Advice for FTB please... my story :-)

AlexP1980

Hi there, great board.

I was just wondering if anyone out there, could possibly assist me with some advice regarding my current position.

I am looking to buy a house, as a first time buyer, and would be doing it on my own unfortunately.

I am a 30 year old lad, in a stable public sector job. Salary is around £31,000 before tax, NI and pension (11%). Usually monthly pay is around £1500-1600 after all mandatory deductions. Student loan is paid off, only outstanding debt is credit card of around £700 (which I do need to sort out too lol!). At the moment, Im renting a room at a friends flat for 350 quid a month.

I have access to around 10k as a deposit, maybe a little more, maximum is 12k.

I have spoken to my bank and they have offered me a mortgage of up to £108k provided I stump up the 12k. The deal is 3.99% for life of mortgage and then Bank of England rate on top, so 4.49% currently (currently a £600 a month repayment on the 108k that works out as)... I dont really want to lend that much, and would prefer to lend up to around 90k, leaving me about 100k to get a house, Ive seen a few I like at this price and lower, so that isnt too big a deal. I havent yet spoken to any other lenders about what they could offer. This is the basic sort of

I was just wondering what everyone else thought I should do next, and whether I am in a stable enough position as detailed above, to make a purchase, or whether I should wait longer etc. Circumstances arent really likely to change much for sometime so it will be as it is detailed above.

Thanks in advance for any advice, and please feel free to ask anything else which you might need to know in order to better advise me.

Thanks, Alex.

Fire_Fox

Have you got money set aside for all the costs of moving, plus at least three months mortgage payments for a rainy day (redundancy, illness, injury)? Believe me, state benefits for a single homeowner are not sufficient to live on. Do you know where every last tenner of your income goes? Do you have £250 extra for mortgage plus repairs and maintenance left each month? Have you budgeted for paying bills including buildings insurance and income protection by yourself?

AlexP1980

Hi Fire Fox, thanks for the reply. I havent got all the costs set aside just yet, I havent even found a property yet (well, I have a few listed on rightmove ranging from £115,000 - £60,000)... I was more wondering if I sounded in a good position to buy in my circumstances and was looking for advice to think about things I obviously have missed. So thanks, your points have been taken on board.

To answer your questions, I wouldnt say I knew where every last tenner goes, but I'm reasonably sensible and can easily cut back on things if need be. I have £250 extra a month yeah, and I have budgeted for paying more than just the mortgage.

I appreciate its a massive finanical investment, and I wouldnt be going into it lightly, I was just wondering what people thought in terms of what I could feasibly afford.

Thanks again, Alex.

BabyBoots

Hi Alex,

Yes, the deposit, salary and purchase price amounts you're quoting make buying sound feasible. Do work out your monthly costs, considering additional ones that relate to being a homeowner, as FireFox says.

I would say that 3.99% *plus* the base rate for the life of the mortgage sounds like a terrible deal. What is the base rate were 5% again, as it was a few years ago, or really high like 20 years ago? Then monthly repayments would be impossible.

You could take a look at moneysupermarket.com to compare rates - they have a page for those with a 10% deposit like you: http://www.moneysupermarket.com/mortgages/
you can just see the rates without entering your details - e.g. Britannia has a two year fix at 4.99%. After the fixed rate term, if you have repaid some capital relative to the market value of the house, you might have a lower loan to value ratio and get a comparatively better rate.

Have a shop around for a better rate, or you can save up more deposit if you're not in a hurry to buy.

poppysarah

AlexP1980 wrote: »

I have access to around 10k as a deposit, maybe a little more, maximum is 12k.

What does that mean?

Have you saved it yourself?

jockosjungle

I wouldn't consider taking that deal myself, is it with HSBC? I'd take out something fixed, you can probably get about 5.5%, it'll cost a little more but interest rates cannot be 0.5% for ever, so even a modest rise to 2% and you'll be paying a lot back

R

paye

I'm a FTB like yourself, I think you should wait abit longer, and save abit more, I think after paying the deposit and legal fees you should aim to have around 8K worth of savings left. This will put you in a strong position for any surprises. Also you should consider taking out a interest only mortgage as this will bring down your monthly payment however you should aim to put away 9-10k to cover the loan of your mortgage every year . If you stick to this you will pay of your mortgage in about 10 years based on a 100k mortgage. Good luck.

lazer

Hi

I'm in the same position roughly and i've decided to go for it now because i've found the perfect house

Ideally i would like to have a bit saved for a rainy day which i haven't, but i have got credit cards with available limits of about £10k in case of emergency - I don't intend to use them but they are there if i need them, as is my Car which potentially i could sell to cover the mortgage payments if i lost my job!

Its a scary position but not impossible!

I have been paying £300 a month rent plus a loan if £150 a month (which is now paid), my mortgage payments would be £500 - so similar outlay to previous months!

I think if your job is stable enough then your in an ok position to start looking, by the time you find a house, you'll have more saved!

sharkie

Firstly I was in a similar position than you. In as much I was earning £12000 per year, had £12000 deposit but my flat was £52000. The interest was 18%

my salary did not match my mortgage.

My plan was to buy a property that had a hallway that lead to all rooms. i.e. a 2 bedroom flat. the other unwanted layout option is that rooms tend to lead off the lounge.

Should the brown stuff ever hit the fan, I'd live in the smallest and rent the other two rooms out (big bed and lounge). This would have covered the mortgage. In practice i did not have to do this. I did though have to account for every penny via spreadsheet.

I agree with BabyBoots that the mortgage of 3.99 on top of the base rate (make sure it is a bank of England base rate) is terrible, also watch out for length of time tied in, and the settlement amount to move. It may be a foot in the door and then move as interest rates go up - if this policy allows??

With this mortgage you could easy end up paying 10% or more per year on £100000 which is £833.33 per month interest alone. If someone recommended this mortgage to me I run a mile from that advice and go elsewhere. Personally, now, in these times, I would go for a 10 year fixed mortgage as I do not think prices will get cheaper and I am sure of the cost.

Also it is good to get a mortgage that allows overpayment. If I did rent out one room, I would have finished my mortgage years ago, rather than have a few years left.

property prices tend to be a tad cheaper in winter. Be aware or maintenance charges/service charges/additional fees too.

welshy_2002

I'd save for a larger deposit. 20% or even 25% to unlock the best rates.. that's what I plan to do (looking to buy in a year or two)

bodmil

Ditto the above, I'm aiming for 25% minimum, hopefully 30% if it take me a while to find the right house.