Advice for first time buyer?

xanderd

Hi,
I've just had the advice from the mortgage broker and I'm stuck in a catch-22 situaiton.

Based on the salary of my wife and I, the absolute max mortgage we can get is £150,000, which isn't really enough, well its right on the border of the prices in our area, we were really hoping for around £170,000.

My aunt has offered to help in any way she can. Putting her as a third name on the mortgage and multiplying in her salary will allow us up to £190,000, HOWEVER, the broker says that because of her age (she is only 56!) the lenders will offer a maximum term of 17 years, rather than the 30 we were hoping for.
This will push the monthly repayments way up to £1450 per month, rather than the £800 we can afford!!

Is it true that no lenders will allow a term longer than 17 years for a 56 year old?!! I'm sure an uncle of mine got a 30 year policy when he was 65!

The other option is that my wife and I get the £150,000 mortgage and my aunt can lend us £30,000 cash to top it up, which is great, however, I feel like when we sell the property and have to pay back the £30,000, we will be stuck as other property prices will have risen and we will be 'losing' £30k of ours. It seems in this case that when we come to sell we wont be able to move up the ladder, in fact I suspect we may be forced off it altogether!

So as far as I can see we have an option where we can afford the monthly repayments but the mortgage amount isnt high enough, or where the mortagge is enough but we cant afford the repayments!

any advice from your experience?

thanks

alex

jamesd

Alex, if your mortgage lender takes debts like credit card payments into consideratiion, your aunt paying them may help.

Alternatlvely, I suggest accepting her offer and paying her a fair rate of interest on her money - at least matching what she would make in her current preferred type of savings account. That way you benefit and she doesn't lose out.

Then you can also do things like giving repaying her priority if she wants her money back, or, if it's a flexible mortgage that lets you withdraw overpayments, you can give her the option of having that overpayment money whenever she needs it.

xanderd

jamesd,

to me, an amount like £30,000 can never be paid off in the traditional sense. I was thinking that if we did borrow that amount we would give it back to her in a lump sum when we sell the property rather than making monthly repayments. £100 a month with no interest would take 25 years to pay off!
My point was that if paying it back upon selling the house we will lose a good deal of the house value and not be able to move up the property ladder, be in the same position we are now...i.e. just delaying the inevitable!

your point about her paying our loans off is interesting though - I hadn't thought of that! We have about £5000 of debt between us, but if she paid that off are you suggesting that we didnt declare that as a loan to the lender? Otherwise whats the difference whether we owe money to a loan or to my aunt? They will still deduct it from our salary multiplier?

cheers

herbiesjp

What do you each earn?

meanmachine_2

So did you tell the broker about your debts or not? If not, then the advice given won't help much.

In fact, that debt tells me that you're in no position to buy.

Stop taking money from poor old relatives, clear your debts, SAVE the deposit then buy.

Sorry if that sounds harsh.

The other bit of advice is to post your incomes here and we'll see if your broker really did get you the maximum borrowing amount.

jamesd

Some lenders will reduce your available loan amount by reducing your effective salary by your loan repayment amouns. If your lender is doing this, then eliminating the repayments would increase the available loan.

Planning to pay her back over 25 years is fine - after all, that's what you'd have to do if you go tthe higher mortgage amount.

Remember that you benefit by your rent going to pay your mortgage, so you will end up better than continuing to rent even with 30,000 to pay off at the end of the mortgage.

meanmachine, accepting help from others is a good thing when it's appropriate, as it is in the case of family helping family. Even more so if the other family member doesn't lose out on the deal. Personally, I'm entirely happy to accept such assistance, will ensure that the family member is no worse off and know that the family member will be getting a good feeling from helping out. No debt in my case - it's simply family helping family.

meanmachine_2

jamesd wrote:

Remember that you benefit by your rent going to pay your mortgage, so you will end up better than continuing to rent even with 30,000 to pay off at the end of the mortgage.

meanmachine, accepting help from others is a good thing when it's appropriate, as it is in the case of family helping family. Even more so if the other family member doesn't lose out on the deal. Personally, I'm entirely happy to accept such assistance, will ensure that the family member is no worse off and know that the family member will be getting a good feeling from helping out. No debt in my case - it's simply family helping family.

The problem is, poor old Aunty will likely be dead in 25 years, so will never see her money.

Also, I hope she's front-loading the interest.

No, my gripe was that the OP had debts and no deposit. Not really the best start to a 25 year commitment.

Joe_Bloggs

If the original posters (xanderd) did buy a property they would face £3-4K of costs almost doubling their existing debt. In saying what you think, others may feel that you are being critical of their entire life. I agree with all the responding posters where they have expressed their view on the matter. Clearing the debt and getting savings that approach mortgage costs would be a positive step. Proving to yourself that you can defeat debt,and save money is hard work, but worth the effort.
J_B.
1% a month works out at 12.6% APR. Hardly a bargain but better that 20%.

xanderd

OK,

I didnt ask for the help, it was offered. My aunt has no mortgage and ££££ 'sitting around' so she is able to do it.

We have a joint income of £31,000, but a very important note is that I will be graduating from my PhD next year and my salary is likely to double. Also my wife will be completing a course and is due a pay rise.

We did declare all of our debt to the broker and he took it into account.

In my view, our debt is under control and when I graduate I can pay it off quickly. We can afford rent so why not a mortgage? It will be saving us money in the loing term.

The broker has confirmed that with my aunts name on the mortgage we could borrow a lot more, however they would only allow a maximum term of 17 years!! This would bring the repayments to £1450 pcm. I am trying to see if we can borrow slightly less, increase the term, and pay a deposit. If thats not possible I think we will be stuck without a mortgage for another year

Joe_Bloggs

Would a change of job involve a change of location ? Buying a property now and then selling in a year to buy another, is a waste of money. This is what makes renting competitive in the short term.

It was a nice gesture of your aunt to offer to help out. I hope she has her pension projections sorted out as the whole area can be hard to figure. Ill health can force early retirement and your aunt's needs may change.

Good luck with your PhD.
J_B.

seven-day-weekend

xanderd wrote:

OK,

IWe have a joint income of £31,000, but a very important note is that I will be graduating from my PhD next year and my salary is likely to double. Also my wife will be completing a course and is due a pay rise.

So why not wait un til next year to get a mortgage?