished family home.

The carpet and wallpaper in every room was dated but in good condition.  There were still a few mementos left behind such as the decorative plates lining the walls and the hand cross-stitched wedding scene hanging proudly as you first walked in.

The downstairs was segmented into a living room, then through a doorway to the dining room, then another door to the kitchen.  Unusually, there was also a large utility room where the washing machine and dryer were kept. The bedrooms were upstairs and all were a good size.  You had to walk through one bedroom in order to get through to the other which felt a bit unusual but was apparently common for properties of the time.

Already fairly impressed with the size of the interior, we were blown away by the garden.  It seemed to stretch on endlessly (well, 150 feet) and was in pretty good condition. The couple had maintained various beds of vegetables however all that was left was a neatly manicured lawn.  There was also a shed and a single garage.

My FIL noticed the neighbour working on the roof of the house next door and shouted out to him.  He gave us a bit more information about the area and how he had extended his own property (which was the same design originally). It was a helpful conversation although I’m not sure if our estate agent approved!

House Two

The next place was further down on the same road and boasted four bedrooms and a huge garden.  It was questionably decorated in the advertised photographs but as I’ve said, we don’t mind spending a few weeks decorating if it means that we get a beautiful home for a good price.

Oh how wrong we were.

We walked in.  The black, glittery, mismatched wallpaper peeling from the walls greeted us. In the living room, glittery decorations, perhaps from a final house party from the outgoing tenants, hung sellotaped to the ceiling.  The light switch was screwed in sideways.  My husband liked that, “It reminds me of when I was at uni”.  The downstairs toilet hadn’t been cleaned in months and that was apparent without lifting the lid.

The house had a huge kitchen (decorated with glittery butterfly wallpaper this time) however there were gaping holes from where the whiteware had been ripped out.  There were more holes in the ceiling, this time from leaks that had gone unchecked for too long.  The sink area, at first appearing tiled, was actually tile wallpaper.

The garden was one of the highlights of the property and although had a lot of rubbish to be cleared, was in reasonable condition.  I stepped in something and my foot couldn’t move.  I asked the estate agent what it was, he just shrugged and laughed.

Upstairs, there were four good sized bedrooms and a bathroom.  There was nothing much to say about them aside from needing redecorating.  There was also a good-sized loft.  The estate agent invited us to go up and look, we declined.

All in all, this place would have been perfect for someone who had money put aside and the expertise to restore the home to a liveable standard.  We however, weren’t in that position so it was a hard no from us.

House Three

We took a break and had lunch at a local pub on the river before going to view the third and final property for the day.  The town is really lovely and I do enjoy spending time here, especially when the weather is so nice.

The third house was in a housing estate built in 2004 so a fairly new build.  The previous owners had owned it since new and were upsizing to a larger property.

The place was really well presented and in great condition.  It had three bedrooms and the master bedroom had it’s own ensuite.

The garden was a bit small but in tidy condition.

There was nothing wrong with this place yet my husband and I weren’t excited about it.  I guess it was just too perfect? My FIL said “This would suit your sister in law perfectly but, and I say this with love, you two are weirdos and are looking for something a bit different.”

His explanation was perfect, we were looking for something a bit different and we would have had no idea that that was what we wanted until we had viewed these properties.  We now have a much better idea of what to look for when viewing listings and organising further viewings.

 

 

Are we ready to buy a house?

I was exploring Pinterest the other evening and found a thoughtful article by Kristina a few years ago at Cents + Order about the questions you should ask yourself before buying your first home.  I took some time to ponder them and my answers are below.

Have you saved a deposit?

The short answer is yes, we have.  Is it enough? To be honest I don’t think you can ever save too much.  The article and many other websites recommends a 20% deposit.  There are many benefits to having a larger deposit including better mortgage interest rates, meaning you’ll pay less interest over the life of the loan and better protection in the event of another crash because you’ll own more of the property.

