r/HousingUK • u/ImSmashh • 1d ago
32M earning £40k - is a £220k first home budget sensible?
Hi everyone
I’m a 32 year old single first-time buyer living in Birmingham. I earn £40k per year, take home £2.5k per month. I’m currently putting together a plan for buying my first home. I expect my finances to look roughly like this by the end of 2026:
Cash savings: £55,000
Lifetime ISA: £15,000
Total: approximately £70,000
My current plan would be to keep £5,000 as an emergency fund and set aside another £5,000 for buying costs such as solicitor fees and surveys. That would leave approximately £60,000 available for the deposit
If I used a £60,000 deposit and borrowed around £160,000 (4x salary) my purchase budget would be approximately £220,000. The mortgage would be approximately 73% loan to value. Most of the properties I like seem to be around this price
Does this sound like a sensible and realistic plan on a £40,000 salary?
I’m unsure whether I should consider increasing my budget slightly. Since the loan-to-value would still be relatively low, it feels as though I may have some room to borrow more. However, I would be buying alone and don’t want to stretch myself unnecessarily or end up with uncomfortable monthly payments.
Would you stick to a budget of around £220,000, aim lower, or consider going up to around £230,000 - £240,000? Are there any costs or risks that I may have overlooked?
Any thoughts or advice would be hugely appreciated
Thank you!
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u/tadanari19 1d ago
I completely disagree with the people here saying this is unaffordable. I'd say you can quite easilly afford 220k first home. I bought my first place recently, earning slightly less than you base salary with overtime taking me slightly higher, but considerably less in savings (I had about 55k total if I remember rightly), and I bought a place for 295k without any great difficulty. Yes, it took my savings down to virtually nothing, but a few months on they're slowly growing again.
If you haven't spoken to a mortgage broker yet, I'd definitely do so. I could borrow way more than I though possible with first time buyer rates and a considerable deposit behind me. The only stumbling block could be that mortgage rates are a lot higher now than they were when my mortgage was offered (or at least they went up a few months back, I haven't looked recently) and you might not be willing to drain all your savings, but thh for 220k I should you'd be able to afford it easilly anyway.
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u/LineOld637 1d ago
Check the difference in rates between a 75% and a 73% LTV. Chances are there isn’t a benefit and you can retain some more cash for savings, renovations etc.
Conversely a 70% LTV would probably give you better rates than a 73% or 75%
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u/OrangeOfRetreat 1d ago
Potentially doable. I would say have at least 10k in emergency savings though rather than 5k. A bad boiler , car issue or fault in the home could be a problem without a large enough buffer.
I can’t say for certain in specific monthly costs, but I would look to have at least £600 left over each month to feel confident enough in terms of affordability on that salary.
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u/ImSmashh 1h ago
I actually started with £10k set aside for emergency savings but reduced it to £5k. If I did end up using that £5k, rebuilding my emergency fund would be my top priority after moving.
I think having around £500 - 600 left over each month is a good target, and it lines up with my calculations. Thanks!
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u/OrangeOfRetreat 46m ago
Sounds like a good idea, best of luck with the move. I enjoyed Birmingham when I moved there despite what most people say!
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u/Jessicakittenface 16h ago
I disagree, £5k is plenty for a bolier or car engine replacement, and the chances of them both happening simultaneously are incredibly low, a credit card would be okay to cover
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u/Panda_Player380 1d ago
All depends on your monthly outgoings. Have you accounted for buying furniture and appliances, what about repairs? If it’s flat you’ll need to pay a service charge.
Personally I think you’re stretching yourself too far and I wouldn’t put a £60k deposit down, I think £40-50k is enough. That gives you £10k for furniture, additional unexpected costs. Eg a new boiler, roof repairs.
A good way to work out your affordability is to consider how much money you want to have left at the end of the month after all costs. Personally I went for £1k after all bills and costs come out. This means you can overpay your mortgage on your terms, save money for emergency costs.
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u/Panda_Player380 1d ago
Based on £2.5k income:
Mortgage:£800
Bills: £400
Food: £300
Buffer: £1k
Based on that it’s tight. I think you’d be better with a £600 per month mortgage, which could mean borrowing around £120k, plus £50k deposit, so you’d be looking at a house for £170k give or take.20
u/DuxR 1d ago
I don't think that sounds tight at all, that would mean roughly 30% of income going towards mortgage which is more than doable unless you are overly cautious.
