First-time buyer - mortgage help/advice

our-kid_2

Hi everyone,

Thanks for taking the time to read my post.
This is my first message on here so please be gentle!

My girlfriend and I are looking to buy our first flat together here in west London. We have been looking for over a year now and we have mainly been looking at Shared Ownership properties. However, we have been saving together for about 3 years now and have managed to save over £24k between us as we are both still living with parents. We are both in full time employment and in the last tax year I earned £21k. My girlfriend earns just over £19k.
We had a mortgage promise from the HSBC for around £153k about one year ago and figured that this was not enough for us to buy a place outright on the open market which is why we opted for Shared Ownership. Since then, we've continued to save and after reading on here a couple of recommendations for the Nationwide I did a quick mortgage quote and found that they would potentially lend us up to £173k. This is a big boost and could allow us to buy a decent enough 1 bedroom flat locally which would be ideal.

However, I have never ever signed up to any kind of major credit and I am feeling the stress of all this as I am a bit of a worrier! I really do not know who to trust and feel extremely vulnerable. We could really do with some help and possible a broker to help us with finding a lender. We were going to call L&C but is it a little premature to involve a broker when we haven't actually found a property? We would really like to know just what we can afford on the open market, though we do not want to commit ourselves to a mortgage where we cannot afford the repayments each month.

Also, I have become quite pally with a local estate agent who showed us around a flat just yesterday. The property wasn't to our liking, but it was on the market at £205k, and the agent said that the seller would probably accept between £180-£185k! Is it common with property of this value that the actual sale price could be £25k less than the market price? Should I be looking at properties this much over what I can afford?

Lastly, as I mentioned earlier, we have managed to save over £24k, but how much of this should we set aside for all of the fees and costs of buying? We though about £6k - is that too little?

Again, thanks for reading my post, and thanks in advance to all those who respond. I've read a few posts on this site over the last few days and have seen people helping others like myself solely out of kindness with no expectancy of anything in return, which is very comforting to know.

Regards,

Michael

Joe_Bloggs

Stamp duty land tax is 1% for properties exceeding the price of £125,000 and under £250,000. So you face stamp duty costs of £1800 on £180,000.
Some lenders feel the need for a higher lending charge. Others abandoned this concept five years ago but may be a bit more selective as to who they will lend and on what property they will lend on. Having a 10% deposit is very good even 5% is commendable. I would hope that you could get away with £3K total fees at the worst case in this situation. If you are buying leasehold then get a very long lease and understand what you are buying into.
You are going to have to understand lots of legal and financial terms and sign your name to contracts that involve these terms. On some forms you have to attest that you understand the terms and conditions in front of witnesses.
If it sounds a big deal and causes you stress then that's because it is a big deal and stressful. You main gain some grey hair from the process.
J_B.

meanmachine_2

Alliance and Leicester might be prepared to lend you 176K. That's going to be the max, I'd have thought.

You don't necessarily need a broker, but they will be able to tell you whether you're likely to get approved, before you apply.

I personally wouldn't go near shared ownership, simply because of the re-sell issues. But you know the area and what's available better than me.

Personally, I'm on more money and I wouldn't even contemplate SW London, as it's so expensive. You could try New Malden or Kingston. Cheaper than Chiswick, Putney et al, for obvious reasons.

Is it not possible to look elsewhere, with a view to avoiding shared ownership?

stanmoresaver

our-kid wrote:

but is it a little premature to involve a broker when we haven't actually found a property? We would really like to know just what we can afford on the open market, though we do not want to commit ourselves to a mortgage where we cannot afford the repayments each month.

I would argue that this is just the right time to be having an initial consultation with a mortgage broker! As a first time buyer- you need to exactly know what you can get and afford in order that you start viewing the right properties so that you don't get it wrong. It would also help you understand the mortgage process better as if when your first talk of mortgages is when you have found a place-it is only human nature that your new place is all you will be thinking about!

Good luck

SS

meanmachine_2

If you are seeing a broker - a word of advice, best to avoid those resident in estate agents. You don't want the EA (who acts for the seller) knowing your full financial wotsits.

herbiesjp

There are lenders that could look to increase what they will lend you based on increasing the mortgage term.

This route would need careful explantion and careful budget analysis.

However based on the purchase price you have mentioned, and the amount of deposit you have, you should be able to find a mortgage for the amount needed.

Being able to borrow £176k form X or Y bank does not necessarily mean it is the right thing for you to do, and again will need careful analysis of your joint finances.

I would sit down with a whole of market mortgage broker and look at what deals you could opt for, and what this would mean in terms of monthly cost to you.

