WRITTEN BY KRISTA BEAUVAIS

When you’re living in London (UK), a city where it normally costs less to pay a mortgage than it does to pay rent, how do you afford to buy a house when you’ve only got £7800? There is a way. If you’re not afraid of a little dust and hard work, or living in an ‘up-and-coming’ area, then it can still be done. Find out how…

I was 26 years old when I bought my house in London. It was January 2006, almost at the height of London’s property boom. Now, in 2013, prices in London are still similar in the area where I bought, due to the global financial crisis that’s brought everything to a halt since then.

How I Saved my House Deposit

Just three years before buying my house, I had arrived in the UK with a backpack and £200 in my pocket. I had arrived on a working holiday visa and had no plans, which is exactly how I had wanted it to play out. I could never have imagined then that I would spend the next decade of my life living in the UK!

With £200 to my name, I went job-hunting the day after I arrived. I remember it was a Saturday. I did a bunch of typing tests at a temp agency in Northampton and I was working at a police station (Weston Favell Police Station, to be exact) two days later, on Monday, typing up police reports.

I didn’t have enough money for the bus, so I walked 45 minutes to and from work each day. I didn’t have enough money for food, so I bought only no-name brand items and food in the discount sections. I had no money for rent, so I managed to crash for free with a friend I’d met previously while working as an Au-pair in the South of France.

It took me just four months of working odd jobs (selling AVON and frozen foods door-to-door, various secretarial temping jobs, and working in the kitchen at TGI Fridays) before I started going crazy and needed something that would actually challenge me! That’s when I started supply teaching. That led to starting my teacher training in the UK, which led to doing my first ‘probationary’ year of teaching.

These were the years that I saved the money, which I used to buy my first house. Keep in mind that I was earning about £7 per hour at my odd jobs. After that, doing my teacher training I was earning about £18,000 for the year. Then, during my probationary year, I think I was earning about £22,000 for the year. I was not earning much money!

That’s why I think this story is worth sharing. In those three years, despite my low earnings, I was able to save a deposit for a house that has changed my life.

Looking for a Place to Rent in London

When my probationary teaching year was over, I accepted a job in London and found affordable accommodation in the form of a rented room. Renting a room is the cheapest form of accommodation in London. It was fine as a temporary solution, but I had dreams of living in my own place again, which I’d been doing before moving to London.

I started looking for a place to rent and was shocked at the prices! I couldn’t find anything (that wasn’t falling apart) for under £850 a month. And that didn’t include any of the taxes or bills! This felt like an enormous rip-off to me; I had been paying less than half of that outside London. I considered my other alternatives.

Perhaps I Should Buy?

I hadn’t considered buying a house. I was single, 26, new to a city where I knew nobody, and still a stranger in this country. But when I did the numbers, it was the only sensible option.

I didn’t plan to be in London forever, but I did plan to be there for a few years. So I looked into the cost of mortgage payments. Shockingly, I discovered they were about the same as paying rent!

‘Why should I pay someone else’s mortgage when I could be paying my own?’

I Only Had £7000 in Savings…

The only thing stopping me was whether I could actually afford to buy something. I only had £7000 in savings. How could I possibly buy a house with only £7000? The answer is that I couldn’t. But I could with £7800.

Still, £7800 is not a lot of money with which to buy a house. How exactly did I buy my house with so little?

Finding a Cheap Area

I was new to the city and didn’t know my way around, but the nice man I was renting the room from did. He showed me the area where he bought his first home.

It’s a nice neighbourhood in the South East of London, called Plumstead Common. It’s quiet, full of traditional Victorian homes, and surrounded by parks.

It should be pricey but it’s actually one of the most affordable areas in London since it’s not immediately on a tube line; you have to get a bus ten minutes to the station. I would be driving to work so that didn’t bother me! Besides, the bus stop is just around the corner from my house, so using public transport couldn’t be easier!

I just wanted to pay my own mortgage, not somebody else’s.  If I didn’t like what I ended up buying, or where I bought, I could simply sell it and move later. That thinking helped me to be very objective in my search.

The Mortgage

Before I even looked at houses, I needed to find out if I could even afford to buy anything. I was skeptical, with so little savings, but I was determined that if I was going to fork over so much each month, that it was going to be into my own house and not someone else’s. So, I pressed on.

I met with a mortgage broker (it’s free in the UK; they get their fee from the bank you choose) and soon discovered that only one bank would consider lending to me because everyone else considered me a flight risk since I was only in the UK on a work permit and not a British passport. I also discovered that banks will only lend if you’ve been living in the country for three years or more. I had just crossed that threshold, so was in luck.