Mrs Frugalwoods says:

The smarter way to go is a 20% downpayment, which ensures good rates on a “conventional” mortgage. If you can’t put 20% down, it’s probably a good idea to keep saving. A solid downpayment signals to a lender that you’re a responsible saver and reduces the chance that the property will be worth less than the loan’s outstanding value in the future.

Although occasionally a 5% deposit will be enough (especially if you use the Help to Buy Scheme and purchase a new build home), the general advice is to save at least 10%

Michelle from Money After Graduation says:

In order to keep extra cash in your monthly budget and protect yourself from volatility in the real estate market, you need to put at least 10% down on your first home. Ideally, you’d put 20% down, but with the average house price in Canada nearly $500,000, there are very few 20- and 30-somethings with a spare six-figures lying around. A 10% down payment is enough to lower your monthly mortgage payment, reduce your mortgage default insurance, and secure enough equity in your home to whether small dips in the real estate market.

So really, saving the deposit is only the first step in deciding if you are ready as there are going to be lots more expenses along the way.

Will you be happy in the same house for many years?

Putting emotion to one side, it’s recommended that generally you keep a house for five years to avoid a financial loss through the closing costs and so you’ve started to make a dent in the principal of your mortgage.

Moneyning says:

Usually, it isn’t until you’re about five years into paying down your mortgage that you’ve made enough progress on the principal to make it a better deal than paying rent each month.

I’ve moved around a lot in my twenties. Aside from my childhood home, our current rental in London is the longest I’ve lived anywhere and it has seen us through some of the highlights of our relationship including getting married and having a baby.

I’ve talked about the emotion behind owning a home but one of the reasons we started looking for our own home is that we feel ready for a larger place.  We have talked about what we want from a new home and been using these criteria when booking viewings.

Ideally we want to buy a house that we would stay in for at least 10 years.

Are you handy (or not handy)?

dane-deaner-284390-unsplash
Just a splash of paint and she’ll be good as new!

Unfortunately not.  We won’t be building our own studio space a la Mr Money Mustache (although to eventually have a space like that would be awesome!).  Older houses can be beautiful and have character too.  Sometimes they can also be cheaper due to the cost of modernising. For this reason, there are some places that we would skip viewing if it looked like there was too much work to be done.

If we were to consider an old home to do up, we would need to carefully weigh up the cost of the repairs with how much value they would add to the place.  Cosmetic renovations like painting and decorating would be cheaper and we could potentially learn how to do that ourselves (you can learn anything from Youtube these days, right?)  Major structural work would cost a lot and not add very much value to the property (but make the house far safer and comfortable to live in).

Michael Holmes, author of Renovating for Profit says:

 Buyers should be looking for “the worst house you can find on the best street you can afford” and consult a builder or structural engineer when putting a renovation budget together – although project managing the process yourself (ordering materials, liaising with the relevant trades and generally moving the project along) could save you 15-20% of the total cost… Most importantly, he adds: “Leave money in the budget to make structural repairs, and to make sure [the property] is warm, dry and weather tight.”

Since we would almost certainly need to hire contractors to do the work, we will most likely try to find the not-worst house on the best street (not quite as catchy!)

What will it cost to live there?

This includes many upfront costs when purchasing the property such as:

  • stamp duty,
  • valuation fee required by the mortgage provider,
  • surveyor’s fee (to ensure you haven’t bought a place that has hidden problems)
  • solicitors fees,
  • land registry fees
  • electronic transfer fee of £40-£50 that covers the lenders cost of transferring the mortgage money from the lender to the solicitor.

Once we eventually purchase a property, some of the expenses we would then need to think about would be:

  • moving costs
  • furniture costs (our families have a lot of hand me down furniture in excellent condition and we intend to purchase secondhand off Gumtree but will still need to have some money in the budget for this)
  • mortgage payment
  • home and contents insurance
  • council tax
  • utilities
  • transportation from the new location
  • ground rent if we chose a leasehold property
  • childcare costs

As you can see, quite an extensive list.  I believe once we’re in a new home, we’ll be able to make the monthly expenses work like we always have done.  The closing costs are probably going to eat a bit into our savings which means less money to go towards the deposit so we will need to remain diligent with our savings.

