When could I get a mortgage?

AndrewLondon

I'm a single 25 year old, currently earning about £36,000 + bonuses. I don't have any dependants.

I'd like to be able to buy somewhere because I have been wasting at least £1,000 a month on rent for the last 4 years, and that makes me really unhappy. I feel like I've put at least £48,000 down the drain.

My problem is that two years ago I lost my job, and being a bit naive I got behind on a loan, which ended up defaulting. I'm 2 months away from paying that off, but I'm sure that will hugely affect my credit score! Once that is paid off, I'll be debt free; I have no credit cards or other loans.

Also, I have no savings. Once I've paid the loan off, I will be putting that money (+ a bit more, totalling about £350) each month for a deposit.

Living in London means that house prices are expensive! If I get a house around the area I live I can expect to pay about £350,000. So putting away £350 a month, I'll be saving for 100 months to get a 10% deposit!

Will I need 10%? And how long before the default becomes irrelevant?

opinions4u

1) Youwill need at least a 10% deposit in the current market - plus legal / valuation fees.

2) Your income will not let you borrow anywhere near £350k. What is your average bonus?

3) Why save just £350 a month when you're wasting £1,000 a month?

4) While the default could impact you for up to 6 years, the older it gets the less likely a potential lender is to worry about it.

AndrewLondon

Thanks for the advice.

Understood about the 10%. £350,000 is for a house with a garden, instead of a flat - and I'm in "zone 1" (central London). I could move further out and the prices would be cheaper.

If I plan to get a lodger, would that be taken into account in a mortgage application?

I suppose I could save more. I could probably stretch to £500 a month, but then I'd still be waiting a very long time to get 10%.

What kind of mortgage can I expect to get with my salary? Bearing in mind that I am due a rise after Christmas - probably between 40k-50k.

g_attrill

You could get up to about 4.5x your salary less any loans/finance, however that will be stretching your outgoings. The most common advice is "how much can I afford to pay monthly?" then work that back into what you can afford to borrow.

To boost your savings potential can you rent somewhere cheaper while you save a deposit, or get a 2-bed place and a lodger? Work out the costings, but even taking a travelcard into account it should save quite a bit,

AndrewLondon

Well, I'll probably be in a position to buy at the end of 2010. By then I hope my salary will be around £45,000. So I will probably be able to spend around £2,000 a month on my mortgage without a lodger. And 4.5x my salary will be £202,500.

So should I look to be spending around £220,000 (and trying to save £20,000)?

poppy10_2

AndrewLondon wrote: »

Well, I'll probably be in a position to buy at the end of 2010. By then I hope my salary will be around £45,000. So I will probably be able to spend around £2,000 a month on my mortgage without a lodger. And 4.5x my salary will be £202,500.

So should I look to be spending around £220,000 (and trying to save £20,000)?

Yes .