urgent help required pls!

wellsie82

hi all

first time buyer here with my girlfriend. we put an offer on a property on monday which was accepted (£114k)

we know that we can afford a good £550 a month for a mortgage and have done our homework properly and have budgeted for everything you could think of

we've got an appointment with our new mortgage lender morning and i need a quick bit of advice

a member of the family has agreed to lend us £30k (to be paid back approx £100 a month), this leaves us requiring a mortgage of £75k over approx 25 years. im 24, my partner nearly 19. we're putting down £15k of our own savings to make the deposit £45k

what id like to know is whether they will ask where on earth we've got so much money from?

im very reluctant to say its a family-loan as surely they will look at that as a big financial commitment and may not give us what we need (£75k) if they think we wont be able to afford to pay both off

if i say its a gift, is there tax implications? will they question where we've got the money from anyway or am i just worrying for nothing?

ANY help and i mean that! is appreciated, thanks in advance

homer_j_3

I believe that you should just be honest with the company and tell them the truth,

If you are paying #100 per month back then they should take this into consideration within the affordability aspect.

Have you gone to a broker or just to your bank? If it is just your bank, I would suggest you see a broker (whole of market pref or multi-tied) to see if they can quote you a better deal. They will have the knowledge and experience to ensure that you are getting the most competetive product.

wellsie82

if i tell them the truth im worried (maybe without need) that they wont lend us what we want

we've gone direct to a bank as we've found an excellent rate and term with them, also my mum has her mortgage with them and so does my dad, in addtion the vendor is looking for a quick sale so we've decided to go ahead directly

homer_j_3

Would you be prepared to disclose lender/rate etc?

Also if you would be prepared to state salaries, I am sure we can give you an idea of where that sits in the marketplace.

I know that you being a First Time Buyer, you may be anxious and worried that you wont get the money but if your income stands up and your credit is good then you are in a good position, especially with that size of deposit so why not get the best deal you can?

wellsie82

decided to just tell them if they ask where its come from

have gone onto their website and an extra £100 commitment between the pair of us reduces their max lending figure from £115k to £110k so hopefully it wont affect how much we can borrow

thanks (homer) , just worrying for nothing

homer_j_3

You should be easily accepted if your purchase price is #114k. With your 45k deposit then you will only need a 69k mortgage....

miaxmia

wellsie82 wrote:

hi all

first time buyer here with my girlfriend. we put an offer on a property on monday which was accepted (£114k)

we know that we can afford a good £550 a month for a mortgage and have done our homework properly and have budgeted for everything you could think of

we've got an appointment with our new mortgage lender morning and i need a quick bit of advice

a member of the family has agreed to lend us £30k (to be paid back approx £100 a month), this leaves us requiring a mortgage of £75k over approx 25 years. im 24, my partner nearly 19. we're putting down £15k of our own savings to make the deposit £45k

what id like to know is whether they will ask where on earth we've got so much money from?

im very reluctant to say its a family-loan as surely they will look at that as a big financial commitment and may not give us what we need (£75k) if they think we wont be able to afford to pay both off

if i say its a gift, is there tax implications? will they question where we've got the money from anyway or am i just worrying for nothing?

ANY help and i mean that! is appreciated, thanks in advance

Both my children have recently started on the property ladder - why don't you take the mortgage on as a 35 year term to begin with - you can always reduce the number of years as you can afford to pay more. That way the mortgage may be more within your budget, without the need to borrow from family.

wellsie82

homer, we like the product we've seen as its a ten year fixed rate @ 4.88% which may not be the best rate out there but its peace of mind knowing it wont increase for at least ten years, should also give us scope to save up then perhaps pay off some more when/if we remortgage

to be honest the vendor is after a quick sale and we've fallen in love with the property so just want it asap, we put the offer in monday, was accepted same day, we're away this weekend and then not back in work till tuesday so it may sound silly to someone wiser but if we wait to see a broker next tuesday we would of lost a week and i dont want to give the vendor any reason to pull out, just dont want to lose the place now our name is pencilled in on it

miaxmia, we orignally looked at 40 years, then 30 but we can realistically live each month whilst stil paying it off within 25 years so the sooner the better really

Ian_W

Wellsie,
Couple of points that haven't been mentioned by homer & miaxmia:

if i say its a gift, is there tax implications?

AFAIK there is no tax implication whatsoever, it's a loan which is interest free - if it isn't there may be a tax implication for the family member who is lending - but none for you.

the product we've seen as its a ten year fixed rate @ 4.88% which may not be the best rate out there but its peace of mind knowing it wont increase for at least ten years ...

Think very carefully about fixing for 10yrs if there are redemption penalties for leaving before the fixed period ends. Yes you have the certainty of fixed repayments BUT your circumstances may change dramatically over 10yrs. For example you may start a family and wish to move house or borrow more for an extension or whatever. You'll be very much at the mercy of the lender as to how much it will cost you for any additional borrowing during that time. At least make sure the loan is portable but do be aware of the drawbacks of fixing for such a long term. Personally, and I'm much older than you with less likely to change, I wouldn't fix for more than 5yrs. BTW 4.88 is not a bad rate at all for a 10yr fix, do they do a 5yr one?
EDIT: Just to add, BoL with your purchase.

wellsie82

ian, fair point in a way regarding the 10 year thing but when we're entering into a 25 year mortgage ten years isn't much, surely interest rates will only rise from here? i mean if in 5 years time the rate is 6/7% then we'd be kicking ourselves, the only time we're going to benefit from a 5 year is if we need to get out of it or if the rates dont increase

we just like the idea of the security more than anything else

thanks for the bit on the tax side of things, been told it could push us into the higher rate of tax but wasn't sure how it worked

MortgageMamma

Wellsie

A ten year fixed can disadvantage you severely if rates actually DROP. Imagine paying more than you should do on your mortgage for about 8 years!! That thought curls my toes!! I see from your post you are very worried about affordability, and I might be wrong but I think you are anxious about the mortgage and the reason you want a 10 year fixed is because you are worried rates will increase drastically in future? You should be equally worried about if rates fall significantly and as Ian says you are tied in with massive early repayment penalties. Think very carefully about this, don't panic about the vendor pulling out, you have time to see a broker and get a good deal, you can do it over the phone in less than an hour. PLEASE PLEASE get some professional advice.