First time buyer conundrum

simont_2

I was wondering if someone could give me some sound advice as up to this point mortgage advisers have been off putting to say the least ( to say the most, insulting). I'm looking to buy a house with my girlfriend, we're first time buyers, both graduates and both in steady jobs. The problem is, being graduates were in a lot of debt, between loans and credit cards, about 14000 (obviously not including student loans). This has been greately affecting our affordibility because of the monthly payments. Our joint monthly income is approx 2k after tax with me earning the most. In the area we currently live in, which we can't really move from because of our jobs, a house is going to cost around 135k, apartments are even more expensive. At the moment only my bank (hsbc) will loan us the amount required and we have an agreement in principal with them.

OK so here goes my questions. Firstly, do the mortgage companies not realise that we're are already, and have been for 18 months paying the equivalent of a mortgage payment in rent every month with no problems. Even though it may appear we are riddled with debt, its actually manageable to the point where were not struggling for money. I have paid over 2k off my debts in the last 6 months alone.

Secondly, and more importantly, we have money for a deposit. I have 16000 that was put aside for a deposit on a house. I want to know how I should be using this money. It covers a 10% deposit including fees and if we go for a new build, with 5% deposit paid it reduces the available interest rates significantly. On the other hand, I could use the money to clear our debts completely, thereby increasing our affordibility rating.

We've been to a mortgage adviser who couldn't beat the offer from my bank (its the graduate mortgage at 5.19% initially). The 'advisor' glazed over when we mentioned our debt. If anyone could advise us on this it would be greately appreciated.

Cheers.

StewL

Simon,

I know what you mean as I'm in pretty much the same situation as you.

It's crazy!

Patmoore

I'd look at clearing off your debts. I say that, as thats what I've done. Each lender has there own way of looking at things. However when I spoke to one advisor a while back, he told me to clear as much of my debt as possible, since I was looking towards affordability in terms of what I could afford.

herbiesjp

There are indeed some lenders that will look at agreeing the loan outside of their normal lending criteria potentially.

This would be a case for a good broker to their knowledge and contacts with lenders to see if they could get the case agreed with a lender.

Difficult to say much else without knowing all your details.

simont_2

Patmoore wrote:

I'd look at clearing off your debts. I say that, as thats what I've done. Each lender has there own way of looking at things. However when I spoke to one advisor a while back, he told me to clear as much of my debt as possible, since I was looking towards affordability in terms of what I could afford.

Well thats what were currently agonising over. It seems that there are lenders who will lend to you with debt and lenders who will lend you 100% of the property value. The only problem being, neither of these solutions really offer the best deals. 5.19% vs 4.5% makes a big difference initially. At the moment, the agreement in principal I have for HSBC will go up to 100% value without affecting the rate. If I loaned 100% of the property and paid off my debts, covered the mortgage for the lock down period of 2/3/5 years and then moved, would that be the best thing to do? At the moment I'd really like to just sit down and speak with a genuine, impartial financial advisor, the only problem being that they either seem to have an agenda or they charge, alot.

Has anyone else got any practical advice in this area, I'm all years and sadly no knowledge when it comes to this. Thanks.

WSO

We were in a similar situation as yourselves about 18 months ago... we first got an agreement in priciple from HSBC and then tried to find a better rate (using the in house brokers within the EAs we were looking at).

As one broker put it "HSBC and graduates are a hard combination to beat", proceeded to put in the figures and sure enough the nearest was about .25% of our HSBC quote (which was 5.49% fixed).

So, in my experience (but I'm no expert) I would say you are unlikely to get better than HSBC in your current situation... as for whether you should use your savings as a deposit or to get rid of some of the debts, well I suppose it depends on how much you are looking at spending on the property and how your choice affects the figures.

When we were sat with the broker we plugged in all kinds of different figures but since we had no savings they came to very similar conclusions, but with £16k of a deposit you might just have enough to get some of the more decent offers available.

simont_2

WSO wrote:

We were in a similar situation as yourselves about 18 months ago... we first got an agreement in priciple from HSBC and then tried to find a better rate (using the in house brokers within the EAs we were looking at).

As one broker put it "HSBC and graduates are a hard combination to beat", proceeded to put in the figures and sure enough the nearest was about .25% of our HSBC quote (which was 5.49% fixed).

So, in my experience (but I'm no expert) I would say you are unlikely to get better than HSBC in your current situation... as for whether you should use your savings as a deposit or to get rid of some of the debts, well I suppose it depends on how much you are looking at spending on the property and how your choice affects the figures.

When we were sat with the broker we plugged in all kinds of different figures but since we had no savings they came to very similar conclusions, but with £16k of a deposit you might just have enough to get some of the more decent offers available.

Actually the broker we went to came up with the exact same story as you, Graduates and HSBC were hard to beat. Note the use of the word "were". Apprantly, around the time you got your mortgage HSBC were an industry leader and hard to beat in any situation. Unfortunately they've fallen behind recently. At the moment I'm running through a huge list of combinations to see what works out best. I'll let everyone know what I find out.

In the mean time, I'm still all ears.

neyo_2

Simont, first off:

Do not be intimidated by the HSBC financial rep. I know how you feel, at times its like someone's looking deep down into your soul as they are navigating through your personal accounts. Remain confident as there are 1000's of people just like you, who 'will' ultimately get onto the property ladder.

I would encourage you to push your resources into getting onto the property ladder, so as long as you do not overstrech yourself. There are a 101 reasons for individuals to put off buying a house. Most commonly, 'let me pay my debts off'. Be realistic however, the market will not wait for you and you may be outpriced when the time comes around.

With 16K in the bank, you are an attractive proposition.

Start to look around a few properties, this will get you motivated.

.:Neyo:.