What Level of debt would you take on?

biting_the_bullet

My income :- 41K

Partners income :- 4K

Seen a 3 bed detached 1920's home with loft conversion giving 2 extra certificated bedrooms. Lovely home we could live in forever and bring our 2 children up in. Just round the corner from the best school in Town. On the market for £259'950:00, although from discussions with the vendors think it could be ours for £240'000:00. We have a deposit available of £53'000:00, and a moving/stamp duty/solicitors etc budget of £6K. I guess this means we'd be looking for a mortgage of £187K. A 4.15 x joint income multiple.

Do you think this is dodgy at the moment the way property prices / interest rates are heading?
If we go with it, would be looking to fix a mortgage possibly for 5 or 10 years. Guess thats the nest question, which mortgage company????

Thanks in advance from a nervous, excited and twitching btb.

Ems*Honie

Get in contact with a broker, Martin mentions a few on the mortgage section, I used London and country who were brilliant. They can work out your monthly repaymants and the best deal. We found it was easy to add up how much we were 'allowed' to borrow but our affordability was differant, so we set a monthly paymant we could afford (with an interest increase after fixed rate) then found a house to suit the budget. Good luck

AndrewSmith

biting_the_bullet wrote:

My income :- 41K

Partners income :- 4K

Seen a 3 bed detached 1920's home with loft conversion giving 2 extra certificated bedrooms. Lovely home we could live in forever and bring our 2 children up in. Just round the corner from the best school in Town. On the market for £259'950:00, although from discussions with the vendors think it could be ours for £240'000:00. We have a deposit available of £53'000:00, and a moving/stamp duty/solicitors etc budget of £6K. I guess this means we'd be looking for a mortgage of £187K. A 4.15 x joint income multiple.

Do you think this is dodgy at the moment the way property prices / interest rates are heading?
If we go with it, would be looking to fix a mortgage possibly for 5 or 10 years. Guess thats the nest question, which mortgage company????

Thanks in advance from a nervous, excited and twitching btb.

Hi,

At 4.15x joint income you will not have the pick of the entire mortgage market. Not every lender will look to stretch this far, with the average multiple on joint income being 3.5-3.75x

You will need to be looking at the likes of Nationwide Building Society or Alliance & Leicester, who use an affordability model when calculating your total borrowing. It can, but not always, work out to approx 4 - 4.25x income generally.

My advice is to always obtain an agreement in principle in such cases from the lender before becoming too set on a particular property. This will allow you to discover exactly what the lender will be prepared to offer you mortgage wise, and the information they will need to proceed to full application. In this case I think it is essential that you do this first, to ascertain whether or not the property you have in mind is indeed do-able.

Andy

biting_the_bullet

Thanks Andy.

I've run through the figures on the Nationwide calculator, and it says we "could" have up to 195K. Does the on line calculator differ from real life??

Thanks again.

BTB

AndrewSmith

biting_the_bullet wrote:

Thanks Andy.

I've run through the figures on the Nationwide calculator, and it says we "could" have up to 195K. Does the on line calculator differ from real life??

Thanks again.

BTB

The affordability calculator is a guide of the Maximum they will lend. This will always be subject to creditr score, credit check, valuation, income verification, any outstanding loans etc.

Best thing is to get an agreement in principle from Nationwide first so you dont waste your time submitting a full application for them to say no.

I put 2 AIP's with Nationwide Friday and had the answer back yesterday morning. It takes about 24 hours with them. I see it as essential in this case as it is the only way of truly knowing what they will lend.

Andy

robwend

woolwich done ours times four, if you have been with your bank a long time ask, coz ive been with barclays scince i was 17 with accounts i got a mortgage so damm easy and we wasnt earning nearly enough at the time!just to tell you how funny banks can be, i was a single parent on benifits for 10 years and when i applied for a mortgage i had a credit score of £120000 GO FIGURE!! lol

biting_the_bullet

Well, been in the Nationwide this morning and they will lend up to around 199K, so it seems to be ok. Now playing the haggling game, from an hour long conversation with the vendor last night it transpires we are 3k away from his bottom line and our top offer. I feel he wants a quick sale no hassle etc, so for 3K i'm expecting him to drop. Fingers crossed.

JennyB

Nothing major to add really just wanted to say good luck!

Been in a similar situation - our last two houses (including this one I sit in right now) were HUGE stretches on the income multiplier front and so far (fingers crossed) everything has worked out fine. Starts out hard but gets easier all the time (especially after pay rises/new jobs etc.) Funnily enough our current house was purchased on such a massive multiplier (biggest I've ever heard of I think) that our mortgage company changed their minds!! :eek: It was pretty stresfull at the time as our sale was going through but we had an AIP and they came through in the end. :cool:

Property_Magnate

At 41k you probably take home around £2500 a month.

With 187k mortgage the repayments would be £1200 a month (Halifax 10 year fix at 5.65%, 25 year term.)

So 48% of your pay goes on the mortgage.

Scary... but not unheard of these days. There are plenty of insane buyers around.

biting_the_bullet

You calling me insane Magnate

tazgirl

I would say that Magnate's estimate sounds steep on the monthly payments - and I'll justify this as I've just taken out a £185k mortgage from Nationwide over 25 years on their 5 year fixed, and OK it's 2k less, but the monthly repayments are around £1077. Given that the OP's household income is actually £45k, then that doesn't sound too bad - obviously depending on other payment commitments.

BUT, if you're planning to be there long-term, and during your 5 year fixed period, interest rates rise dramatically, will your salaries rise by a similar level - i.e. could you cope if repayments shot up after the fixed period?