FTB - please advise

pavlovs_dog

Hi all, I have tried searching the forums but have had no luck finding what I'm looking for - I'm hoping you can help.

OH and I are hoping to buy a house at the end of 2009/start of 2010. I'm on the home straight of my teaching training course. As I teach a shortage subject the odds of finding a job are in my favour. OH has a not particularly well paid job that he enjoys. Our forecasted combined income once I am in a teaching job is approx £32K. Our current deposit stands at just over £20k, and should rise by £3-5k by the time we are ready to buy. We have £2.5k saved for fees, £8k towards furnishing and decorating and will have in the region of 6 months of our combined wages saved for emergencies (can you tell i'm a bit anal when it comes to these things :eek::D?!). Other than my student loan (which is not considered as 'debt' for mortgage purposes) we have no debts (or history of debt), and we both use credit to build up our credit rating. if it makes any difference, I will be 24 by that point, he'll be 29.

various online mortgage calculators have suggested that we would be able to buy a house worth up to £180k, and my rightmove obsession suggests that we should have no trouble finding a house that we love within that price band (as we are not averse to the idea of DIY we frequently spot things that appeal at around the £140k mark). As we are in south Wales this buys a reasonably sized 3 bed family home for us to grow into. As the local market stands at present, the extra £40k does not seem to make a big enough difference to the size/style/location of the house for us to justify taking on such a big mortgage so i doubt that we would need/want to go as high as £180k if we could indeed get a £160K mortgage.

OH's parents have suggested that when our time comes, they will happily lend us the money to buy our house outright, as they did for OH's brother. The idea behind this is that as cash buyers with no chain we would have real bargaining power when it came to price, completion etc. After the purchase we would then mortage (/remortgage ) the house in order to pay back OH's parents in full, minus the value of our deposit. This could prove advantageous as I would not be able to provide 3 months proof of earnings until January, but the loan would enable us to start looking (and buy, if we found the right property) earlier. What I would like to know is:

* does the loan have tax implications for us or OH's parents?

* (how) would it affect the type and value of the mortgage we could get?

* what affect is it likely to have on the mortgage rate that we would be eligible for? (ideally we would want a fixed rate repayment mortgage)

* would the type of contract i have be taken into consideration? (given the shortage in my subject I ought to be offered a permanent contract but there is a slight possiblity as an NQT i may only be offered a temporary one for the first year, to be reviewed around Easter next year).

* what would be the most acurate way of finding out exactly what we would be able to borrow, to ensure that any mortgage we took out would enable us to repay the loan?

* is there anything else that we ought to be aware of in these circumstances?

any help/advice/annecdotes gratefully received :beer:

Berkshiregirl

Hi

Not really answering any of your questions, but are you sure you'll be able to borrow enough? With a combined salary of £32k, it might only be £112000 plus your deposit - you'll probably be offered a max of 3.5 times joint income.

Of course, this may well provide you with enough to buy the kind of house you're looking for, but it might be worth checking again.

slummymummyof3

Have you also considered the 'golden handshake' that some authorities pay for shortage subject teachers?
Be prepared to travel or perhaps relocate as although you will be teaching in a shortage subject, the competition for jobs is rather intense (even in teaching!)

LoopyPrune

We also have a combined income similar to yourself and the maxmium they would lend is £100,000 plus out deposit of around 25/30k so your going to be looking around the 140K area but this also means you arent going to get the best deals as in their eyes this is the maximum LTV.

Im sure parents gifting a large sum of money does have some implications as its seen as a way for them dispose of income that would have normally had tax paid on it upon death etc. I may be wrong but Im sure there is a max limit of how much cash they can give any one person but a solictor would sort that out I woudl imagine.

pavlovs_dog

Berkshiregirl wrote: »

Hi

Not really answering any of your questions, but are you sure you'll be able to borrow enough? With a combined salary of £32k, it might only be £112000 plus your deposit - you'll probably be offered a max of 3.5 times joint income. Of course, this may well provide you with enough to buy the kind of house you're looking for, but it might be worth checking again.

the online calculators have chucked out all sorts, from paltry sums that wouldn't buy a shed to the max of £180k. At the moment we're playing around with ballpark figures, which is better than nowt although i accept is less than ideal. We're trying to be realistic about affordability, and even with our savings safety cushion would not want to overstretch ourselves - it's important to have some quality of life after all! There is plenty within the £140k range that I could see us living in, so even if £180k is totally unrealistic then it shouldn't hold us back too much.