No point in putting in an offer, and then doing the calculations only to find out that it is not affordable

our-kid_2

Thanks for your responses. Firstly, is it really only £3k in costs? What would be the breakdown of that? Also, is it all paid out in one hit or over a period of time? Sorry for so many questions.

What would be the repayments on a £176k mortgage? I fear I'd be biting off more than I could chew, so to speak.
Also, regarding the location, I really have to stay pretty local as I do not drive and I start work at 6am in Hammersmith.

SS, you're right, I do need to know exactly what I can afford, so perhaps we should find a broker. I just wasn't sure if it was too early for that without actually having a property to make an offer on. Would anyone recommend L&C? Or is there someone else that I should contact? Maybe someone could recommend someone from this board?

Thanks again,

Mick

our-kid_2

meanmachine wrote:

If you are seeing a broker - a word of advice, best to avoid those resident in estate agents. You don't want the EA (who acts for the seller) knowing your full financial wotsits.

Cheers! It's little tips like that that I need. I'm an honest and trusting bloke and would assume that the agent knowing those details would be fine - anything else that I shouldn't disclose?

our-kid_2

Hi again everyone,

Can anyone please give me an estimated breakdown of the costs of buying a property other than stamp duty (i.e. solicitors fees, mortgage setup costs and surveyor fees)?
Joe_Bloggs stated earlier that worst case scenario would be around £3k but I was expecting around double that amount (inclusive of stamp duty) . Can anyone clarify that £3k would be a more realistic amount? (if yes, that would obviously free up some extra cash and be a big boost).

Also, I took on board what meanmachine said regarding the Alliance & Leicester offering up to £176k. I went through their quick quote feature on their website. Now another thing is, I'm not sure whether to take out a mortgage with a 25 year term, or to keep down the monthly costs go for a 30 year option. Should I purely base it on affordability or are there other factors that I should consider in doing this?

To get an idea of the monthly repayments, I tried both the 25 and the 30 year options. With the 30 year mortgage, on the A&L 2 Year Fixed Rate Tracker revert Mortgage, for the fixed period, repayments on a £170,000 loan would be £880, increasing to just under £960 thereafter. The 25 year option would be £953 and £1143 respectively, which I found a little daunting!

I have totalled up our possible outgoings and found that we would be left with around £500-£550 between the two of us for the month after all is paid out on the 30 year plan. This includes optional extras such as Sky TV and Broadband internet. The only things that I haven't included are ground rent and maintenance but obviously I don't know what these will be until I find a property. Would this be a reasonable amount of money to live on after all outgoings?
When adding up my outgoings, I estimated the monthly costs of Buildings & Contents insurance and Life Assurance for the two of us at around £75. I did not account for Mortgage Protection. Firstly, is £75/m a realistic figure, and also, should I be considering Mortgage Protection?

Lastly, Is there anything that I have missed or should I start looking for a broker now? If yes, can anyone recommend a good one with the golden rules of no fee, and whole of market?

Thanks again for all your help, guys!

Kind regards,

Michael

scheming_gypsy

meanmachine wrote:

I personally wouldn't go near shared ownership, simply because of the re-sell issues. But you know the area and what's available better than me.



Is it not possible to look elsewhere, with a view to avoiding shared ownership?

What issues with the re-sell? i'm on a shared ownership and the only conditions is that you have to sell to somebody in a similar position. If you can't then you can sell for full price but only receive 60% of the final price.
You can also buy the remaining share in smaller percentages at the market value.


OP.
One thing with shared ownership is that quite a lot are new and only come with bathroom and kitchens. You'd need to keep some money aside for flooring / garden etc.

Edit : insurance.
If it's shared ownership the buildings insurance is covered by them and is included in the rent on the remaining percentage.
My contents insurance for a 3 bedroomed mid mews is £13 a month.

Wickedkitten

our-kid wrote:

Hi again everyone,

Can anyone please give me an estimated breakdown of the costs of buying a property (i.e. stamp duty, solicitors fees, mortgage setup costs and surveyor fees)?

Here are ours, they may be completely different to what you are paying though because we are up north, and different lender charge different application fees, some of which include

Solicitor - £974 all in on a no sale, no fee fixed price deal, and we gave him £200 up front for searches
Stamp Duty - nil because it's under the threshhold
Valuation + Homebuyer survey - £440
Application Fee - £245

Don't forget to budget as well for any work that will be needing done after you move in to satisfy any conditions of the mortgage if there may be some added.

The one big thing that I would suggest, is you don't take out the absolute maximum that they will loan you, and definitely don't take out the maximum that they are willing to loan you on a shared ownership property.