The only bank willing to take a risk on me wouldn’t offer the 100% mortgages that were on offer at the time (this was the housing boom, and just before the global economy crashed). Instead, they could offer me a 95% mortgage. That was my biggest saviour. Without that, I wouldn’t have managed – or I would have needed double the deposit, which I just didn’t have.

Still, if that had been the case, I would have struck a deal with my parents to borrow the rest and pay them back. Or I would have tapped into some of my savings in the bank back home. I would have done almost anything to avoid paying somebody else’s mortgage!

I think that is a huge thing to consider:  find a mortgage that will ask for the smallest deposit from you.  Hunt around.  Call everyone.  Keep looking until you find the lowest deposit required.  You can always remortgage later once you’ve saved more money and can put more down on the capital at that point.

Lowering my Standards on the House Hunt

With an ‘offer in principle’ agreed with the bank, I started my house hunting and quickly discovered that, even with a 95% mortgage, I couldn’t see anything on the market that I could afford and could see myself living in.

I had to adjust my thinking.  I was not going to get anything in good condition.  They were all at least £50,000 more than I could afford.  The only way I was going to afford anything at all was to get a major fixer-upper.  This was a comical thought at the time, as I didn’t even know how to use a hammer!

A little flavour of the project I just bought

I think the only reason I even considered a fixer-upper was because the TV was full of house flipping shows, renovating and selling, and I thought it might be fun to do what I’d spent many hours watching others do.

I then started to think about what sort of fixer-upper I would be able to tackle on my own. Yes, I was very single at the time. I figured that I could slowly pay for repairs over time, as long as the place was liveable.

I Didn’t Want to be House Poor

I didn’t want to buy something that was going to suck huge amounts of money out of me, because I had heard of others being ‘house poor’ and I didn’t want to be one of those people.

‘Great, you’ve got a house, but you have no other money to do anything else. That’s not what I wanted!’

That meant I needed something that was structurally sound, had a good roof, already had double-glazed windows, and already had a central heating system.

Finding a Reasonable Compromise

When I found all of this inside the walls of a 120 year old Victorian home, complete with…

• original wooden floors
• picture rails
• a cast iron fireplace in the lounge
• a tub in the bathroom

…I was able to look past the stench of cat urine that burned my nostrils, the plaster falling off all of the walls and into my hair, the purple/pink/aqua gloss paint covering everything, and the insidious ivy devouring the front and back of the house.

It may sound strange, but I loved the vibe in the house. It holds a happy energy and I could feel it, despite what the place looked, smelled, and sounded like (everything creaked). I loved the potential. I could see myself bringing this old home back to life – once I learned how to use a good many tools, that is.

Finding a Motivated Seller

After viewing 20 other houses, I went back to this one to see the owner without the estate agent, asking if I could look around again, as the estate agent had rushed me.  In doing so, we got to talking and I discovered that she was actually moving later that week to Australia – permanently. In fact, that’s why it was in such a state; it had been rented out for the past few years while she was trialing a new life in Australia and nobody had looked after it.

I knew nothing about ‘motivated sellers’ at the time, but I knew this house was £10,000 more than I could afford and I knew that she’d likely accept a lower offer in the hopes of getting a sale agreed before leaving.

Making the Offer

To make a long story short, I put in an offer with the agent for £10,000 below asking, which was the absolute top of my budget.  As I said, I still hadn’t saved the money I needed for the deposit (I was £800 short), but I knew it would only be needed in another six or so weeks, so I had time to get it.

In the end, the inspections on the house showed that there were damp problems. She wanted me to buy it anyway and I refused, saying I didn’t have the money to pay for it, which I didn’t. When you really don’t have the money, it’s easy to not get emotional about these things, which I think is important when buying a house. You need to be objective. It’s a lot of money to spend!

Waiting for Exchange of Contracts

She agreed to pay for the damp repairs and I agreed to take care of the other issues from the reports that I knew I could worry about later when I had more money. The sale actually ended up taking four months to close because both of our lawyers were pretty useless. She was also in Australia so paperwork and communication between she and her lawyers took longer.

Through this time, I tried to stay pretty unemotional. In the UK, the buyer or seller can pull out of the deal at any point before ‘exchange of contracts,’ which only happens right at the very end. It’s the most ridiculous real estate system that I’m aware of in the world!

In this case, I was silently pleased things were going much slower than planned because it meant that I was able to save more money than I needed for the deposit, which I was clearly going to need for renovations. Besides, I liked the room I was renting and I knew that my life would become centered around renovations once I moved in, meaning everything would soon become much less comfortable and much more expensive.

