Mortgage Advice needed please!!!!

migdog

Hi,
My girlfriend and I are desperate to move away from the council estate that we currently rent a house on. We would like to buy but need serious advice about mortgages. I am working fulltime and earn 23.5K per year my girlfriend only works part-time as we have a little boy and she earns around 4k a year. I recently took out a loan for £9000 to consolidate a few debts that we had, this costs £172 per month for the next 56 months.

A 3 bedroom house in our area will cost £125,000 but I will need to get out a mortgage of around £134,000 to wipe out the loan.

We do not have a deposit but we can realistically afford £670 - £700 a month on a mortgage. I am 28 y/o and my Girlfriend is 24 y/o.

Can anyone give me some advice on where i should look for this sort of mortgage or an easier way to aproach this issue. Any constructive help will be gratefully recieved as we are desperate to move away from where we are.

lightspeed

Speaking as a FTB who has just done a lot of research into house buying and mortgages, i would say that you would struggle to get a mortgage of that size from a prime lender in your present situation.

I found that Nationwide and A + L were the only 2 lenders that could lend more than others and that was only an extra 15K on combined incomes of nearly 40K (max quote was about 145K,only 11K difference compared to 134K,debt free and no dependants). These 2 lenders work on affordability, so i suggest using their borrowing calculators to give you a rough estimate on the max you can borrow.

When doing this, create an excel spreadsheet of every single outgoing against your income. This will give you a realistic figure of how much you can afford.

IMO, 134K (or 125K) is quite ambitous, earning 27500 (excluding loan repayment), with no deposit and 1 dependant. I would get a whole of the market broker to do some searching for you.

Also,dont forget moving costs. This has cost us nearly 3K including stamp duty.

Good Luck!

Ian_W

Hi migdog,
lightspeed's advice is really sound, particularly seeing a broker. Northern Rock do a mortgage with an unsecured loan attached that goes past 100% BUT you pay for it and usually get tied-in beyond any introductory rate. I think it puts people in serious jeopardy if their financial circs change even slightly for the worse.
Appreciate you want to get away from the area you're in, have you thought of and costed private rented? You'd be far better getting some savings behind you to cover both moving costs and a deposit if you can.

migdog

Cheers for the advice,
I have thought of private renting but the cost of this in my area would mean that I would only be able to save around £150 difference against what I would probably pay for a mortgage so I am unsure as to whether this would be a practical solution. Also what should i be looking to do :- should I save up and pay my loan off so I have no loan or should I save up a deposit and just pay the loan repayments each month? The Excel spreadsheet is something I have recently started doing anyway and really helps with visibilty of finances and shows any weaknesses you have. The spreadsheet was the reason I got the loan in the first place as we were paying far too much in little debts hence I consolidated. Any other lenders other than Northern Rock as I have had dealings with them before and I was not impressed to say the least.

Eels100

Here are a few general thought spurely from my own experience. If you really have to borrow such a large amount, I would pay off your loan ASAP simply because the interest you pay on it will always be greater than what you will earn on anything you can save.

I am in the process of buying my first house and like you I had no deposit or savings, but I did have an outstanding loan. Luckily my loan was for a car so I sold the car and borrowed the difference from my boyfriend's Mum, thus allowing me to pay it off. Otherwise the lenders take loan repayments into account and offer you a lower figure.

Due to my lack of savings/deposit I was looking at a 100% LTV mortgage (98.5% in the end thanks to a considerate surveyor!), and as a result I haven't got a partcularly competitive rate. Hopefully in 2 years time when the fixed period ends I can get a better deal. In your case you might not have that light at the end of the tunnel because you might still be paying off your loan.

I think my advice would have to be to research the renting market as thoroughly as possible, negotiate a fair rent (I know of people who have knocked loads off their monthly rent outgoings by offering to repaint/carpet/improve gardens etc - some landlords are delighted to accept less in exchange for some basic maintenance). Research how much the building has cost them to buy and from that extrapolate their likely mortgage repayments - this gives you a really rough idea of what sort of profit they're making and allows you to negotiate sensibly.

I'm sure with some shrewd money management you can save a small amount, even just to cover the up front costs as sensibly mentioned before (I'm looking at £1800 plus furniture). This will at least mean you don't have to borrow more at such an expensive time. I think realistically you may struggle to borrow as much as you are hoping, and even if you did find a lender willing to do it, I would question the wisdom of it. Without savings to fall back on you need to be certain you can afford these repayments whatever happens - redundancy/ill health/babies etc.

Finally, think very, very carefully before involving your current unsecured debts with your mortgage. Although you may be paying more interest on these debts, at least your home isn't at risk.

As I say, these are just my thoughts, and like the others I'd suggest a financial adviser or mortgage broker. Remember, these people are basically salesmen (albeit very helpful ones!) - they will push you to go for the mortgage, but if once you know more you decide that you're going to rent for a while, just tell them you haven't found a house yet and back off. Good luck - it's tough!