Lowest possible monthly payments

Dear mortgage advisors,

I earn £28000 PA.
I have an immaculate credit history.

These is the current state of my finances:
(3 bank accounts, 3 credit cards)
Account 1:
Balance: 0 – Available Overdraft: £750
Account 2:
Balance: 0 – Available Overdraft: £2650
Account 3:
Balance: 0 – Available Overdraft: 0

Egg (0% is available again 03/2005 to 08/2005):
Credit Limit: 4000 – Available: 4000
Barclaycard (0% expires 08/2005):
Credit Limit: 3500 – Available: 430
HBOS Tuc (Royal Bank of Scotland) (0% expires 08/2005):
Credit Limit: 3500 – Available: 0

I have £5000 in a savings account.

I am in the process of considering whether I am ready to buy a house, and I would like advice on some issues.

The limit of what I intend to pay as deposit is £6000. I had a look at mortgage tables and found out I can get up to 4X my wage with 95% LTV (e.g. West Bromwich). Therefore I can get up to £112000.
For instance, if the house is worth 118000, the lender would put £112000 in and I would put £6000.

My objective is to try and get the lowest possible monthly payment.
This is much more important of the total amount I am going to repay, interest rates and duration(fine even at 50 years). But tie-in should be up to 5 years (no more).
Why is this? Because I look forward to good wage increases in the next 3-5 years, and I will remortgage. But I would like to pay as less as possible right now. Does it make sense?

I have been told to look at interest only mortgages. What I don’t understand is this “endowment” or “insurance” I would have to pay on top of my mortgage. Is this compulsory? If this is the case, then I am not any better than with a mortgage which includes capital repayments.

I have made a search on the West Bromwich website, with the following parameters:
FIELD: Are you a first time buyer, moving home or remortgaging?
VALUE: First Time buyer

FIELD: What type of mortgage are you looking for?
VALUE: Don’t mind

FIELD: How much do you wish to borrow?
VALUE: £95000

FIELD: What is the estimated value of the property or purchase price?
VALUE: £100000
FIELD: How long do you want your mortgage for?
VALUE: 25 years

FIELD: How do you wish to repay your mortgage?
VALUE: Interest Only=£80000; Capital Repayment: £15000

FIELD: How many applicants are there?
VALUE: 1

Among the results were a couple of products with an estimated monthly repayment at £233.77, and an early redemption charge (is this the same as a tie-in?) for 5 years. This is the product:
<http://www.westbrom.co.uk/westbrom/mortgages.product?id=593&insearch=true&changingproduct=>

Why is the monthly repayment so low?


Another problem is with the type of house I want to buy. Unfortunately, since London is incredibly expensive, this is probably going to be an ex-council flat in a big estate, and I have read lenders are reluctant to give out mortgages for these. But it is also true mortgage demand is down 35% year on year, so lenders may be less reluctant to allow it now. Anyway this is a side issue, which has nothing to deal with the above-mentioned financial considerations. I may find a non-council flat for that price if I look for it long and hard enough.


Can you advice on my situation? I have been doing a lot of homework, but this stuff gets complicated guys. Thanks in advance …
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