Affording a new home? Any advice?

Bunners

Hi if anyone can give me any advice I would be really grateful. I am currently looking to buy a flat. Probably wont be able to afford more than 100K. i surrently earn £13000 per annum and will hopefully have about 55 to 60 k cash after divorce settlement. Having done a few iinitial sums I still wonder if I am going to struggle with a 40k mortgage. I only work four days a week but in the next few years will be looking at working full time and in the meantime get a part time evening job. My earnings potential is likely to go up, I am starting again after a career break. Would it be better for me to go for an endowment mortgage rather than repayment? I have to take into account that although I live cheaply, and have no debts, most flats have charges of approx £50 per month. I am going to use a mortgage broker who was reccommended to get me a mortgage but just wondered if anyone had any views?

Thanks very much.

Annpan

Hello Bunners,
I wouldn't like to be considering a mortgage of 40K with your present income. Could you afford to rent somewhere for a while until you know how your career will progress and what the future holds if you're newly divorced? If your career does take off you may set your sights on something better and have to move all over again. Good luck.

Bunners

The trouble is that renting is so expensive. Have been told that a 40 k mortgage would cost around £230 a month. Renting the same size 1 bed flat would be around £450 a month. Renting is actually a more expensive option.

schueys_girl

The mortgage might be low now - what happens when it goes up? Your income isn't huge at the moment, so renting is probably a better option in case things in the economy get worse and you cannot increase your income, because once youve rented somewhere for 6 months you can go on a rolling tenancy where you give 1 month to go, therefore if anything happens and you cant increase your income at least your not tied in like you would be a mortgage....

archie9uk

Personally I would look to buy somewhere, rather than renting, if I was in your position. You might be best off going for a good fixed rate deal, so your repayments would be a set amount each month instead of worrying about interest rates increasing. £50 per month service charge sounds like a lot. I own a maisonette (one of four in the block) and the ground rent is £25 per year!

MX5huggy

Remember you will get about £140 a mth from the intrest (at 3.5%) on the 60k in the bank to offset agaist the rent.

Rent the cheepest smallest place you can stand to save.

You just don't earn enough to take on a Mortgage and the long term risks that come with them.

hethmar

Service charge isnt the same as ground rent archie. Service charge covers things like maintenance, window cleaning, updating of the communal areas, the gardening and so on, sometimes includes water rates. £50 sounds very reasonable

You need to speak to a broker but if you have something like a pension or other savings vehicle they may suggest an interest only mortgage.

Bunners

Thanks for your replies.

I can get fixed deal for 5 years at £230 a month, so its way less than I would be paying in rent. I realise I dont earn a lot at the moment but I do have the advantage of having a large deposit, or does the 55 k mean nothing? I can not get a 6 month tenancy because my income is too low.

hethmar

With that sort of deposit (50%) you should have little problem in getting a mortgage. Bargain hard when you buy. Very good luck to you. Dont forget you can always take in a lodger.