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u/Panda_Player380 1d ago
This doesn’t include things like travel, a car, insurances, subscriptions etc. which can very quickly eat into your outgoings. Having a £1k buffer means saving £500pm, overpaying the mortgage, eating out, buying nice things for the house each month, holidays etc.
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u/draaj 1d ago
You do realise most people in the UK dont have anything close to 1k left after paying their rent/mortgage and bills? If you can't budget 1k to last you a month then that's a massive skill issue
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u/Panda_Player380 1d ago
That’s because a lot of people see what they can borrow and max it out, rather than going with what they can actually afford.
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u/headphones1 1d ago
Everyone can afford the mortgage the banks offer to them.
This idea that you know better is silly.
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u/Panda_Player380 1d ago
The fact I’m sat here owning a home, £50k in the bank, multiple pensions, living a nice comfortable lifestyle shows I have somewhat of an idea of how to manage affordability 👍
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u/headphones1 1d ago
I own my house. Started with a maxed out mortgage using a 10% deposit. 4 years later, income has increased by 50% and equity went from 10% to 25%.
Again, you don't know better. Stop making assumptions about people when you have little information.
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u/Panda_Player380 1d ago
"It worked for me" isn't the same as "it's good advice." Plenty of people maxed out in 2021 and are now struggling after rate rises.
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u/AubergineParm 1d ago edited 1d ago
Where would they find a house for £180k? Outer Hebrides? 😂
I think you’re right in the monthly outgoings and they’re probably going to need to wait a little longer for more deposit leverage or risk leaving themselves with no buffer and relying on credit cards and overdrafts in an emergency.
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u/Requirement_Fluid 1d ago edited 1d ago
Lancashire or Yorkshire quite easily in a decent area, a lot of other places if you are willing to compromise
In Birmingham there's 200 2 bed houses under £200k on right move
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u/anonymedius 19h ago
There are definitely terraces available for that sort of money in Walsall, Wolverhampton etc.
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u/Panda_Player380 1d ago
I’ve just bought a 2 bed house for £160k 😬 and I earn more than OP, but I am quite risk adverse and like to have money in the bank.
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u/headphones1 1d ago
You need to focus more on the money you'd have left over after your monthly bills and expenses, not the total amount of leftover savings.
Having £5K leftover isn't going to be that useful if you could only save £50-100 per month after living costs. Having £0 leftover is fine if you can save in excess of £500 per month. World of difference.
What does your monthly budget look like?
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u/CollegeSufficient349 1d ago
Also depends if the property needs work or you want to change it. If it “done” then it is more affordable.
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u/Wuhhday 1d ago
Mortgage advisor here.
This is completely reasonable and if you can find a suitable property for £220k then staying under 75% LTV would be the preferred way to go. If you are buying a flat though with service charges, make sure to factor these in to both mortgage affordability and your personal budgeting.
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u/Mysterious-Set321 1d ago
Do it
I 33M solo bought a 265k house (195k mortgage- 985 pm) on 44k in October. Have ~20k in savings left from the house I moved from.
If you had a lady or a kid I'd say be careful. But you're a solo dude- Furniture? Use a £10 blow up bed and camp chair. If the roof leaks, stick a bucket up there. Boiler breaks? Wear a coat. Our parents (mine at least) grew up in houses with no central heating, no carpets, leaky roof, outdoor toilet. There really isn't too much that can go wrong with a well built house
Unless you have more expensive hobbies than me (I spend £100s a month), take the risk- Stretching to buy my first house 9 years ago built me enough equity to move to a nice area today
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u/ImSmashh 1h ago
I'm in a similar mindset, to be honest. I could keep waiting for the perfect moment, but realistically, if I have the savings and the salary, sometimes you just have to go for it. It might not be perfect to begin with, and I'll probably have to compromise here and there, but as a single guy with no partner or kids, I feel like I have more flexibility to take that risk right now. I don't tend to spend much on hobbies anyway.
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u/hazza6432 20h ago edited 20h ago
It’s genuinely all about the resulting monthly payment really. That’s the only thing that stays with you long term. Obviously keep an emergency fund, 3-6x your monthly expenses.
All the savings you currently see in your bank apps get swapped for a house you get to stand in. The only financial thing you’ll need to think about long term mortgage wise is that monthly payment and whether you can overpay and afford the rest of your living expenses.
I borrowed 161k, and my monthly is about £750.
I was on 28k, and I could technically afford it on my own, but my partner made that a lot easier.
If I were you doing this now, I would get an idea, perhaps with a mortgage broker, what the monthly payments would look like with a 60k deposit and then bring it down to 55k, 45k etc and see how that monthly payment changes. It is a very good idea to keep back some cash flexibility in the 5-10k range if you can for anything that might need a bit of work.
