First Time Buyer Help Please :)

lunagirl_2

Buying in Kilmarnock.

Thanks

lunagirl_2

as far as I know the current owner has put down carpets and floorboards throughout, floored the loft and fitted a new kitchen.

The conservatory extension was in place before then.

dmreig

valleygirl1984 wrote: »

The best 5 yr deal we can get has rates set at 7%.

Would we not be best going for a 3 yr fixed rate and hope the market had stabilised by time 3 years is up?

How would we build up equity in 5 years on a fixed rate? (sorry if this is obvious but im a newbie trying to learn as much as i can)

Been offered variable mort - but this seems madness as rates look set to rise.

Thanks

Whether you build up equity or not depends on whether your mortgage is interest only or repayment (and how the value of your home changes with the amount you borrow). As a very broad rule of thumb, young first time buyers will tend to start with an interest only mortgage for the first two or three years and then move to repayment. If your real concern is negative equity, then start with a repayment mortgage.

However, if you're putting down a 10% deposit and you're not going to think about moving for the next 5 years, negative equity shouldn't be a concern at all - speak to your FA about your concerns. And if you're still considering whether to buy now or not, my advice would be don't try to second-guess the mortgage market in 6 months' time. I put an offer in on my flat and got a (100% 5-times salary) mortgage offer accepted in November. If I'd have waited a few weeks I wouldn't have gotten the salary multiple and by February, nobody was giving 100% mortgages any more.

beecher

dmreig wrote: »

As a very broad rule of thumb, young first time buyers will tend to start with an interest only mortgage for the first two or three years and then move to repayment. .

.

Do they? That's quite shocking if that's the case!

With a 10% deposit, I'd be quite wary of negative equity. Prices don't have to fall by very much to be a concern, and Ayrshire is in my opinion likely to see substantial falls as the prices have gone up by so much in recent years.

I do admire your positive slant on having a 100% , 5 times salary mortgage though which wouldn't be given now though!!

lunagirl_2

Going for repayment as not keen on interest only at this stage.

House prices in Kilmarnock have shot through the roof but the area we are planning on buying in seems to have relatively steady over the last 5 years. Kilmarnock was hit by a new build boom which seems to be where the most substantial rise has taken place.

Really just panicking as dont want to be in situation in say 4/5 years time when we go to remortgage and find out that we owe more than the house is worth.

beecher

lunagirl wrote: »

Going for repayment as not keen on interest only at this stage.

House prices in Kilmarnock have shot through the roof but the area we are planning on buying in seems to have relatively steady over the last 5 years. Kilmarnock was hit by a new build boom which seems to be where the most substantial rise has taken place.

Really just panicking as dont want to be in situation in say 4/5 years time when we go to remortgage and find out that we owe more than the house is worth.

I can understand that, and it is a possibility. How much do you think you can afford to overpay on your mortgage? It is worth using some of the calculators to see what difference overpaying would make - if you can put an extra £100/month onto it it'll make a big difference

http://new.egg.com/visitor/0,2388,3_54988--View_1028,00.html

I suppose only you can judge how much you want to buy now - no-one knows for sure where we'll be in 5 years time. Good luck in deciding - at least you're going into it with your eyes open and are in a much better position than those who have paid much more and are sitting with a 100% plus mortgage.

lunagirl_2

We could overpay £200 a month if we get the lower rather than the higher end rate just now. I take it that would make a difference?

Broker is offering us variables but i think thats a bad idea.

do you see any problems in going for a fixed rate 4 or 5 yr deal? Worried rates will drop in few years and we'd be paying more.

Thank you so much for your advice, its really helping me consider options

beecher

What you have to know about me before you take on any advice, is the fact that I'm extremely risk averse!! If I were you I'd make sure to take on a 5 year deal, and if rates do come down over the term then so be it, but you may well be a different type of person from me! I prefer to know what I'm paying in order to be able to make long term plans.

Overpaying by £200/month would make a huge difference as over £2k would be coming off your mortgage every year. If you managed to do it over the whole 5 year term you'd have overpaid by £12,000, ie equalling your deposit! An option might be to put the £200 into an ISA through direct debit (to save you from being tempted by it) and do a part repayment once a year, and then you'd be getting interest on it as well.

I'm suprised that the best 5 year deal you can get is at 7% and I wonder if you could get a better deal yourself.

edit: make sure whatever mortgage you get allows you to make overpayments without penalty if you do want to take that route.

guppy

Personally, I think you'd be a fool to enter the market as FTB at this time. The market appears to be at its peak, regardless of the underlying economic conditions, sentiment seems to be pushing prices down alone.

If prices drop by as little as 10% then your hardearned deposit is as good as gone. Prices will no doubt come back up, but last time round, that took nearly a decade from the peak...

What's the rush? If you sit it out, you'll be in a great position if prices fall further. If you dive in, you might be regretting it for a long time to come.

poppy10_2

valleygirl1984 wrote: »

the property was bought in March 2005 for £100k and our offer of £120k has been accepted which to me seems like a modest rise.

Has your pay gone up by 20% since March 2005?