Couple looking to buy their first property

paulinho121

Myself and my girlfriend are currently renting at £375 per month. Neither of us has yet bought property and are therefore first time buyers.

We are looking at the property market to buy in the region of £100,000 to £120,000. I currently earn in the region of £15,000 but this will increase to the region of £23,000 in March next year (upon professional qualification). I have savings of approx £14,000. My girfriend also earns £15,000 but has a personal loan in the amount of £15,000, which I think she is paying off over 7 years.

What are our most realistic mortgage options at the moment, considering our different circumstances?

Also, will mortgage lenders take into account future projected earnings?

herbiesjp

Hi there

Based on the figures you have posted, you will be very close to the prices you are looking at, based on your current incomes.

The only thing that would need clarifying is the loan situation and how much this costs you on a monthly basis - this will reduce the loan amount a lender will look at for you both.

In so far as the pay rise in March, the lenders will not take that into account just yet as it is a bit too far away. If you had something in writing guaranteeing the rise, a broker could see what the lender says, but more often than not they would want the rise a lot sooner.

As always, this is all generic information and whether or not a lender with agree your loan request will depend on your current circumstances and whether you meet their mortgage criteria.

If you have any other questions - fire away.

paulinho121

Thank you for your advice and apologies for the delay in responding.

Is a lender likely to be willing to incorporate the existing loan into the mortgage? We are currently shopping around for another loan provider at the moment for a cheaper deal on this existing loan.

herbiesjp

You would be better off keeping them separate, as the mortgage deal you could get would be a lot higher if you tried to incorporate it into the mortgage.

What is the current monthly cost of the loan, as this will impact on the loan that may be available to you?

MarkyMarkD

I would say the opposite regarding the loan.

Any mortgage lender is going to take account of the cost of servicing the loan in determining how much they will lend. So if the mortgage rate is cheaper than the loan rate, it will be better to combine the two - it will save you money, and it will make the affordability look better.

But, of course, even if the rate is cheaper it will cost more in the long term - unless you over-pay on the mortgage so that effectively you have paid off the loan element over the original period.

herbiesjp

Sorry, maybe didn't quantify enough.

Looking at the figures - if they did not put the savings down for the deposit and used to clear the mortgage - then the mortgage would become a 100% mortgage. This would mean higher rates.

And the other point which I meant, but didn't say clearly,was MarkyMarks second point. If you do combine the two then you will in the long run pay more for the two combined.

Fairdo_2

As herbiesjp mentioned (and MarkyMarkD), the loan payments will usually have an inpact on your affordability in the eyes of a Lender. However, there is a lender out there who will ignore the loan commitments. (Whether that is a good thing or not, is another question.)

Another point that would need answering would be, whether you can get written confirmation of the pay rise. if you can, then some lenders will be likely to take this into account. As a general rule, many lenders will use the income if there is a pay rise within 3 months. Now, based on the fact that this will be a new purchase mortgage, the likelihood is that, even if you filled in an Application Today, you would probably get a mortgage offer within 2 to 3 weeks. (With Christmas coming, that will be very likely to be longer now)

Exchange on a reasonably straight forward chain would tend to be within 8 to 12 weeks, so while the legal work was going on, your lender could hold off putting out the offer, or making it a condition that you had to be within 3 months of a pay rise before they would be prepared to release the funds.

Therefore, I would not consider this too soon to take the pay rise into account.... AS long as you can get written confirmation!!!!