Rent or Buy?

Dummie_2

We've been talking to a IFA who was introduced to us by the lady who showed us around a new build show home.

House value 235K
Deposit 50K
Burrow 185K
Term of 25 years
Rate of 4.39% for 2yrs

The IFA has offered us the following.

1) Capital Repayment (repay £1022.24 per month)
2) Interest Only (repay £680.43 per month)
3) Combination of the 2 where the loan is split so that one
portion is being repaid whilst the other portion remains on Interest Only (repay £846.72 per month)

At the end of the two year period we are able to remortgage to gain another low rate.
Can make overpayments without penalty so can reduce the outstanding mortgage.

Is this a good offer? I have absolutely no clue if the terms/interest rate etc are good or not.

We originally went to view the new build because they advertised that they were offering to lend 20% of the property value interest free for 5yrs but the IFA has since explained to me that the amount due repayable to them after these 5yrs is not on the current value of the property but on the value at that time. He advised me not to go for this option.

If this was the case then DH and I have figured that for 235K we can buy an older property with more to offer. The new build has 2beds (both double) but for that sum we could probably buy quite a nice 3bed or maybe take out a smaller mortgage and buy a 2bed.

Views, opinions and advice desperately needed pretty please.:T

Oh, one more thing. Can we actually tell this IFA that we are not considering buying the new build? Will he still help us?

advent1122

Have I missed something?
You have £1314 monthly income and you are thinking about getting a £185K, costing £1022/month mortgage?
Do you need a quarter of a million pound house?

F_T_Buyer

Dummie wrote:

Rate of 4.39% for 2yrs

I'd question what tie ins they are with that mortgage. That rate is less than the base rate, so there must be some other costs with this or painful tie ins later on.

Elliesmum

I would not take on a £1022 pm mortgage with an income of £1314! What would you live on! What would the council tax be on this property? I live in a band A house and have a CT bill of £95 per month!

EM x

A_Nice_Englishman

With a combined income of £15K or so coming from the business plus £6K tax credits that makes a total of £21K. Bearing in mind that profits from a business (or tax credits for that matter) are not guaranteed like wages/salary I personallt wouldn't borrow more than 2.5 x. With your deposit of £50K you should be looking at properties around the £100K mark.

Dummie_2

Just landed back on earth with a BIG bump.

Thanks for that tug on the leg to get me back down. Could have made the landing a bit softer though :rotfl:

You are all so right (damn!). I suppose I'm aiming far too high. The worse thing is I now have to try and explain all this to DH. Wish me luck.

Dummie_2

The clouds are calling again (It's so foggy here it does actually look like I'm in the clouds here in Somerset):D

Say we adjust our income to be 18K net per month (everything accounted for. TC/CHB/income). Then say we look at properties that are around the 200K mark. This will mean we need a mortgage of 150K. I know this is more than the usual 3x annual salary but I'm trying to base this on affordability. Will this work?

Anyone know what our monthly repayments will be?

Don't mean to be a pain. Just trying to explore every possibility. Thank you.

A_Nice_Englishman

Try the BBC Mortgage calculator , for example.

Assuming an interest rate of 5.75%, you would be looking at £1177 a month repayment or £886 interest only. Remember that interest rates and other bills can rise and property values fall, though!