First Time Buyer - Advice please

Toffee_3

Hi


My husband and I know we want to buy a property - the question is the timing.

Our monthly rent is £500. We currently have £4,200 in outstanding loans on which we pay £350 a month - these will be paid off by August next year. We have been advised that for what we are prepared to spend on a mortgage each month we could look at properties up to £140k (£850 a month - the current cost of our rent and loan payments).

Also, at the moment we have no deposit and only a small amount of savings (although this is growing each month)

Option 1: Buy a property as soon as possible. Aim for a property under budget and take out a mortgage that will cover the property, moving costs and the outstanding loan amount.
This will free up the £350 a month we spend on loans, and mean we start investing money in our own property as soon as possible.
The downside is that we end up paying a lot more in interest on the loans over the life of the mortgage, and that we have to take out a mortgage larger than the current value of the property.

Option 2: Waiting until the loans are paid off next August before buying a property.
This will mean that the mortgage we take out will be a 100% mortgage, rather than negative equity, as there will be no outstanding loan and we will have had 10 months to save for the moving costs (still no deposit though). The
downside is that we will have paid another £5,000 in rent - far more than the cost of the outstanding loans.

So, it is best to amalgamate the loans into a larger mortgage and start paying into our own property asap. Or is it better to wait and have less debt to incorporate?

Sorry to post this opus, but this is the debate that is raging in our house.
;D

smartsaver

You could try to get your debt interest to 0% - read here http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1058700002,77120,
and other related credit card links. EGG card allow you to pay off a loan.

Or as you say consildate your loan into a mortgage .. when you do it is really up to you.. Good luck

Mortgageman

have been advised that for what we are prepared to spend on a mortgage each month we could look at properties up to £140k (£850 a month - the current cost of our rent and loan payments).

Will your salaries support this - if this is the maximum you can afford you should consider the importance of stabalising your interest rate for a period (either with a fixed, or capped rate)

Also, at the moment we have no deposit and only a small amount of savings (although this is growing each month)

The higher your deposit, the more mortgage options are open to you - can you try to get to a 5% deposit.

Beware any "higher lending charge" - these are almost always bad value

Option 1: Buy a property as soon as possible. Aim for a property under budget and take out a mortgage that will cover the property, moving costs and the outstanding loan amount.

Are there any properties in your area "under budget"? By wanting to borrow more than the house is worth, you narrow your options considerably - you also maximise your risk to problems should house prices drop (you would already have negative equity at what some would argue is the peak of the market)

Option 2: Waiting until the loans are paid off next August before buying a property.
This will mean that the mortgage we take out will be a 100% mortgage, rather than negative equity, as there will be no outstanding loan and we will have had 10 months to save for the moving costs (still no deposit though). The
downside is that we will have paid another £5,000 in rent - far more than the cost of the outstanding loans.

The fact of the matter is, that by getting a larger mortgage your debts don't dissapear - you still have them, you are still paying interest on them - by having a more than 100% mortgage the rate you pay on this and the mortgage loan will probably be higher.