Do you have what you need to furnish and care for a home?

The dream is once you have bought your home, you can let your imagination run wild and have multiple Pinterest mood boards dedicated to every area of the place, all perfectly coordinating.

The reality is, coming from a partially furnished rental property, we are going to need to purchase a few large bits and pieces such as a bed and bedroom furniture and seating for the living area.  We won’t do this all at once, and as I mentioned before, we have very generous extended family who will help us out with some of it.

I’m only thankful that we’re not moving to a homestead from the city like the Frugalwoods did.  Each month Mrs Frugalwoods update us on their monthly expenditure and although they’re doing it frugally, there are some absolutely massive expenses on their lists!

Do you have an emergency fund?

Emphatically, YES! Writing this article has alerted me to the sheer number of additional costs associated with home ownership. As Kristina says in the closing paragraph of her article:

Home ownership is a serious investment that can come with unexpected expenses if you are unprepared. Consider the neighbourhood, your life plan, and whether you can afford all aspects of home ownership before you buy your first home.

We are continuing to work hard to achieve our dream of home ownership and by doing exercises like these and taking time to properly consider our circumstances, we become more prepared to make the leap.

Thanks for reading! What questions did you ask yourself before purchasing your first home? What other questions should we be asking ourselves?

 

 

 

Reflecting on our experience of Shared Parental Leave

On Friday my husband spent his last day at home caring for our son.  This week our little boy started with his childminder and my husband returned to work.  He’d met up with his colleagues for after work drinks on the Thursday and had a chat with his managers about his role returning to the company.

I’ve taken some time to reflect over the past 10 months of our shared parental journey and share my thoughts with you.

One thing I’ve been very grateful for has been the positive reaction to our decision.  Sometimes you read articles where women have been ‘mummy-shamed’ about their decision to return to work early or the father is questioned why he isn’t providing for his family (the internet can be the worst sometimes).  We have received no judgement from family and friends or our workplaces and we feel incredibly lucky for this.

One of the main reasons we chose SPL was financial.  Since I am the main breadwinner, I was keen to get back to work once my maternity pay had dwindled. As it turned out, we had saved enough to safely cover emergencies (thank you PF/FIRE community!). Good thing too as we had to purchase a new car and pay a one month deposit to the childminder.  Would we have done SPL if my husband earned more? Probably as there have been other benefits too.

My husband has had a valuable chance to bond with our son and develop his own style of parenting.  We have different approaches and sometimes I question why he is doing something a particular way but then I have to stop myself.  His way is no less effective than mine, only different so I have learnt to respect his judgement more.

Some of the downsides have been I have lost some of the friendships I had developed when I was on maternity leave since going back to work now that I can no longer hang out on weekdays.  Some may say this isn’t much of a loss but I do miss having people to talk about parenting with and children of a similar age for my son to play with. Thankfully I still have a couple of people that I still get to see on the odd weekend and of course all of our other friends, with or without children!

Setting up SPL was a bit of a pain as it is still reasonably new and there was a bit of paperwork to complete.  We almost had to be experts ourselves before approaching our HR departments.  There was an issue with my first month’s pay back at work full time as I hadn’t been put back on payroll so there was a flurry of activity and a lot of anxiety on my end as they sorted it out.

I think my husband found the change of pace challenging at times and although the landscape is changing slowly, he would still sometimes be the only man at our son’s activities. We also had to consciously make time for each other, rather than just ‘changing shifts’ when the other parent got home from work.

Overall though, it’s been an amazing experience and I highly recommend looking into it, even just to give yourself more options when deciding on childcare.  I have had colleagues of both sexes ask about how we set it up and about our experiences and I hope we can help them as they decide the best course of childcare for their families.

