House Hunters Int’l, Billfold Edition: A Mortgage With A View
This is Part Two of a series. Part One can be found here.
My parents bought their first property while in their 20s. I grew up in that house: two floors, four bedrooms, and a big garden. It was far more space than the three of us really needed, but normal for the remote village where we lived – space was cheap. Sometimes, when my laundry is hung out to dry in the gap between the refrigerator and the sofa in my small London flat, I take a mental tour of that house. After 11 years in London, I can’t even imagine what I’d do with all that space.
I don’t know exactly what it cost to buy that house in 1980, but I know it was realistic for my parents, a teacher and a bookkeeper, to pay down the mortgage in 20 years. In 2014, however, things are a little different. As we proceed with our plans to buy our first property, neither my husband nor I are in our 20s (thank heavens), having a garden is a fever dream, and once we take on a mortgage, my expectation is that it will eat up every penny we ever make until the day we die.
I’m horrified by the idea of committing to this kind of debt. I’ve never even had a credit card! I was so lucky as to have attended university in England back in the days when tuition basically cost the same as long weekend in Paris, so I only ever had a small student loan. Once that was gone I became a diligent saver — not because I’m particularly good at denying myself the things I want, but because it’s important to me to have a bit of cash available. As a freelancer I need it as a cushion against bumpy earnings. Also, it represents the very powerful idea that I can buy a plane ticket tomorrow, should the mood strike.
But the average London property is currently worth a ridiculous £514,000 [$806,00], according to the UK’s Office for National Statistics, compared to the national average of £272,000 [$426,000]. Of course, that statistic includes the millionaire mansions; still, the national average is about where property prices start in London, at least in the semi-scruffy area of town where we’d like to live. I do have some savings, but never before have thousands of pounds felt like a mere drop in a bucket. Then there’s the fact that I’ve never once missed rent or a bill, including the time I left my in-house reporter job to become a freelancer with no contacts — where’s the box on the mortgage application I can tick to indicate that?
Be careful what you wish for, though. As we’ve embarked on the joyride that is mortgage application paperwork, it turns out there is indeed a box to tick to indicate all these things. That box is called “self-employed.” Both my husband and I ticked that box, and the moment we did, we could practically hear the sound of banks cutting what they’d be willing to lend us by 20%. I’d like to think that having a dozen sources of income is somewhat safer than having just the one, but it seems the freelance economy has yet prove its worth in the world of finance. For a bank, a freelancer is a wildcard. Who knows what they’ll do! A loose cannon, surely! So reckless!
I was joking about this the other week with a friend, another freelancer who owns his own place. The crucial difference is that he bought his property while he had a full-time job, having postponed freelancing in the knowledge this would make all the difference for the bank. Not to mention that these events took place before the recession, during a Wild West time for London property lending, meaning my friend now owns an flat there’s no chance in hell he’d be allowed to buy today.
With this in mind, my friend recently saw a mortgage advisor for some advice about moving, but it was a short visit: “The advisor took one look at my numbers, closed the folder, and sighed. Then he leaned back in his chair and said: ‘If I were you, I’d let sleeping dogs lie.’”
My own timing for applying for a mortgage is a lot less fortunate, but one thing me and my financially over-extended friend have in common is that we both took our parents’ money for the deposit [down payment]. I hated doing it; it made me feel like a child. But is there really any other way anymore?
Never in my life have I genuinely felt like I wanted to have a lot of money, but this property hunt has been the first for a lot of things. The bank wanted to see my records from the last three tax years, which happened to coincide with the period where I built my freelancing practice from scratch. Going out on my own was huge for me and it took a while to get going, and of course the numbers reflect this. I want to be diligent as I’m filling out the forms, but there’s no essay section where I can put it into context. There’s no box I can tick that explains that yes, it’s going better now, and yes, it was the best decision I ever made.
To be continued!