Advice about mortgages - again

firehawk_2

Hi. I am a self employed IT contractor.
Recently I have saved ALOT of money and getting a really good pay from a client of mine. in around 3 months, I have saved (with all the expenses taken out etc...) around £6-7K.

My contract also just got extended

I am thinking about buying a property and having it classified as "mine"

I currently rent and pay £600/month. My monthly expense with bills, food etc.. including rent comes to around £1000, give or take.

Now, I am wondering:

1) how does a mortgage work?
2) how much do you need to pay back / month?
3) which is the best type of mortgage?


I am really a newbie 101 when it comes to things like this, and would love to hear your experience and comments and advice.

I am looking around the £200K mark for some properties I have seen but again, not sure how it all works. who knows, maybe like the past 2 years I probably wouldn't get anywhere! But I am saving alot of money and getting great pay from my client, which helps! Makes up for last year's recession!

Thanks

getmore4less

Basicly you borrow money at a given rate for a given time and then pay it back prefereably on a repayment schedule, which evens out the payments.

Stick some numbers into a mortgage calculator, I use this one,
http://www.whatsthecost.com/mortgage.aspx

look at the details of the monthly schedule and it will show you how much of you mayment is interest(or renting the money) and how much is actualy paying back the debt.

A typical mortgage will be a between 2% and 6%. and initialy over around 25years some need longer to keep payments down other prefer shorter to pay less over all.

eg: in you case £200k @5% 25years £1170pm
play with the term and the interest rates to see what the differences are.

Ok looks good so far whats the catch.

Well there is a BIG ONE.

Lenders don't like to give you all the money they like you to have paid some and curently this needs to be around a minimum of10% so for your £200k house you will need at least £20k and on top of this expenses, for netter rates this need to be 20% and very good rate 25% or more for dome lenders.

This will give you plenty of time to learn about mortgages if you are saving at about £2k per month

dimbo61

So if you can save say £2000 a month and in 12 months you will have £30K+ in savings
Now you then find the £200K property you want well YBS have a 3 year offset fixed at 4.69% and borrowing £170K works out at £963.34 a month for the first 3 years!!
As you are earning and saving good money each month the offset would be useful.
Dont forget the legal fees, surveys,stamp duty,moving costs and mortgage fee £495

firehawk_2

ouch. ok so... not really affordable then. how on earth do people manage to buy a house, it doesnt make sense, unless you are a banker I guess!

1200/month (roughly) for repayment is wayyyyy too much. not enough money to pay the rest of the bills.

opinions4u

firehawk wrote: »

how on earth do people manage to buy a house, it doesnt make sense, unless you are a banker I guess!

You probably earn more than 80% of the staff working in a high street bank branch.

firehawk_2

true. but not sure how they can still afford 1200/month repayment + other bills!

so how can I get the repayment to go down to around 800-1000 / month?

Conrad

firehawk wrote: »

ouch. ok so... not really affordable then. how on earth do people manage to buy a house, it doesnt make sense, unless you are a banker I guess!

1200/month (roughly) for repayment is wayyyyy too much. not enough money to pay the rest of the bills.

Millions of modest means can and do afford it. You simply buy a property within your budget. I often get people who more or less demand they get thier nideal home, but cannot afford it, to wit I reply -'I want an Audi spyder, I demand it - it's not fair the price is high'.

If it means moving area, so be it. If that does not suit, rent.

Conrad

Also as a self employed person the lender will lend something like 3 or 4 x your net profit, not your turnover. They want at least 2 years figures and like to see a stable or rising trend. YBS will be VERY fussy in what they lend you.

A great many people do interest only mortgages - the payments are less, but you need to think about paying capital down nas time goes by.

firehawk_2

sure. thanks. tough stuff! cant have a place of my own then really

Peelerfart

Unfortunately in the house buying world 6-7K is not a LOT of money.

keep saving though and then you WILL have a lot of money to buy your house

firehawk_2

yeh, 1 year before I die probably!

so really how can I reduce the amount of repayments per month? a high endownment?