Nervous first-timer

reformedspender

I wondered if I could get some impartial advice over whether hubby and I are overstretching ourselves. We have just had an offer accepted (£225,000) and are putting down exactly 10 per cent (£22,500). We've had the mortgage accepted (northern rock together) and the mortgage broker reckons we'll be paying back £1300 month. Our post-tax salaries are £2700 and we don't have any other significant debts (hubby's £149 loan has a few more months to run, that's it). I reckon that means the mortgage will be 48 per cent of our salary - which seems terrifying to me.

Does that sound like too much? I reckon that after bills, food and the like we'll have about £300 month each to live on. I don't know whether I'm just panicing because we've been paying a family member peppercorn rent for years and I'm not used to such figures...or are we over-stretching ourselves?

All advice/opinions gratefully received.

Wickedkitten

600 quid left after bills and all isn't that bad.

Joe_Bloggs

If it has got a garden consider growing vegetables or apply for an allotment plot. I have no business to pry but does the 'together range' include some kind of loan. It is often a good idea to mention the interest rate you are on and how long this rate lasts and consider what happens after that. The term of the mortgage is also important in making comparisons. I also think that savings buffers are important too. Did you get flogged for some insurance products at the same time ?
I'm working on my own mortgage comparison calculator so excuse the questions if I am asking for too much.
Regards J_B.

meanmachine_2

A few things:

Don't expect inflation to whittle away your debt quickly
Don't get pregnant
Do expect rates to rise (so therefore consider fixing for a long time)

Sadly, I don't thnk your situation is much different from the vast majority of FTBers.

Hope the house is nice. You're likely to be spending lots of nights in it, instead of going out!

EDIT: Hold on, 1300 a month, off a loan of 200K? That doesn't sound right. What interest rate are you paying? Sounds like 6%!

reformedspender

Joe_Bloggs: The 'together' mortgage does include a loan, but we don't need/want one. The Mortgage Advisor says that we need it to get the multiples (4.5). We've both good good credit ratings (it came out high after his credit check).The interest rate is 5.99 per cent for five years. After then we have an interest rate of 6.59 per cent. Yes we got quoted for life insurance (26.32/month) for decreasing cover for us both. Don't apologise for asking questions - I'm really grateful for your help.

Meanmachine: yes it is at 6 per cent. Seems a lot to us too - I've looked on moneysupermarket and moneyextra and got cheaper quotes. Moneyextra quotes 4.78 per cent fixed for 60 months at £1143, but when I looked on its website I couldn't get the same quote!

I suspect we're buying at the wrong time. I'm really frightened that there is going to be a crash.

homer_j_3

Sorry, cant stop but I am sure that some of the other brokers may look to offer some commentary.

Northern Rock do good income muiltiples however I know that some lenders do affordability testing rather than income multiples and those lenders may offer more competetive rates than the NR. Was your advisor Whole of Market?

Affordability testing is basically comparing your monthly income to outgoings so with somebody who has relatively no other financial commitments, you can borrow a little more than the income multiples suggest.

As I say, I am on the run so will not be around for a while. If your adviser is WOM then I am sure he will be aware of this so just pose the question.

Hope it all goes well and if you have any questions outstanding when I get chance to come back online, I will try to answer these for you.

Joe_Bloggs

Since the thanks is broken I would like to thank meanmachine for reverse engineering the interest rate with some intuitive speculation as to the term. Can you not find a better rate ? What fees are you paying for 6% ?
I almost understand there are high salary multiples involved but 6% is beyond some lenders standard variable rates. I am sure even Northern Rock can do better.
Do not despair as wiser words may follow my ramblings.
J_B. (Copy your posts before posting as the site is in yoyo mode.)

meanmachine_2

Yeah, I'd look at some affordability lenders.

Assuming you earn 45K together, the Alliance and L might lend you up to 198K.

If you took out a variable 4.44% two year rate, that would make your repayments around 1100, giving you another 200 quid.

Nationwide also go by "affordability", so look at them too.

These aren't recommendations, but it does't hurt to have a look. and your broker might already have tried these avenues and found you aren't eligible.

But yes, a rate of 5.99% is awful. I'd either not touch it, or borrow less and get a better rate elsewhere.

meanmachine_2

reformedspender wrote:

I suspect we're buying at the wrong time. I'm really frightened that there is going to be a crash.

There won't be a crash while banks are prepared to lend up to 48% of a household's income!

Sad, but true...

herbiesjp

Just about to log off - but as has already been noted above - the rate does appear to be pretty high compared to current market rates.

There may well be other affordability/income multiple lenders that could look at getting the deal agreed for you, but difficult to say without knowing your circumstances.

Is your adviser Whole of market - but can access any lender and not just a panel?

tomstickland

Personally I think that 48% of income on mortgage is too high. Somewhere around 25-30% would be better.