first time buyer help

davidcampbell

first visit back for a while. good to see the site still going strong

need some advice.

im an FTB with no deposit. have some savings but will probably need it for fees.


low salary just now so can borrow up to £50k only, which is enough to get me a property on the outskirts of glasgow.

got some quotes on both interest only and repayment mortgages for the amount i need to borrow.

leaning towards interest only because i feel i dont see the logic in paying capital repayments to a place i never intend to own outright. could afford repayment based on the quotes, but interest only would give me more breathing space for decorating, refurbishment etc.

how much emphasis will a lender place on my choice of repayment? eg will they think ... if he wants interest only, must be because he cant afford a repayment mortgage - therefore, too big a risk and wont lend at all.

is my logic flawed? i sense it is

secondly, credit file is clean, only slight worry is i have had 5 addresses in the last 3 years (twice moved back too family home on temporary basis) so only actually 3 different addresses but 5 moves in total. how much effect will this have?


thirdly, considering moving jobs shortly. should i wait until mortgage is complete first even though new job will be approx 20% higher salary (therefore easier affordability) or are lenders likely to place more emphasis on the fact im in new employment (so potentially unstable)


finally (and this is probably a stupid question), if i go for a shared ownership mortgage, which im considering, can i rent out the second bedroom (if there is one) or do i need to apply to the housing association for permission to do so? (would only be renting to a friend so no security concerns)

bit rushed so sorry if doesnt make sense

TIA
David

MortgageMamma

Hi David

Sounds like you have a lot spinning round in that head of yours! I'll try my best to help. here goes.

1. Interest only repayment vehicles. Some lenders insist on them, some lenders don't. Some insist you use their products, some want evidence of your savings plan, sme don't. A lender won't necessarily think you arn't good for the money just because you have chosen the interest only method. good advisor will be able to help here.

2. Different lenders taken differing stances on how long you have been in your job. If you are in no rush to buy a property then hold on until new job, you can get a mortgage even if you have only had job a short while. If you are in a rush then its apparent you should go for it now.

3. Shared ownership mortgage - It makes no difference if you have a shared ownership or not, lenders are not keen on you renting out the property, friend or not!! If you write to a lender and ask permission the chances are they would refuse it, as they are not advised to formally recognise a tenant in your property in case you default and they need to reposess and they struggle to get rid of the tenant. With a housing association, they are there to assist people in need, and I'm not sure they would take kindly to you getting a tenant in but you best check that with them, Shared ownership properties are hard to get hold of (well they are in england anyhow)

4. 100% mortgage. plenty of lenders doing them, but they are usually at a higher interest rate and have loads of conditions attached to them. A good advisor will help you navigate the market and find the right one for you.

Good luck!

MortgageMamma

ps - addresses

put a note on the additional section of your application form explaining why so many moves and the lender will assess your case individually!

village_life

if you dont intend to repay any of the capital on a property, then what is the point in buying!????

surely renting is a more flexible option for you if that is the case?

the beauty of house buying is that as the property prices rise over the medium/long term -and with you paying off the capaital you get a big chunk of 'equity' in your home - interest only mortgages very much limit your scope for this!???

mummytofour

village_life wrote:

if you dont intend to repay any of the capital on a property, then what is the point in buying!????

Because its home, often the morgage is cheaper than if you were to rent the same place and also you will make money in the long run when the prices go up, which they will as its the way of the world.

Sorry butting in there, but thats my take on the question anyway.

village_life

mmm - i see the point, and there a couple of arguments for doing it - but with all the fees involved in buying and subsequently selling i'd look at a) how much it'd cost to rent and b) how long you plan to live there and see if it all stacks up

sarah_elton

If you're getting a 100% mortgage, think carefully before doing interest only, as you have to be certain that house prices will rise before you sell.

None of the capital gets repaid, so say you buy for £50k, whenever you sell you still owe the bank £50k. *If* you need to sell early on and it's still worth £50k, you get nothing out, and once again have no deposit next time. (Plus you pay seller and buyer fees instead of just one set).

Worse, if prices dip, say it goes for £47k, you owe the bank £3k on top of all your selling and buying fees....

Not meaning to sound doom mongery - I've just bought my first place with a 100% mortgage and don't believe the market's going to drop in the long term. Just something to think through....

Having said that, the first few years of a capital repayment mortgage it's virtually all interest anyway. Think of my £620 repayment a month I'll see the capital go down by £200.