Contracts finally exchanged and I got the keys in January 2006. I walked in, sat down and cried. It felt surreal. I had always hoped to be buying my first home with my husband. But, there I was, very single, very alone, and very ill-equipped to renovate this old house that was falling down around me.

Renovations Begin

I wiped my tears and reminded myself that I would now be paying money into my own pocket each month, not somebody else’s. Who cares if I was now living in a dump!

I spent the next two years looking like this when I wasn’t working my day job

I spent the next five years renovating my home, slowly, a bit at a time as I could afford it. I learned so much in that time and I think those first two years of intense renovation were two of my happiest years so far. I had a huge project that consumed me and it became a passion that I poured all of myself into.

Getting a Lodger to Help with the Bills

Once the really dusty work was done, I didn’t worry about my own bedroom. In fact, I slept on a mattress on the floor for a couple of years until I could afford a bed. Instead, I did up my spare room nicely so that I could get a lodger as a means of income each month to help pay the bills.

The downside to getting a 95% mortgage is that your interest rate is relatively high, so you end up paying the bank more per month than you would if you’d put down more up front. But when you don’t have more to put down up front, it’s a compromise you’re willing to make.

Back-up Plan

If I had lost my job or something bad had happened, maybe I would be telling a different story right now.  But I always knew that I could just sell the house if I needed to. Houses in London don’t last on the market very long.

In fact, houses on my street are usually snapped up within a week or two of going up for sale. I figured that buying a house in London could never be a bad financial move. And I was right!

My Beloved House Now

In April 2011, I turned my house into a holiday rental.

It’s now a wonderful Victorian sanctuary in London that guests consistently review as five stars. I’m still amazed that tourists from all over the world now pay to stay in my house – and I meet wonderful people because of it!

When I think of how it all started, I regularly smile in disbelief. If I hadn’t been willing to put in the hard work then, I most certainly wouldn’t be reaping the benefits now.

I truly believe that my £7800 deposit is the best money I’ve ever spent!

Is it Still Possible Today?

It’s true that we’re now in 2013, but house prices haven’t changed much in Plumstead Common, in the Southeast of London. I haven’t been keeping close tabs on other neighbourhoods, but I know that good deals can still be had in my area.

Like I said before, I bought at the peak of London’s property boom, meaning prices were as high as they’ve ever been, and we’ve been in a global recession since – so similar deals can still be found on property. In fact, in some cases you can even find better deals now, as there are more heavily motivated sellers due to the very sad circumstance of foreclosures.

My Advice to Others Trying to get on London’s Property Ladder

First of all, unless you’re minting it, you’re only going to be able to do this if you’re willing to sacrifice. You’re going to have to move somewhere that you can afford, and that is not necessarily as nice as where you could live if you were simply paying rent.

But, where there’s a will, there’s a way. If you really want to do it, my top tips are these:

• Find a cheap area to buy (see next point)
• Use Rightmove to house hunt (all agencies worth using register with them so you can see houses from lots of agencies in one place – and you can search easily by price so you can see what’s available for your budget)
• Use Zoopla to see what the property sold for before so you know if you’re getting ripped off
• Start looking before you can afford it
• Talk to the bank so you know your precise budget – and look at things that are higher
• Have an objective mind, not an emotional one
• Find a motivated seller
• Find a mortgage offering the lowest deposit
• If you don’t have enough deposit, start saving what you need
• Be ready to walk away if the deal isn’t feasible for you
• Be prepared to deal with a headache of a real estate system where it could fall down right at the very end
• Be willing to get dirty and live in a building site for a prolonged period of time
• Be willing to get a lodger to help with bills
• Don’t buy any property that needs the expensive repairs, like structure, roof, central heating, rewiring, or double-glazing
• If you can’t afford to do it alone, buy with a friend and strike an equitable deal

If you’ve also got a story about buying your first house, I’d love to share it here on Wodara. Please get in touch to tell me a bit about your story!

KRISTA HAS ALSO SHARED

• See Krista’s profile page for the full list

FURTHER DETAILS

• Written, formatted and edited by:  Krista Beauvais
• House purchase date:  January 2006
• Affordable London location she recommends:  Plumstead Common, SE London
• Photos:  all photos are courtesy of Krista Beauvais
• Favourite estate agent in Plumstead Common:  Goodwin Ellis
• Info about her house as a holiday rental:  Home Away and Trip Advisor

CONTACT KRISTA

• Via the Contact Form
• Email her directly:  krista [at] wodara [dot] org