Feb 2025
Background
Tom and Katherine are 28 and 31, busy professionals living in East London and earn a combined £120,000.
They have £300,000 cash available made up from gifts and savings, joint earnings of £120,000 a year, no debts and a clean credit history.
Their rent is currently £2,200/month and is going up to £2,500 soon. They’re looking to buy and have been looking at properties anywhere between £500,000 and £850,000.
Tom and Katherine were worried about overspending on a property and not being able to enjoy the local restaurants.
Main issue - How much they should spend?!
The MUVADO method
We undertook the following steps to help Tom and Katherine set up their house buying budget.
Cash deposit available?
Tom and Katherine need to budget for stamp duty, legal fees and moving costs, plus a buffer for furniture, redecoration and an emergency fund.
Stamp duty £20-30,000. Legal fees £2,500-£4,000. Moving costs £1,500. Agreed buffer £20,000.
This left an approximate cash deposit of £250,000 from their £300,000 available.
Maximum loan
With maximum loan amounts available of 4.5 to 6 times income, Tom and Katherine agreed they wanted to focus on the monthly repayment. It was important they could continue living a similar lifestyle to now and meet their mortgage repayment comfortably.
Monthly repayment
To keep the monthly repayment low, it was agreed the term of the mortgage would extend to 38-year term (maximum available).
The best interest rates are available when loans are below 60% of the total value (60% LTV).
This would give a total budget of £625,000 and a loan of £375,000. With a monthly payment of around £1,625, Tom and Katheirne felt they could stretch a bit further.
A house purchase of £750,000 and a loan of £500,000 provided a monthly payment of c. £2,210. Much closer to their current rental payments.
Summary
Tom and Katherine felt comfortable searching for properties valued at around £750,000 and eventually bought a flat in East London for £735,000.
Working with MUVADO from an early stage allowed Tom and Katherine to buy their first home confidently and secure a property that allowed them to continue their lifestyle and live comfortably.
If you want to find out how much you should spend on your home, book a call below to get started.
Risk warnings
Your home may be repossessed if you do not keep up repayments on your mortgage.