Berkshiregirl

pavlovs_dog wrote: »

the online calculators have chucked out all sorts, from paltry sums that wouldn't buy a shed to the max of £180k. At the moment we're playing around with ballpark figures, which is better than nowt although i accept is less than ideal. We're trying to be realistic about affordability, and even with our savings safety cushion would not want to overstretch ourselves - it's important to have some quality of life after all! There is plenty within the £140k range that I could see us living in, so even if £180k is totally unrealistic then it shouldn't hold us back too much.

Agreed, and you're perfectly sensible in making sure you only borrow what you can afford to pay back. Just make sure if you can only borrow £140k that you know where the money to do the DIY is coming from - a lick of paint etc can come out of your salary over time, but a major project will require £x and you'll be at your max for borrowing.

The mortgage calculators are somewhat unreliable - but a good place to start. Would suggest you also speak to an IFA for an idea of the current mortgage market - websites are out of date almost instantly at the moment!

before_hollywood

pavlovs_dog wrote: »

the online calculators have chucked out all sorts, from paltry sums that wouldn't buy a shed to the max of £180k. At the moment we're playing around with ballpark figures, which is better than nowt although i accept is less than ideal. We're trying to be realistic about affordability, and even with our savings safety cushion would not want to overstretch ourselves - it's important to have some quality of life after all! There is plenty within the £140k range that I could see us living in, so even if £180k is totally unrealistic then it shouldn't hold us back too much.

as a rule i would only ask to borrow a figure as many lenders as possible say you can afford, it allows you to get the best deal rather than compromising. when i did that i was able to get in principle from 2 lenders and then when i spotted the place i going for now, i was still able to get a better deal with option of another :j

pavlovs_dog

slummymummyof3 wrote: »

Have you also considered the 'golden handshake' that some authorities pay for shortage subject teachers?
Be prepared to travel or perhaps relocate as although you will be teaching in a shortage subject, the competition for jobs is rather intense (even in teaching!)

I will get £2.5k in my second year of employment, so that will probably end up going towards the DIY/wedding or new car rather than the house deposit (at best if we are *really* on the ball financially it might be used to overpay the mortgage).

Re travelling, I'm quite open minded about commuting to work (i like the idea of not drinking in the same local as my students ). We are very conveniently placed for the m4 where we live currently, as are the two main areas where we would like to live. We haven't ruled out relocating by 40 odd miles or so but if we can avoid it i think we would - we both like to be reasonably near our families and friends (it would not have much of an impact on the price of houses either way).

pavlovs_dog

Berkshiregirl wrote: »

Just make sure if you can only borrow £140k that you know where the money to do the DIY is coming from - a lick of paint etc can come out of your salary over time, but a major project will require £x and you'll be at your max for borrowing.

we have 8k put by to start us off with the furniture and decorating, and a forecasted SOA suggests that after all expenses are paid/budgeted for the there ought to be in the region of £300-£500 spare each month towards projects. Again that's using ball park figures so may not be as high as £500 but as i tend to overestimate by a healthy margin it ought not to be much lower than £300. We haven't planned on taking on anything that needs extensive structural work so hopefully over time that amount will be ample.

Both our parents are handy at the diy and eager for new projects, and we're both looking forward to getting our hands dirty so wherever possible we will be able to cut out labour costs. We're also aware that the sacrifice of being able to live in our dream first home is that we will have to live in the 'shell' of the building for as long as it takes to pretty it up.

slummymummyof3

Would definately recommend not living and teaching in the same town! Not only students you need to consider on your outing to the pub but also parents!!!!!

pavlovs_dog

slummymummyof3 wrote: »

Would definately recommend not living and teaching in the same town! Not only students you need to consider on your outing to the pub but also parents!!!!!

very true! I'm on placement in a challenging school at the moment - the type of environment where a significant percentage of parents would rather sit in the pub than turn up for parents evenings etc :rolleyes: with a school like this there would be a fair chance of running into little johnny's parents in the local!