First Time buyer - desperate for help!!

JoJoGray

Hi...

Ok I am getting myself really really confused and seem to be going round in circles!!

I am trying to sort out a mortgage as I am desperate to buy a flat in London. I have a good deposit of about 30k but i only earn 20k. I am trying to buy a 2 bed flat so that I can rent the other room out to my friend and help me pay the mortgage.

I have been to HSBC as this is my bank and they offer graduate mortgage and I thought that this was probably the best offer i can get because they could give me 4 times my salary. But I'm not sure where else to look or if I have any other options?

i need to know the maximum that I can borrow so that I can look at flats. I wasn't sure if it made any difference that I have a decent deposit or that I am going to rent the other room out? Please help somebody I have no idea what the hell I am doing!!!

sarah_elton

You need to speak to a mortgage broker who can run through all your options.

I have HSBC's graduate mortgage and yes, they will lend up to 4.25 times your salary (or that was the multiple when I looked). That would mean you can spend £115,000 (4.25 * £20k, + £30k deposit). You'd have a mortgage for £85k. However, since you have a large deposit you should be able to get a lower interest rate than HSBC's current one.

A broker can help, and I've heard there are lenders who will do higher multiples if you have a large deposit.

However, the most important thing for you to look at is affordability. Do you have a breakdown of all your monthly costs once you own? The bigger the mortgage, the higher the repayments. And bear in mind that if interest rates go up, your mortgage repayment goes up - a small rise can make a large difference.

Before you speak to a broker who may well find you a large mortgage, play with some figures. On this page you can put in mortgage size and interest rates and play with what the repayments will be:

http://money.guardian.co.uk/calculator/form/0,,603156,00.html

You need to be certain that on your monthly income you can afford the repayments in the event the rate rises.

Lizbeth

Last year I got a 2yr tracker with Halifax - I think the rate's 4.49 or 4.99%, I can't remember! To get this rate they will only offer you a mortgage for 85% of the value of the flat.

They lent me 85% of £105k, which meant I borrowed 5x my £17k income at the time. I chose their 40 year mortgage term (as had enough working years left!) with monthly payments of £400 a month, because I wanted a couple of years to get settled and buy the essentials (fridge, bed...). After that I'll look round for the best deal to suit my circumstances then.

I've got a lodger too, which makes a huge difference financially. I told the lender but they said they wouldn't take it into account and it would be better if they didn't know - don't know why! Also I own a flat where in the contract I'm not allowed to rent a room out!

I'm thinking of staying with a longer-term mortgage in the future - so that I only have to repay a certain amount and have the choice to overpay if I can afford it (you will have to check whether the mortgage will allow you to do this - my current one doesn't, but I knew I wasn't going to have any spare money in the first two years!). As I don't have a lot of spare income, this will also provide a buffer if my lodger moves out, I lose my job, interest rates rise.

MortgageMamma

you could get a mortgage for much more than 4 x you salary, I know one lender which will definately go up to 4.7 x income on a 95% mortgage and another that may stretch even further based on affordability. The issue is renting a room to your friend. firstly, you will need to get your lenders permission to do this, and if she moves in she will have to sign a consent to mortgage form which would basically enable to lender to chuck her out if they evicted you for whatever reason. The key thing here is not to be overly reliant on having an income from a lodger. You won;t be able to borrow any more than say 95-100k at a stretch so I don't know that you will get a two bedroom property for that price in london. Perhaps it might be an idea to wait a little longer?

sarah_elton

Lizbeth wrote:

I've got a lodger too, which makes a huge difference financially. I told the lender but they said they wouldn't take it into account and it would be better if they didn't know - don't know why!

Isn't it because technically you're not allowed to rent out rooms under the terms of a standard mortgage, and you're supposed to have a BTL mortgage if you are?

MortgageMamma

different lenders have varying attitudes to this. what i will say is that you cannot add any of the rental income you will receive onto your affordability calculation. As the mortgage is your own residential property and you live in it a buy to let mortgage is unecessary. Personally I would talk over your situation with a whole of market broker, as they may be able to find ways to make your mortgage more affrordable in the early years dependant upon other factors.