More information about Shared Parental Leave can be found at:

https://www.gov.uk/shared-parental-leave-and-pay

http://www.acas.org.uk/spl

https://www.maternityaction.org.uk/advice-2/mums-dads-scenarios/shared-parental-leave-and-pay/

 

Building up momentum – house viewings and free money!

Before I continue, I should probably explain the ‘free money’ part of my post before people begin to think I’m running some kind of give away!

You may recall in a previous post how we had filled our Lifetime ISA.  This is a special account that you can use for the purchase of your first home or retirement.  You can save up to £4000 in it each financial year and the government will top up the balance by 25%.  Well, we just received the bonus today, it was a good feeling! Even better was that for this first year you could transfer your Help to Buy ISA and receive the bonus on that amount too.  It has given our house deposit fund a good boost.

Another exciting development is that we have booked to view three houses next week! All three are located within 10 miles of my husband’s family.  We’re still not sure where we want to buy but these three places tick a few of our main requirements which are:

  • Be freehold (find out more about that here)
  • Be within our price range (this should be common sense but it is surprising how many people overextend when looking at properties!)
  • Between two to three decent sized bedrooms (one has 4 bedrooms!)
  • Have a good sized garden
  • Have an good sized kitchen

Our criteria are still pretty broad at this stage in the game but I’m certain that once we’ve seen these places we will continue to narrow down our key requirements.

The first house we are seeing has been owned by the same couple for 50 years! The interior will need some updating and it also has a strange bedroom layout where you have to go through one bedroom to reach the other one.  But it looks great outside and has an absolutely massive garden.

The second house is three bedrooms and the garden backs onto a lovely peaceful river.  Unfortunately it is on a main road and doesn’t have central heating but the house looked nice enough to warrant a look.

The final place is 4 bedrooms (that we could even consider looking at a 4 bed place on our budget is a testament to how much cheaper homes are in this area compared to London).  The interior is… interesting.  Very bright and every room has a different patterned wallpaper but aside from this (and let’s face it, we can always redecorate), it seems to tick all of our boxes.

We still have to wait a week until the viewings which isn’t ideal and we may lose out on them for not being quick enough but even if we only end up viewing one, I think it will be a valuable learning experience.  I feel like I’ve been all talk about buying a house but no action and finally the wheels are being set in motion, it’s all very exciting!

What were your criteria when looking at houses? How many did you view before you knew you’d found the right one? Do you have any viewing tips for these real estate newbies?

What is an Agreement in Principle (AIP) and why do I need one when buying a property?

The more I learn about the home buying process, the more I think it’s all about the acronyms.  In most of the research I’ve done, the first step of the home buying process, before you even begin to view properties, is proving that your lender MIGHT lend you the money to buy a house.  This is called an Agreement in Principle (AIP), but also can be called a Decision in Principle (DIP), Mortgage Promise or Lending Certificate.

What is an Agreement in Principal?

An Agreement in Principal (I will refer to them as AIP for the rest of this post) is a certificate or statement from a lender to say that ‘in principle’ they would lend a certain amount to a particular prospective borrower or borrowers based on some basic information. Most providers will require you to complete a form detailing your income and expenditure and the amount you think you would like to borrow.  They may also conduct a credit check.

Although an AIP doesn’t give any guarantees over what size of mortgage you may be offered once you formally apply, it will give estate agents some peace of mind that you can potentially afford the properties that you are viewing.

That all sounds good, where do I sign up?

Hang on just a minute! Many banks boast that you can get an AIP from them in just a few clicks however if they do a ‘hard’ credit check, it will leave a footprint on your credit file, regardless of whether you go on to borrow from them. Too many credit checks on your file can make it hard for to arrange a loan, and the fact that a lender has checked your file stays on record for six years.  Some lenders will leave a soft footprint but they are few in number and may not be the right one for you.

Why should I get an AIP?

