First time buyer's guide...?

ukmonkey

I find it quite surprising that Martin has not produced a "first time buyer's guide to getting a mortgage and buying a house". I feel that such a guide would be invaluable.

I (and I would imagine most people my age) know nothing about buying a house and getting a mortgage.

There are so many different types of mortgages out there and I don't understand most of the terms (i.e is a capital or interest only mortgage best? fixed or variable rate mortgage? etc etc).

Can anyone point me in the direction of some help please?

AndrewSmith

Hi there,

Try this thread, you might find it useful.

http://forums.moneysavingexpert.com/showthread.html?t=175653

Cheers

Andy

ukmonkey

Andy, thanks for that.

I did read that guide, I've no idea what I need!

Basically myself and my partner are on below national-average wages, and don't have a deposit saved up (and no possibility of saving a deposit this side of the 2012 Olympics!).

I have seen that northern rock do a 125% mortgage that seems, on the face of things, as though it would suit us perfectly as it would leave some money aside to pay off a few debts (a personal loan and 3 credit cards, total debt of a shade under £10k) and also to buy things for the house.

Can you give us any advice?

ukmonkey

I should add that I have read, and I fully understand your disclaimer.

AndrewSmith

Thanks for that,

Ok.

There are a number of things that you should consider before entering into a mortgage, which will very much depend on your own circumstances and situation, coupled with what exactly you are trying to do and why.

The obvious initial thing that a broker would ask is would it be financially beneficial for you to remain in your current situation until the level of outstanding debt you currently have as been reduced, thus freeing up monthly income and even giving you the opportunity to save for a deposit.

That said though, you may be in a situation such as short term tennancy where it is not possible to stay and, faced with the choice of renting again or buying, you have chosen to buy.

The main thing you must take into account is that although the Northern Rock product on the face of it seems generous (it is a good product for what it does) you will be potentially adding shorter term debt to a long term mortgage and paying more in the long run for it over time.

Also by borrowing 125% of the property value, you will be tied to that property until such times as it has increased in value to cover the 25%negative equity (this is where you owe more than it is worth)

Other things to consider may be shared ownership where you buy in partnership with a housing association, buying 50% and renting 50% for example.

At the end of the day the final decision will always be yours, but always tread with extreme caution when borrowing anything in excess of 95%.

Any more help, just ask.

Cheers

Andy

ukmonkey

Andrew, I've heard little about these shared ownership schemes.

I've no idea how I'd found out if this is possible in our area. Who would I need to contact? I've certainly not seen anything advertised.

The 125% mortgage really is seeming to be the best option. Waiting untilt he debts are reduced is really not an option. My partner is renting at the moment and I am living with my parents, and we REALLY need to get our own place soon.

Combined, we are paying out about £400.00 in "rent" per month, so a mortgage is really not going to be a great deal more.

Adding the debts on to those monthly payments, it comes to about £650.00 so you can see yourself why this seems to me to be the best option.

What is the difference between an interest only mortgage and the other type (capital & interest if I recall correctly?).

Also, what are the benefits/downsides to fixed rate vs variable? What is this "tracker" mortgage I seem to recall hearing about somewhere (I may well be totally wrong about this tracker thing though).

If it helps, our combined income is circa £30k p.a.

Also, Martin - If you're reading, us "kids" REALLY need "an idiots guide to mortgages and buying a house"!

Andy, thanks again for your [informal of course] advice!

AndrewSmith

No worries,

Regarding shared ownership, do a goole search for housing associations in your local area. They are the ones to contact and register with for properties falling withing this.

If you are certain that a 125% mortgage is the only way to progress for you then I would suggest a consultation with a whole market broker, they will explain all the different types of mortgage available to you, tailored specifically to your situation, and such things as Interest Only / Capital & Interest.

Hope this helps

Andy

clutton_2

take your time and research this thoroughly before you jump in - the jargon is huge, and if you dont understand it you will be signing something very significant as if you were blind. A court will take no note of the fact that you "did not understand" what you were signing. I have come across folks who have been sold truly horrendous mortgage products, where repayments doubled in 2 years, and the mortgage holders had no idea this would happen and are then really in trouble, and many lose their homes because of it. Property will still be there in a few months time, research, read and research some more.

ukmonkey

Thanks to you both for your replies, particularly Andy.

I know this question is like the old adage of the length of a piece of string, but I'll ask anyways...

My partner is a (maybe rightfully) little concerned that should we take the 125% mtg, and the house prices drop then we'll be "in the sh*t". Would we be in the preverbial if this were to happen (I think we would be, but only if we wanted to move house)?

Also, (sorry), how likely do you think it is that house prices will drop by enough so as to put us "in the sh*t"?

MSE_Martin

Funnily enough I just finished the MoneySavingExpert Guide to getting a mortgage today - the new free printed one that will accompany the remortgaging guide

Should be available after its laid out and been to the printers in 6 weeks or so

Martin

nelly_2

Maybe there is no difinative buyers guide as the market is different from area to area also person to person.

credit cards; he can guide on, cos they are fixed no matter where you are how much your on or whether the roof is in good condition or not.