How Mad am I?

joey-lou

My fiance & i are looking to buy our first home. We are both FTB. We have been saving & have £25000 deposit. We earn a combined total of £33000. Would we be able to get a decent mortage? He also has backup funds that at the moment I don't want to be taken into the equation (Fathers pensions etc.deceased) I want us both to go in equally if possible,although he is willing to offset.(he has another £20000 in savings) The choices of property we are looking at range from 100000 to 140000. What i really need to ask is this do-able?

Sonofa

It sounds infinitely do-able to me.

Now you can wait for the "Don't buy!, Don't buy!" brigade to show up. :whistle:

opinions4u

With a clean credit file, you should be well and truly able to achieve this.

Just be aware the value of your property may fall in the short term.

Also, find out about what rates are available if you have a 25% deposit. This may save you a little on payments, but should be balanced against spending your backup funds.

Good luck!

wymondham

Seems do-able, what's your take on the economic news - does it concern you at all or not?

ad9898_3

Well I guess I'm part of the "Don't buy now" crew.:D
My opinion, it depends on your circumstances, how long you want to stay in your house etc.. I'm sure you are aware of what is happening at the minute, house prices are falling and that is a fact. Does that bother you ??, if not go ahead.

To answer your question, the answer is yes, you should have no problem as long as both your credit files are tip top.

getmore4less

The key to the doable is afordability so you need to know you income and outgoings and what they will be if you buy a place. DO a SOA for before and after.

If swaping rent for a mortgage then that may be relativly equal, but if stay at homes on peppercorn board and lodgings it could be different.

Don't forget all the costs for moving and setting up homethey can eat a few £k.

Going in 50:50 is sensible makes the getout a bit easier but if one of you can take on the place should you split that can avoid selling.

If he did offset his other saving would that be unconditional or would he want some compensation for loss of interest?

what happens if one of you loses your job, this couls eat intothe extra savings if you do not keep some back for emergancies, sounds like you will be 100% commited. will you still be able to save if you Buy to rebuild emergency funds again.

Anyway that out of the way since you have been saving that is a sign you have been relativly carefull with outgoings.

I would use the mortgage/rental as a guide to value, the cost of an 100% interest only mortgage should be less than the rental of a similar place otherwise you are better of renting till the prices drop that far.

personaly I would keep saving, watch the market very carefully and start to look for one of those depressed desperate sellers, perhaps check out auction selling prices and repos to see the trend in your area.

As time goes on you wil find that your money will buy you more you could today.

This will be the biggest comitment you ever make, research it well especilay the costs of owning, that is one thing most people underestimate when starting out.

sarkin

I am a signed up memember to buying cheap houses does that count. In answer to your question you need to work out how long it took you to save the money and would you be happy loosing it.

House cost 200,000 loses 2% in value every month for the next 9 months and you will not only have lost all off your money that you worked so hard to save, you will be looking at negative equity.

Now as most people will tell you this is not a problem if you want to stay in your house for a long time. What they forget to mention is that you will not be able to access the best rates as you need 25% equity when you come to remortgage.

So not only will you have lost all your money but you will be paying more for the money that you have purchased untill house prices rise enough to get back all the equity you have lost.

So if house prices fall for the next 3 years, large drop this year and next with a year of gradual drops, followed by 3 years of flat house prices and then 3 years of house price growth it will take you 10 years to get back to where you started from.

Assuming that everybody thinks house prices are a good investment vehicle and prices rise by 2% each month.

Remeber life is a long journey and a mortgage is for 25 years so if you buy now or in a years time, this could make a big diffrence to how you live the rest of your life.

good luck with your choice.

getmore4less

Good point made by sarkin,

Choose your mortgage carefully to avoid high follow on rates, not that big a problem since there are plenty of liftime trackers or even fixed deals that revert to the current tracker rates.

The days of taking deep discounts(not that many about) then getting stuck with high followon rates are avoidable.

There is in fact no reason to ever need to change lender if you pick the right deal/lender first time.

Also if you go for an offset the should not be an issue most are trackers.

Also with an offset you could Stooze as well and reduce costs that way.

Locoblade

sarkin wrote: »

Now as most people will tell you this is not a problem if you want to stay in your house for a long time. What they forget to mention is that you will not be able to access the best rates as you need 25% equity when you come to remortgage.

So not only will you have lost all your money but you will be paying more for the money that you have purchased untill house prices rise enough to get back all the equity you have lost.

If you look at it in the longer term though, which if buying a house you arguably should be, you can cover yourself not getting the better rates at remortgage by taking out a longer term fixed rate or lifetime tracker, so you don't need to remortgage for 5 or 10 years. Obviously you need to take into consideration things like "what if we split up", but if the biggest deciding factor is not wanting a long term tie-in because it might be costly if/when you split up, perhaps its not the right time to be buying anyway...

joey-lou

Thanks guys. you have given us a lot to think about. I am aware of the current situation & when we find the right place we are looking to stay there. We have been together a long time & its for keeps( i hope!!)

We won't overstretch ourselves now- but you have made me think about later down the line - re:remortaging -neg equity - payment jumps.

We have an appointment with mortagae advisor next week (independant ,whole of market or course:D )

I appreciate all of your advise.

Cozworth806

Unless you live together already it may be difficult to acurately plan a realistic budget for the affordability but if you can then certainly it is worth doing, even if the worst happens and you fall pregnant (Arrrggghhhh!!! )

To my mind though there is nothing wrong in looking at the mortgage costs compared to the amount you would pay for a similar house to rent, especially if that allows you more time to increase your deposit. This is a buyers market if you choose wisely but don't be tempted to rush in as you can certainly bide your time, and choose something you want.
Also remember that if you can afford it then there is nothing wrong in putting in far lower offers as long as the estate agents know you are serious and have the finance in place to move quickly.

FTB are still like golddust at present.