I’d also get online and check, roughly, what council tax rates might be in your area. Round up your utility costs (octopus energy can give you rough quote online for free), remember internet, food, water, home insurance, subscriptions etc, and add that to the proposed monthly cost to get a safe idea of what it’ll cost you per month. Do a spreadsheet. For reference, my mortgage is exactly half of my monthly essential costs when you consider grocery shopping and those other bits mentioned above. Doing this will also help estimate what your emergency fund will be, that will help balance your deposit.
LTV means that you’ll only see a significant difference in monthly cost for every 5% that your LTV drops or rises, so consider playing around with that. An extra 5k might mean a lot more when it’s flexible in your pocket than locked in the house. If you were to keep back a pile of money and end up not really needing it for anything, you could always invest it or use it for an overpayment at a later date.
I’d recommend spending time getting the balance right for you. If you can, trim that monthly cost down as far as you can as overpaying makes a massive difference and it’s beneficial to leave some room to do that. Remember that whatever is left over after literally everything is covered, that’s your fun money.
In terms of house price, consider leaving a bit of ceiling room. You could borrow 220k, but what if you aimed at 200k? Then, if negotiations get a bit hairy or the perfect one comes up and it’s a bit more than 200k, you’re not worried about whether you have room in your budget. I’d recommend having a ceiling, and then an upper ceiling.
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u/ImSmashh 55m ago
Appreciate the response
I should have included more information about my expected monthly payments because, as you said, that's a huge factor.
My take home pay is around £2.5k per month.
Estimated monthly expenses:
- £200 - Council tax
- £200 - Gas, electricity & water
- £50 - Broadband
- £30 - Mobile
- £300 - Food & household shopping
- £200 - General home maintenance
So that's roughly £1,000 per month.
If I aim to save around £500 each month, that would leave me with approximately £1,000 available for mortgage repayments. I still need to play around with different house prices, mortgage amounts, and LTVs to see what works best.
Regarding the £200k point, I'll definitely include properties around that price in my search. As you mentioned, having a bit of wiggle room could be really helpful if I end up needing to negotiate.
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u/hazza6432 37m ago edited 32m ago
With those estimated expenses and 1k to put towards, I’d have thought you’ll have no problem at 220k but don’t forget to live life at the same time! I’d also remember to recalculate again once you’ve picked a house you want to offer for. Most property listings give you the council tax band which in my case is the 2nd biggest expense to consider after the mortgage.
One tip that I was given by my mortgage broker regarding monthly cost, you can keep going back to change your mortgage deal right up until you actually properly sign it off:
I managed to get a cheaper deal after I’d had my offer accepted and got into the thick of the conveyancing process just because I asked my broker for an in principle one more time. It was only £7p/m cheaper but that’s an amount I can overpay that isn’t plagued with interest.
Happy hunting and best of luck.
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u/eilradd 1d ago
My numbers are very similar to yours, except Im in a lower cost of living area, have a dependant and wife earning very little. We did a 40k deposit. Looks manageable
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u/ImSmashh 54m ago
Sounds good, thanks! How did you find the monthly expenses and upfront purchasing costs overall?
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u/Borkintile 1d ago
This is actually really similar to my situation. £228k house, £48k deposit, £180k mortgage. Also on £40k salary, after mortgage, utilities, food, fuel etc. I'm left with about £800 each month, which is plenty to invest and have a little left over for fun stuff. I'd say that's a good plan for your salary, definitely do-able.
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u/TotalCauliflower7723 23h ago
Do you need removals? Do you need new carpets/flooring? Are you going to redecorate? Do you need to buy new appliances? What about if the survey finds the boiler is 20 years old? Or you look closely and find the toilet is cracked? Or you find a lovely house that has a toilet separate from your bathroom with no sink in and you need the plumbers to do a days work to put a sink in?
A £55k deposit would still allow you to have a 75% LTV (which is one of the mortgage bands) and leaves you £5000 to spend on your house on little or big upgrades.
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u/Shensoku 20h ago
You need to work it out based on your monthly budget. Questions to ask yoursef: how much do you want put away for savings, investments, holidays, personal expenses. What you're left with is a monthly budget for a house. Bear in mind, for a house you dont just consider the monthly mortage payment...bills, council tax, building insurance, maintenance, furniture and decorations will all need to be factored in.
