FTB - What could we potentially borrow?

Saver-Rob

I thought it may be interesting to ask people their opinions on what kind of money I could potentially borrow at most and what monthly repayments would be like on that amount with normal repayments and for example a 5% fixed rate.

I am 22 years old and in full time employment. I earn £21,500 basic with £10,000+ a year overtime (though this is not guaranteed).

My girlfriend is 22 and works part time but is at Uni full time. Her earnings are low - probably about £5000 year and wont dramatically rise until she graduates.

We want to buy together and have saved up approx now £51,000 but would not want to put the whole lot down as a deposit.

What is out there for us? I have looked @ some mortgage calculators online and different places are offering wildly different amounts. We just wanted a few ideas from people before we start to get some formal offers.

Thanks,

(Our main thread can be found: http://forums.moneysavingexpert.com/showthread.html?t=1395977 where I am keeping a type of diary).

Robert_Sterling_3

Your current savings are very impressive indeed. :j :j :j

GGGG

Hi Saver-Rob,
Me too! (Impressed with your current savings)
Dependent on your credit rating (I'd imagine it to be excellent; if you have the discipline to save that amount, you're likely to be in control of your finances) you'd realistically be able to borrow up to about 3.5 to 4 times your basic salary- lenders differ on how they treat overtime/bonuses, but they'll often allow up to 50% to be included in the calculation, so about £100,000 plus whatever deposit you are prepared to put down. Remember, the bigger the deposit, the lower the LTV (loan to value), & the better the deal you'll get. For example, if you looked to buy a property for £140,000 with a deposit of £40,000 & a loan of £100,000, your LTV would be 71.4%. I don't know whether this would be sufficient in the area you are looking to buy to secure the type of property you'd like..?
In view of your girlfriend's current employment status (student in part-time work,low income & quite possibly a student loan..) it may be better to NOT include her income in the calculations at present, as any debts would be offset against her earnings.

Hope this helps

Saver-Rob

Thanks thats very useful. Our savings will be around £55,000 by the end of next month so yeh its a good position to be in but we always wish we had that extra 10k for something a bit better (dont we all?)

Neither of us have any history of non payment, which is great, but on the other hand I have never borrowed or got credit on anything. I guess the nearest thing to it is my mobile phone bill which gets paid by direct debit each month.

Yes, she has a student loan but that is paid back in full at the end of the year I believe as she gets grants etc to pay for her course as it is basically government funded. She shouldnt come out of Uni with any debit whatsoever.

With your example of buying a property for 140,000 and putting down 40,000, borrowing 100k that would put us just about in the sort of pricerange we need in our area. We dont want to put the whole lot in as there will be a fair bit of stuff we will need just starting out. Hopefully we will be in a position to put in the best part of 50k deposit but then again if we buy a wreck we are going to need some money to make it habitable.

GGGG

Good luck! I wish my three sons would take a leaf out of your book regarding looking after their money, despite my constant nagging...
:T

VKay

hi!
Well done on the savings -amazing at your age- or any age come to think of it.

Thought Id write as you are thinking of buying for 140k and putting down 40k deposit. EXACTLY our scenario (although sale looking a bit dodgy but that's another story!) in any case in terms of monthly payments ours will (hopefully)be £540pm. this is a fixed rate of 4.39%. Good luck you are in a great position!

spuds_2

Spectacular saving, especially if it is all yours (not an inheritance etc,), so well done there. I don't think most lenders will take your gf's earnings into account as she is still at uni.

The Guradian has an excellent mortgages page where you can compare offers from various lender. Go on the personal quote bit at the bottom of the mortgage table:

http://www.guardian.co.uk/money


I would think you are in a pretty good position, especially if your gf will be working in a year or so's time too. You should get at least 3.5x your basic salary.

My advice though, would be to look for a property you can grow into, not out of, eg 3 bed not 2 if you can get that within your budget. If prices continue to fall it may be difficult to sell and trade up, whereas if you are in house you really like in a good area you can wait out the market. You shouldn't be in neg equity with such a big deposit, even if prices drop another 10%.

Also, if you don't mind doing work, buy a house that you can add value to, a bit run down or needing tlc. If the market falls further it won't matter so much because you won't have paid top price. Buy the worst house on the best street is still good advice. Good luck.

herbiesjp

It's important to see how it would hit you in the pocket as well

A £100k mortgage over 25 years, on an average 5 year fixed rate (4.88%) would come in at £577.62 pm

Would that look comfortable to you?

maninthestreet

How can you manage to save an extra £4000 in one month based on a gross monthly income of less than £3000?

Saver-Rob

Thanks for all posts.

herbiesjp - £600 a month would be comfortable as it was the sort of figure I had in mind. I wouldnt want to be paying much more than this each month on my current salary.

maininthestreet - It isnt £4000 in one month, it will be £4000+ by the end of next month taking in consideration my February and March pay which will both come in at approximately £2500 after tax (yes, I do alot of overtime).

We would be looking for somewhere that requires work as we are able to stay at home until the essentials are complete.

hellyboo_2

Well done Rob on your dedication and for both of you to save so well.

Just as an aside, could you do what Martin suggests and get a credit card but pay the balance off IN FULL every month?

I don't know how credit rating works exactly but would that help you to get some credit rating? I am sure that someone could confirm this on here soon.

I had a similar thing when I was looking at houses as I never had a credit card or any loans when I started looking for a house. It wasn't a problem though and in the end my Financial Adviser got me a professional mortgage with Scottish widdows who do lots of mortgages for doctors/lawyers etc.