Moving house/ lender - advice needed please!

lobsta100

Hi all

I am new to posting on this site so forgive anything that breaks with etiquette!

I am looking for advice on my current situation:

We currently live in a 2 bed flat, bought for £250k in mid 2007. We have an interest only mortgage with Nationwide. We are currently on their BMR which is 2.5%, and on the £212,500 loan (85% LTV), we have pretty low monthly payments.

Here is the predicament - our mortgage was secured orginally as a guarantor loan, as neither myself or my wife was on a very good salary. This option is no longer available for various reasons.

We are now looking to potentially move to a house, as we have 1 young child and a baby on the way (pls G-d) and really no longer have the space.

Houses we have been looking at are in the region of £475k.

My wife currently does not work as she looks after our child. I am currently on approx £35-40k p.a.

I am concerned that it seems lenders will only lend 3 or 4 times your annual salary, which means practically speaking we will never get a mortgage from anyone!

Is there any solution for us in our current situation to enable us to move before we reach retirement?! Is there perhaps a way of porting our current smaller SVR loan and borrowing additionally with Nationwide for the new property?

Many thanks, and apologies for my naivety in this regard,

Adam L

TonyMMM

lobsta100 wrote: »

. I am currently on approx £35-40k p.a.

I am concerned that it seems lenders will only lend 3 or 4 times your annual salary, which means practically speaking we will never get a mortgage from anyone!

Shouldn't be a problem getting a mortgage with that income - but you are not going to get anywhere near £475k ... time to be realistic about what you can afford.

Multiples of 3 or 4 times salary , maybe 5 if you were lucky are the historical norm ... the market has just gone back to somewhere near reality for lending (which it had lost completely in 2007).

If your flat cost £250k in 2007 ...what is it going to sell for now ? How much equity (if any) do you have ?

Senior_Paper_Monitor

Unless I have misunderstood something ...... you have something less than 8% deposit available for your 'new property'.

This would mean you are looking to borrow approximately 11 times your salary, with three dependents.

AND you want it interest only ?

Naive may be a slight understatement !!

CloudCuckooLand

It doesn't really matter if you keep the current deal and add extra borrowing to it, or go for a single product. Other than the interest rate side of things of course. Both are possible.

The problem is your income, even using £40k, you are trying to borrow over 10x income. Not just trying to stretch from 4x to 5x/6x. Which is a complete non-starter.

Unless you have a £150k deposit, that you have chosen not to mention..?

Why suddenly jump £225k in property value? A 3-bed terrace can often be obtained at the same figure as a 2-bed flat (although regions differ obviously)

The London average property price is around £300k, why aim 50% above that ?

Especially when your income is relatively low for the capital.

shortchanged_2

Sorry OP but your plans are totally unrealistic. How the heck do you think you can afford a £400K+ mortgage on an income of £40K.

Most lenders now are reluctant to give IO mortgages and definately will not if you have no repayment vehicle in place (do you)?

With increased costs to you with more dependents, I'm afraid you really need to be looking at cheaper areas to live.

originalmiscellany

400,000 at interest only at a very generous 5% = £1666 a month! I think as others have said you need to be realistic, even 4 times your salary is going to be a burden long term.

lobsta100

Ok I told you I was not very knowledgable in this area so go easy!
!
The reason the house we would be looking at is so expensive is we are extremely limited with what area we can live in as we need to be in close walking proximity of certain religious amenities due to our beliefs. In these areas, a 3 bedroom house!worth moving into (without needing to move again in a couple of years) is minimum £400k (so maybe use that as a figure instead of my original £475k).
!
Due to the demand in the area, our home has not lost value and may well sell for slightly more than £250k - perhaps £260k is realistic at this time. Let us say at a push that after sale of property, paying off mortgage, we could have a 20% deposit on a £400k property.
!
I accept the average for London is £300k, but I do not have the freedom to live in the cheapest areas in London.
!
Surely there are plenty of people out there who obtain mortgages for houses costing £400k who do not earn £100k?!It can't be that uncommon for a wife to be looking after children and not working?

CloudCuckooLand

So, there's a £42k deposit sitting around to boost your equity for the next house purchase?

You already live, despite your religious belief requirements, somewhere that you can get a 2-bed flat for £260k. A 3-bed equivalent would cost £300k or so. Is there not a 3-bed version in the same block?

£80k deposit, leaves £220k mortgage. Very borderline. Pretty unlikely with dependants. Even more unlikely interest-only - you'd need evidence of a repayment vehicle.

Anything near £400k is a complete non-starter. Check with your employer that you are getting the right rate for London. People wouldn't need £100k. Two incomes on £40k, or one £70k and one £20k, and some deposit, etc... all do-able.

If religion is the priority in your life, you could find what you need and live near it outside of London, and commute to your work in London. It seems strange that your religious elders were short-sighted enough to setup facilities in a catchment that none of their "parishioners" could afford to live in?

(assuming this is not a troll post - get off to school you scamp)

lobsta100

CloudCuckooLand wrote: »

So, there's a £42k deposit sitting around to boost your equity for the next house purchase?

You already live, despite your religious belief requirements, somewhere that you can get a 2-bed flat for £260k. A 3-bed equivalent would cost £300k or so. Is there not a 3-bed version in the same block?

£80k deposit, leaves £220k mortgage. Very borderline. Pretty unlikely with dependants. Even more unlikely interest-only - you'd need evidence of a repayment vehicle.

Anything near £400k is a complete non-starter. Check with your employer that you are getting the right rate for London. People wouldn't need £100k. Two incomes on £40k, or one £70k and one £20k, and some deposit, etc... all do-able.

If religion is the priority in your life, you could find what you need and live near it outside of London, and commute to your work in London. It seems strange that your religious elders were short-sighted enough to setup facilities in a catchment that none of their "parishioners" could afford to live in?

(assuming this is not a troll post - get off to school you scamp)

This is not a troll - not sure what a troll is.

I'm not sure what religion you are describing but I am an observant Jew and therefore there are only a handful of areas in London that we can live in where synagogues and the community are within walking distance on the Sabbath (as we cannot drive) and kosher food is available.

For this reason, these areas are high demand and subsequently the properties are overpriced.

I also do not believe that my salary is so low for a 27 yr old and I can't believe that it is this impossible for a married couple where only 1 person works to move into their first house.

CloudCuckooLand

Not pretending to know anything about the details of your religious requirements, it seems that others cope; http://en.wikipedia.org/wiki/Stamford_Hill

Rightmove has 3 3-bed+ flats under £300k... http://www.rightmove.co.uk/property-for-sale/Stamford-Hill.html?sortByPriceDescending=false&minBedrooms=3

We need "NeverDespairGirl" to contribute...knowing both London and the religion.

beecher2

OP needs a severe reality check. Even with a £80k deposit (though I can't work out where the extra £42k comes from), you'd struggle to get a mortgage on your present house, and the lender would require you to say how you'd pay off the capital. You need to rethink your whole plan, as what you want and what you can afford appear to be two very different things.