NURSES Irvin De Guzman and Christine Sanchez never thought they’d be able to afford living in central London – but they managed to boost their budget by £30,000 to buy their first home.
Irvin, 30, and Christine, 36, took out a loan covering 10% of the total value of their £303,000 flat in Caledonian Road, London.
While many first-time buyers use the government’s Help to Buy scheme, this couple took a different route, getting a loan from financing company Proportunity to get the extra cash.
The couple wanted to get on the property ladder quickly, and needed extra money to boost the deposit they had saved up for a home.
While they had managed to save an impressive £20,551, this was far less than the amount needed to buy a home in the area they wanted.
According to Zoopla, the average price of a property in Caledonian Road is £527,916.
Desperate to live in the buzz of the city, the couple looked into ways of increasing their budget.
They researched the Help to Buy scheme, whereby the government lends up to 20% of the value of a new build property, or up to 40% if you live in London.
But it was difficult finding a new build property in the area they wanted to live that was within budget.
That’s when Irvin came across Proportunity.
It works in a similar way to Help to Buy – but the key differences are that you can get a loan to cover up to 25% of the total value of a property, and it doesn’t have to be a new build.
You can repay your loan at any point – for example, you could choose to pay it back at all once when you sell up.
But you do have to pay interest on your loan, so you need to factor this in.
Irvine is paying an interest rate of 6.99%, which is more than double the interest he pays back on his 33 year fixed term mortgage rate of 3.31%.
You should research whether applying for a scheme like this is right for you before take the plunge.
Quilter mortgage expert Karen Noye said you could end up paying “significant interest repayments” applying for alternative ways of financing your home.
She added: “Not all lenders will consider lending to someone using this type of equity loan and therefore you may not be able to get the best mortgage deal available.
“However, if you are confident of your ability to pay off the equity loan within a few years and then remortgage it may be the right option.”
We sat down with Irvin to see how the couple bagged the flat of their dreams for UK Times’s My First Home series.
Tell me about your home
Our flat is on the lower ground floor of a block of 15 flats in Caledonian Road, London.
When we bought the flat, it was a one-bed, one-bathroom flat.
But we did some renovation work and turned it into a two-bed home with two bathrooms.
The kitchen, dining room and lounge is all open plan.
How did you decide on the location?
We both work as nurses at a hospital in central London.
Both of us wanted to live near work to save money on having to get the tube or train, so we wanted to live in Zone 1 too.
It means we run, cycle, or walk to work every day.
Caledonian Road is great for us as it’s near Kings Cross and in the heart of the city – there are lots of great shops and restaurants on our doorstep.
We found the flat on Rightmove.
How much did you pay for it?
The flat was £303,000.
We took out a mortgage of £252,449 over a 33 year term, at a fixed rate for five years at 3.31%.
Our monthly mortgage repayments are £1,045, and we put down a deposit of £20,551.
But this meant we were still short by roughly £30,000 for the flat we wanted.
So, we took out a loan of this amount with Proportunity to boost our budget.
We chose to use Proportunity because we wanted to get on the property ladder much quicker.
We would have had to save for several years more to raise enough money for the deposit we needed for the flat.
But the loan we took out with Proportunity went straight towards our deposit.
We make monthly repayments on our loan with interest included at £175.
We chose not to use Help to Buy because under the scheme you have to buy a new build home – and we found that any new flats in the area we wanted were out of our price range.
We applied for the Proportunity scheme online. You have to fill out an online form which calculates how much you can take on.
The application process took less than a couple of hours, and it took a couple of weeks to get the loan approved.
How did you save for it?
We were saving for a couple of years for a deposit for own home, and we didn’t get any financial help for it.
The main way we got extra cash was by working more shifts at the hospital.
We both took on around two extra shifts each per week, which gave us a total of £800 per month.
Cutting back on nights out and meals out helped us boost our savings too.
We would be spending around £300 a month on this, but when we started saving seriously, we made sure to only spend £50 to £100 per month.
Going on holiday was something we both did a lot of before we knuckled down saving for a deposit.
Every year we would spend around £2,000 on four to six holidays, but then we stopped going abroad and went on little staycations instead, spending just £200 to £500 a year.
Shopping in charity shops for clothes we needed instead of at high street stores saved us £600 a year.
We would spend £100 each on clothes a month, but this was cut down to £50 by buying second-hand things.
How have you afforded to furnish it?
We’ve furnished the house in stages, and we’re still buying things now.
Everything in the house is second hand, apart from the fridge and a new bed we bought.
We bought everything off Facebook Marketplace – including the microwave, dishwasher, chest of drawers and sofa, which was the biggest bargain of all.
It was £500 full price, but we got it for £100.
We also bought a day bed from Habitat off Facebook Marketplace for £80 – it was being sold for £400 full price in the store.
Advice for other first time buyers?
Having a long-term goal in mind helps you keep motivated.
I kept reminding myself what it would be like at the end of it all, living in central London and owning our own place instead of renting.
The beginning is always difficult, but once you see your savings go up, it really motivates you to keep going.
Make sure you reward yourself by making a budget for treats every now and then.
Here’s how one couple bought their first home after being rejected for a mortgage due to a poor credit score.
Another family used the snowball method to clear £26,000 worth of debt and buy their first home.
One savvy saver managed to put half of his wages away while still renting to buy his first home.
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