FTB- Financial Advice?

BossTheSector

Hello all.

My girlfriend and I are looking to buy our first house. Firstly, can anyone advise what percentage of our income should we be looking to spend on mortgage repayments? I'm of the impression that you should keep repayments to no more than 30% of income- is this in fact the case?

Also, is it worth renting for a while longer to save up a bigger deposit or are we in a decent position to buy? We really would prefer to buy now.

We have a joint income (take home) of ~£3600 per month and a deposit of £40k.

Any thoughts/comments would be appreciated.

Bufger

I think you're possibly being too careful there! My joint income with my partner is 3k (take home per month) and the mortgage is 820 pcm and its not a stretch at all. Thats borrowing 130k on a terrible rate. With a 40k deposit you will be absolutely fine on repayments. as your LTV should be 80% or better (depending on the house you're looking at).

What price house are you looking at? i think you'd be fine with your wage and deposit on anything up to 200k.

Fill out a Statement of Affairs (found throughout this website) based on what you would be paying out when you live there and see if you're happy with the outcome.

herbiesjp

Well done on the deposit front!!

What prices are you looking at?

BossTheSector

Thanks for the swift replies. We're looking at houses in the region of £170k-200k although it looks as if we could can get a maximum mortgage of ~£240k so we could go a bit higher- which is partly the reason for my original post!

Bufger

i wouldnt go as high as 240k. you will already have a good foothold on the property ladder at 170k and (dependant on where you live) you can get some really nice houses for this. See if you can avoid going for a massive really expensive place at first and get a mortgage that allows you to overpay. By the time you've got a fair few quid paid off the mortgage the market will be more predictable and you can play your next hand from there.

Remember rates will go up!

herbiesjp

But dont look at it in terms of what the maximum mortgage you can get.

YOu need to see also how your deposit relates to the purchase price i.e 10% 20% etc

The higher % deposit you have the better it will be for you in terms of choices and rates available. Also, having lower income multiples needed, means more lenders will also be able to offer you a mortgage.

SO work out how much you could afford comfortably now, then work out what your upper limit would be (to factor in if rates increase in the nect few years) - and then you need to work out what deals/prices you could then look at

BossTheSector

Thanks again. My comment about the 240k maximum mortgage may have been misleading!- we've no intention of taking out that size of mortgage! I was simply trying to highlight the fact that we could go a slightly higher than a £200k house if we really felt good about the property.

Yes, I am aware of the LTV ratio and with a 20% deposit, we can get much better rates-after playing with the figures it would make sense to keep within that 20% deposit threshold to take advantage of this. At this threshold, our payments are very comfortable too. My initial thoughts were to aim for comfortable repayments so that we can regularly overpay so it seems as if I'm thinking along the right lines.

Cheers.

BossTheSector

Oh, and we're looking in the South East Glasgow area- Rutherglen, Cambuslang, East-Kilbride, Burnside etc!

BossTheSector

Ok. We've seen a couple of houses we like and want to get a mortgage agreement in principle.

The stand out choice of mortgage I've found is the 2 Year Tracker from RBS/Natwest which tracks +2.49% BoE base rate. My reasoning behind this choice is working on the basis that most commentators are saying interest rates will stay low for the next year at least and if it does rise significantly after that, we will only be tied down to the mortgage for a further year or so.

I'm just looking for confirmation that my thinking and choice of mortgage is along the right lines. If anyone has any suggestions of other mortgages I may be interested in please let me know.

Thanks again!