More FTB advice pls...

jparnell

Hi,

My partner and I are on the verge of becoming first time buyers. We're after a little bit of advice first though...

We have a joint income of 34k, and savings of 40k potentially for a deposit. A house that we would like in our area would be approx 180k. We've already been to a bank to have an 'informal chat' about how much they would be prepared to lend us.

The bank said they could offer us a maximum of 167k mortgage (over 40yrs - which we're happy with) whether we put down a 20k or 40k deposit. We're unsure whether it would be better to have a higher mortgage, and more money saved in the bank i.e. 20k deposit and 20k savings, or have the smallest mortgage possible i.e. 140k and no savings.

Any advice would be helpful.

Thanks,
James

MortgageMamma

Hi James

Addressing your mortgage first. I see you went straight to your bank. Which bank is it? what mortgage have they offered you? how do you know your getting the best mortgage to suit your needs?

What I am getting at is, had you been to see a whoel of market mortgage broker you would have had a lot more options and possibly could find something much more competitive, and if you needed, to borrow more money.
A whole of market mortgage advisor is somebody who had access to all mortgage lenders on the UK market.

As for the savings, that really depends on your future plans and potential to save even more. Do you have/want kids? Is there a lot of work to do on the property? Is your job secure? Have you any major purchases planned? By asking yourself these questions it should be apparent to you what is the best solution. If you really want to reduce your mortgage you could always get a flexible mortgage with the facility to overpay.

HTH and GL

MM

jparnell

Thanks for the response.
We went to the Alliance & Leicester; it was a variable repayment mortgage. This mortgage has the option of overpaying at any point. Like i said, this was a very informal chat, just to get an idea of whats on offer etc so we can judge how much we can afford. Once we really knuckle down and start looking then we probably would visit someone independent.

There aren't currently any plans for any children, no major purchases (of course apart from a house!) and we both feel our jobs are secure.

James

MortgageMamma

Hi James,

A & L are great for stretching your income multiples, they will often go to 4.7 x. They are not always the most competitive rate wise though. and certainly are not at the moment.

A good lender you could look at who would stretch your income the same as A & L. would be royal bank of scotland, they currently have a 2 year fixed at 4.49%, with a 699 application fee (added to loan if you want) and £255 upfront for valuation. But its due to be withdrawn from market very shortly.

I would personally put some of the money into the mortgage and save 10k for a rainy day. As you build up more money just keep paying it off the mortgage. You'll soon whittle it down! Ask your A&L (if you choose to use them) to give you an illustration showing a mortgage with 40k deposit and one with a 20k deposit. That should hel you decide.