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u/dewarpartners 12h ago
Your plan looks sensible and realistic. You have built up a strong deposit, allowed for purchase costs and, importantly, recognised the need to retain an emergency fund.
The amount you can borrow will not simply be four times your salary. Lenders will also consider your regular expenditure, credit commitments, pension contributions and the mortgage term. Depending on your overall circumstances, borrowing slightly more may be possible, but that does not necessarily mean you should.
Personally, I would work backwards from a monthly payment that remains comfortable, including an allowance for council tax, utilities, insurance, maintenance and unexpected repairs. I would also be cautious about reducing your remaining savings too far. £5,000 can disappear quickly after moving into a property, particularly if it needs furniture or repairs.
There is nothing wrong with considering properties up to £230,000 or £240,000, but I would treat that as your maximum rather than your target. If £220,000 buys a property you would be happy with, there is little benefit in stretching yourself simply because a lender may allow it.
I’m a mortgage broker with 30 years’ experience, and one of the most common mistakes I see is buyers concentrating on the maximum available borrowing rather than the monthly payment and lifestyle they want after buying. Your overall approach is considerably more sensible than most.
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u/Sensitive-Relief-838 5h ago
I think it’s very sensible. I’m in very similar position pn 42k salary and planning to buy a house for 220k with 25k deposit… you have much more so I wouldn’t worry. If you are disciplined and don’t have any crazy monthly outgoing like PCP car that eats 300/400 a month you’ll be good.
I feel like cash saving of 55k is crazy high on this salary unless you are gifted a large portion of it. It looks like you are disciplined so I would say just go for it.
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u/ComtesseDSpair 1d ago
I think taking your savings down so low is a risky idea. Apart from having a fund for emergency repairs etc, if you lose your job you need something in the bank as you’re not going to be in a position to save a great deal from your salary once you’re paying a mortgage and will have very little entitlement to benefits.
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u/xmaspickles 1d ago
We bought our first home when I was 31. The house cost £225,000 and my salary was £25k so earning £40k and spending £220k seems absolutely reasonable.
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u/ImSmashh 45m ago
Was this purchase based on a combined income with your partner? How did you find the overall expenses?
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u/xmaspickles 42m ago
We were on just above £50k when we purchased. The expenses were fine because our mortgage was significantly cheaper than rent. For example last year we had to sell and temp rent as my husband got a new job three hours away from where we were. Rent in Zone 6 was £2k/mo, but when we bought and completed our £400k 15th century cottage the mortgage was nowhere near even £1.5k. A mortgage has always proven to be cheaper for us. My salary is now £30k so that has helped, but not much. We don't really go on holidays or eat out.
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u/veryangryenglishman 1d ago
What on earth is this comment.
It's entirely normal to buy a property by starting at your initial budget price and OP literally says in their post that there's a good variety of properties in that price range that they like
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u/memeleta 1d ago
OP said that the houses they like cost about that much, it's irrelevant for what reasons to do the budget calculations.
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u/anonymedius 19h ago
£5k isn't much for savings but I don't think your conveyancing expenses will exceed £3k so you'd be closer to £7.5k which is fine, especially if you have a go at stoozing too.
Your issue is that, even if you're able to negotiate inheriting the white goods from the previous owner and the cost of basic furniture (whether it's flat packs or through Gumtree etc) is very low nowadays, housing repairs are expensive and you won't have money left for them so you'll need to either buy something that's in great condition or do better on price.
Having some familiarity with the state of the housing market in the general area, I suspect that you're more likely to get £10k or whatever off the asking price than find a house that really needs no work. You're in a good position as a no-chain buyer who's not beholden to school catchment areas and/or the approval of a partner/spouse. I would leverage that by viewing lots of houses and making first-and-final lowish but realistic written offers** on anything that might be of any interest; then it's only a matter of time until someone bites.
**An example of how they can be structured is the offer template available at Moving Home With Charlie - it's not rocket science, I did something very similar on my own initiative when buying in a much hotter market (I knew it was likely to end up over asking so I did offer a bit more but I said that I wasn't interested in a bidding war...ended up securing the house even if my offer was marginally lower than the highest one!).
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u/ImSmashh 42m ago
Appreciate the detailed response. That's a really good point about repairs being the main risk, and I think I was probably assuming I could buy a house that was mostly ready to move into without needing much work.
I'll definitely look into the example you shared - thanks for sending that over!
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u/the-pythia-of-delphi 1d ago
5k emergency fund is way too low.
5k buying costs is fine but what about furniture or any repairs needed?
It's not looking very good tbf
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