Theoretically you could skip the AIP and speak directly with a mortgage broker as they aren’t compulsory but there are a few benefits to getting one.

  • If you have a poor credit history and aren’t sure if you would be accepted for a mortgage, the AIP can give you reassurance about your borrowing prospects.
  • It can give you more credibility with estate agents as it shows that you can move ahead in the process if the offer you make on a property is accepted.

 

We are looking at mortgage brokers now with the view of starting to look at properties from next month and will probably have a chat with the broker before applying for an AIP.

I’d love to hear your experiences with AIP’s.  Did you find it useful in your house hunt? Were you able to get a mortgage without one?

Things I learnt when my brother-in-law moved to Denmark

Two weeks ago we said farewell to my brother in law who has finally made the move to be with his long-term girlfriend in Denmark.  They have been long distance for almost the entirety of their relationship so it’s great to finally see them living together.  Now that he has somewhat settled into his new home, I had a chance to reflect on what his life changing move has had on us.

Keep your eye on the prize

Not that his girlfriend is a prize to be coveted, but once they had gotten through the initial ‘honeymoon period’ of their relationship, they both started to think about their future together and where it would be.  Both the UK and Denmark were considered but ultimately, my BIL’s job was more transferable and his girlfriend had just started her university degree (which might I add is fully funded by the state… not envious at all…) so Denmark seemed like the logical place for them to begin their lives together.  Once this was established, they set a date for him to move and steadfastly worked towards their goal.

The importance of regular saving and an emergency fund

As you can imagine, it can be a bit expensive moving to another country.  I know firsthand after moving to London from Auckland, New Zealand but my brother-in-law had never saved substantial amounts of money before but soon realised that he would need to in order to make his dream a reality.

He moved back home in order to save money paying rent, gave up expensive habits such as smoking and cut down on going out with mates to the pub.  Once he started saving a bit more, this motivated him to increase his monthly savings so he had a good cushion once he arrived in Denmark.

Time spent in planning and preparation is rarely wasted

To be fair, his girlfriend takes most of the credit for this next point.  My BIL is laidback almost to a fault so she found affordable accommodation near her university for them to live, researched the documents you need to live and work in Denmark (think the equivalent of a National Insurance Number in the UK) and started finding potential jobs he could apply to.  My BIL started learning Danish and has enrolled in a Danish school. He updated his CV and had an interview booked the same day he arrived, which he got. As a stroke of luck, one of his new coworkers is from the same town in the UK!

Read the T’s & C’s before you sign!

Unfortunately there was one pot hole in the road in the lead up to the move.  After deciding he would sell his car before moving to add some more money to his savings, he was a bit shocked to discover that he had purchased with PCP (Personal Contract Purchase) finance. With this kind of finance, rather than paying off the entire value of the car, you instead pay how much the finance company predicts the car will lose in value over the term of the deal (usually 24 or 36 months) minus the deposit you’ve put down. This means that the monthly payments are usually lower.  At the end of the deal, you can either give the car back or trade it in for a new one (less penalties for going over stated mileage or damage) or pay a balloon payment to own the car outright.

My brother-in-law had been hoping to add to his savings pot but instead found himself having to pay to give the car back.  Thankfully he had an emergency fund to cover himself but it does highlight the importance of carefully reading contracts so you know exactly what you are signing for.

Support networks are crucial

As I mentioned before, his girlfriend has worked very hard to ensure his adjustment to Danish life has been as smooth as possible.  Both her family in Denmark and his friends family in the UK have tried to do everything they can to support the couple as they enter this next chapter of their relationship. They have offered practical advice, reassurance when fear creeps in and moral support over Skype.  Although many people have moved long distances alone, knowing that there are people out there willing you to succeed can certainly help you when having a down day.

 

Have you or one of your family members moved a long distance away? Did you find yourself reflecting on the experience? What did you learn?

