Advice on first mortgage

cjoffy

Good Day, I am a 21 year old, recently graduated from university and am currently living at home with my parents. Obviously i want to start looking to find my own place and am currently working full time in a mediocre job.

I want to find a flat locally but don't want to rent as its basically just a waste of money. Therefore, i am looking to buy a place and take out a mortgage. Does anyone know the best mortgage i should apply for and what kind of deposit i will need?

All help will be much appreciated

opinions4u

I want to find a flat locally but don't want to rent as its basically just a waste of money

Buying property that goes down in value is a bigger waste of money.

Check out mortgage deals at sites like www.moneysupermarket.com

Minimum deposit these days seems to be 10%, with cheaper mortgage deals available if you have 15%-25% saved up.

Don't forget:

- stamp duty
- solicitors
- surveyors
- mortgage product fee

Yorkie1

The 'best' mortgage will depend to a certain extent on your priorities e.g. certainty of fixed monthly payments, or lower but variable repayments.

You will also need to decide whether to go for an interest-only mortgage, where you will need a separate savings vehicle to repay the initial loan at the end of the period; or a repayment (interest and capital) mortgage, where at the end of the term the whole mortgage is paid off.

As for deposit, the more the better. Most people on here advise a minimum of 10%. Don't forget the solicitors fees, any stamp duty (1% if the sale is more than, I think, £125K from this weekend), moving fees, etc etc.

There's a great guide at the top of this mortgages advice forum - labelled Announcement - Free printed step-by-step guide to mortgages and remortgages. You can download it as a pdf. I'd recommend you look at that by way of introduction.

blueberrypie

cjoffy wrote: »

I want to find a flat locally but don't want to rent as its basically just a waste of money.

It's not a waste of money - it's a way of putting a roof over your head. Having a home, whether rented or purchased, costs money. There are pros and cons to both ways of doing it.

As opinions4u has said, if you buy and end up in negative equity, you're not only paying the interest on the money you borrowed, but you are in debt to the tune of whatever you owe over and above the value of your property. Even if you don't end up in negative equity, most of your mortgage payments in the early days of a mortgage go towards paying interest.

Buying a home also means that if you move to another area - perhaps due to being offered a better job - you have to sell your property, incurring fees for estate agents and solicitors as well as possible Early Repayment Charges on your mortgage. If you're renting, it's usually just a case of giving notice.

So don't dismiss the possibility of renting - it might well a much better option for you than buying.

If you do decide to buy - yes, a minimum of 10% deposit, plus a decent credit history, plus an employment history - if you've only been in your job for a few months, many lenders won't consider you for a mortgage.

herbiesjp

What are the local house prices?
What deposit do you have saved up?
What is your income?

As stated above "best" depends on what you are looking, and what criteria you meet.

So it would be better to have that clear and then start to look at options that match what you are looking for.

cjoffy

I understand what you are saying about renting being suitable in certain circumstances...but what i meant to say was in reality i won't be getting anything out of it. In some situations (like job relocation as someone mentioned) i can appreciate the desire to rent but at the end of the day my money is simply lining the landlords wallet. At least when you take out a mortgage you are getting the positives of getting your foot on the property ladder (which is always difficult initially) and the fact you are contributing money into an asset that you own. I understand i am young, probably don't have an amazing credit rating and also don't have a long employment history (and am 99% sure i wouldn't be able to get a mortgage at the moment anyway.) Basically i am just getting clued up on what to expect and the best options available from people who know a lot more about it than i do. I wouldn't imagine i'll be able to move out for about 1-2 years anyway as that's how long the deposit is going to take me to save. The general consensus is about 10% deposit which is helpful to know. Apparently in several years when the market sorts itself out, the housing market will revert back to 100% mortgage again? Is there much truth in this? Thanks for all your help

Rob71

cjoffy wrote: »

Apparently in several years when the market sorts itself out, the housing market will revert back to 100% mortgage again? Is there much truth in this? Thanks for all your help

TBH the 100% (125%?!) typically required by 1st time buyers, self certification mortgages (where you could essentially lie about your income) and terms longer than 25 years are basically what caused the current housing/financial crisis (I'm over simplifying, but you get my drift!) - these are the sub-prime mortgages people keep banging on about. People were over-stretching themselves...

Will they return? Who knows... I wouldn't bank on it for a long while yet, the banks are trying to offload toxic debt, not acquire more of it!

It sounds like you've got your head screwed on, and you're sounding out ideas - if it were me, I'd start saving frantically, get that deposit (live a bit of life as well!) and see where things are in 18 months time.

Frustrating, I know, but the best things in life are usually worth waiting for...