Every couple of months, my poor husband comes home and has had it with commuting. And I don’t blame him. The last few weeks has been particularly bad with train disruptions, leaving him standing all the way home without a seat.
He has to go back and forth on the metal machine every day, as they ship workers into and out of the city. Even now that I pick him up, it is still over an hour each way, adding an additional 2 hours to his already taxing work day.
According to one study: In England and Wales 90% of the workforce commutes to work, spending an average of 56 minutes travelling, rising to 79 minutes in London.
So like all other times as a consequence of his long and arduous commute, we discus moving to London town. Only this time, we have been to see a mortgage broker and now know that buying a 1 bed flat in London is probably going to cost about as much as renting a 1 bedroom flat in the areas that we are interested in, but to do so, we would probably only be able to afford a 5% downpayment.
And yet this worries me for a host of reasons, including the possibility of negative equity 3 years from now. Let’s say that we take out a 5% down mortgage and therefore have 5% equity and the housing market goes down, rather than up, this is problematic.
I did a bit of research and the advice out there seems to want you to consider three things:
- Counting on High Levels of Appreciation (this may not happen i.e. Brexit)
- Ending Up With Too High a Payment (this might happen if interest rates go up, but so far, landlady here also wants us to have a 5% rent increase every year at least as well)
- Letting Good Financing Result in a Bad Purchase (I don’t think we are at risk of this as we are basically priced out of anything expensive.)
So lets think about what the options are here. Say that we can borrow together 400K pounds for a 1 bedroom flat — which will get us approximately 46 sq meters of apartment in London in areas that we are interested in which have reasonable commute times (1 hour + 20 for me and 25 for him).
Say that we put down 20K for a 5% downpayment and need another 2 to 4K for all the fees.
Say we secure a fixed rate mortgage at about 3.5% for 400-20 -> 380K
This would mean our monthly costs for the mortgage is about 1800.00. Add to this council tax (1000 a year) and home association fees (685) per year, this means that we are paying 23,280 in housing costs buying in London. I would have to commute but not every day, so add another 3000 for a grand total of 26,280.
If we continue renting in the land of commuting, however, our annual housing costs are 14,940 but then add in the car and the train costs for 11,707 and you now have 26,647.
But you have 80 as opposed to 46 sq meters of living space, a car, and you have an enormous garden. You also don’t have equity risk.
But you don’t have the taxing commute every day which is difficult on everyone. And, as much as I love my suburban house, I am growing fatter and fatter as I live in a car-bound environment, which I do not like.
What would you do? My brain is screaming downsize and screw the suburbs. What do you think?