5 ways to get out of a rut

I’ve been meaning to write a blog post for some weeks now but the ideas weren’t flowing nor did there ever seem to be the time to actually sit down and draft something out.  I’m off for a week over Easter and I finally had some time to consider what was wrong.  I would like to share a few tips that I’ve used over the past few days.

Consider external factors

You’ve probably heard of Maslow’s Hierarchy of Needs or seen it displayed as a pyramid with the most basic physiological need such as food, sleep and shelter are at the bottom, progressing through to self-actualisation, or the need people have to achieve their full potential.  You cannot begin working on the more psychological growth needs until the more basic needs are satisfied.

Over the past few days, our son has been having trouble sleeping at night, constantly waking almost every hour. This has led to an unhealthy lack of sleep for both of us.  The off shoot of this is as well as being chronically tired, we’re not taking time to eat well or exercise which perpetuates the cycle.  If you’re not feeling particularly inspired, have you stepped back to ensure all of your basic needs are being met?

Try the 5 Whys Technique to establish the root of the problem

The 5 Whys technique was created by Sakichi Toyoda, founder of Toyota Industries in the 1930’s and the company still use it today.  I first read about this in a blog post and have found this an excellent way to pinpoint the exact cause of my worries.

You begin by defining the problem and then ask ‘Why?’.  When you have answered this question, ask yourself why in response to your answer.  This process continues until your answers to why produce no more useful responses.  The five in the 5 Whys is subjective, you may be able to reach the root of the problem in only 2 or 3 whys or you may need to keep questioning further.

In my situation, I felt the cause of my lack of productivity was caused by uncertainty about our housing situation. I’ve previously written about where we want to eventually live but we are still currently saving our deposit so feel a bit in limbo at the moment.

Look at your long term goals and check the short term goals that you need to achieve them

It’s important to set goals however it can sometimes be overwhelming considering the steps required to take action. Unfortunately simply dreaming about what you want will not get you where you need to be.  Similarly, dwelling on potential problems can be as equally paralysing.

Instead, break the goal down into smaller, easier-to-tackle parts. Completing these smaller steps can generate positive momentum, a bit like the debt snowball you frequently read about on personal finance blogs. If you need help with setting goals, the SMART method (Specific, Measurable, Achievable, Relevant, Time-bound) is a useful tool for drafting them.

Our end goal is to own our own home.  To do that we need a mortgage so one of my smaller attainable goals has been reading everything I can about the process to maximise our chance of a successful application.

Take action

“A journey of a thousand miles begins with a single step”

– Lao Tzu, Chinese philosopher

Of course, writing your goals down is the easy part.  Enacting them is the challenge which is why it is important to have a time scale in mind. Regularly review your goals and check your progress, are you on track to achieve them in the time you’ve set?

Taking action can also mean admitting to yourself something is not going to plan and rethinking and potentially abandoning that goal. Some of the bloggers I have read that have been steadily working towards FIRE (Financial Independence, Retiring Early) have achieved the goal, successfully retired early and then have found that it’s not the right path for them. Have they failed? Certainly not! They had to reach that point in order to know it wasn’t right for them and now they are setting new goals for the future, with far more financial resources to help them.

One of our mini goals was filling one of our Lifetime ISAs for the current tax year. And it does give you a boost to know that you’re on the right track.  We now need to check our goals for our next achievement towards that ultimate goal.

Take a break

Sometimes, you just need to take a step back to recharge. Scientific studies have shown that the brain is able to perform better when given the opportunity to divert from a task. A chance to rest and the time away can give you a fresh perspective when you return to the task and help avoid getting into a rut in the first place.

I’m only a couple of days into a week off work and already spending time with my family and using my free time to pursue my hobbies and even just sit back and watch Netflix has enabled me to approach my projects with fresh eyes.  I was able to look at some of our house buying goals and not feel hopeless anymore. Incidentally, I do believe this is going to be my longest blog post to date so I’m going to accept that as evidence that taking a break works!