Would like more money – is it possible?

PeterMT

Hi, I have a tricky mortgage situation and would appreciate advice.

Took out a 100% mortgage on a £140,000 property in 2007. Have paid about 5 grand off that since then. We now want to get into a nicer area and a bigger house, close to where we'd like our daughter to be schooled. The new property will cost around £220,000.

I'm on a salary of £25,000 and, currently, my wife is not working (full time mum). We can probably raise a £10,000 deposit on the new property (including the equity in the house if we sell for what we've paid (which is doable). We're thinking of asking our current lender (Bank of Ireland) for more money, though obviously this would require nearly a ten times multiplier which is unheard of in the current market.

The reason we're even contemplating this is that we live a very careful lifestyle and have no debts. As such, we can easily pay a lot more each month on the mortgage. On the new house our repayments would rise by about £250 per month, which is easily affordable. We're also comfortable in paying another few hundred pounds when the interest rates inevitably rise. We also have a few other dribs and drabs of monthly incomings, but nothing stable enough to qualify for self certification.

Therefore, in short, we can pay the new mortgage even on my current modest salary, however my wife is a teacher (left work for baby). As such she can pretty much walk into employment in our area on a salary of £25,000. The only reason we'd consider this more expensive house is because, if payments got tight, she'd just go back to work. Trouble is, we don't want her to have to go back to work (and therefore get a contract to prove income to the lender), if we probably don't have to in the short term. She can also raise income via private tutoring and child minding (she's registered). All this tells us we can easily afford the mortgage, but I'm thinking we're going to struggle to convince the lenders? Will our years of repayments (never a missed payment) have any bearing on reassuring them?

The other part of the story is that our house was purchased with my mum standing as guarantor (my wife was training at the time). We never took her off the mortgage (she's not on the deeds) because of the admin charge. If they fail to allow it on mine and wife's salary - would they extend my mother as a guarantor but for the new amount (combined £55,000 salary).

In short, we're worried that the area we're trying to move into will soon be out of our price range (it's recovering quickly round there and prices are a premium). We have a decent potential earning capacity, but we need to push now to get in the schools we want before prices skyrocket!

Comments welcome.

Regards
Pete Tyler

[Deleted User]

Less than 5% deposit and a mortage of 10 x income?

No.

beecher2

You have absolutely no chance of getting a mortgage on your salary. You might get a mortgage of £100,000, leaving a shortfall of £110,000. Lenders won't take into consideration that your wife may or may not enter employment.

No idea about guarantors, but no matter what you need a 10% deposit, you need to start saving as you need at least another £12,000, plus fees, stamp duty etc. I think the cost of the house is at present out of your price range.

herewegoagain2010

I think to be honest you'd be very lucky to find a lender that would take the risk. A 10K deposit on a 220k house doesn't leave any room for price drops and won't provide the banks a safety blanket. It wouldn't take a lot for you to be in negative equitity,.I think the only option is to sit it out, save like mad and concentrate on reducing the amount you owe on your current property first. You really need 25% deposit on houses now to get a decent interest rate, or you'll end up with a lot higher rate. Realistically, you're going to need a 40K+ deposit even if your wife was working full time to get the better rates.

Without sounding rude PT, if you're really careful why haven't you saved any additional money or overpaid anything off your current mortgage? I'd work out how much the new mortgage would be and then overpay this amount on your current mortgage to see if it's possible for 6-12 months.

Peelerfart

Have to agree with the guys above - You've got no chance, sorry

Annisele

The only way I can see for you to move to the new area would be for you to rent there (and either sell your current house or let it, subject to getting consent from the lender - which is not guaranteed given your LTV).

Regardless of your wife's employment situation, your deposit is simply too small, sorry.

If your wife does get new employment, you might still have the problem of convincing the lender that the new mortgage is affordable, given that you might then have the costs of childcare.

Remember that your mortgage payments might go up by more than "another few hundred pounds". At rates of 10 or 12% (which are historically not all that high) your payments might go up very steeply. I'm not making a prediction about interest rates other than "they'll go up", but with such a tiny deposit the risk for the lender is huge, no matter how careful you are.

somethingcorporate

I am suprised the futility of the situation didn't come to you when you were typing out that post.

Save hard and get the wife back in to work and when you reach £30k+ deposit you can make a go of it. I'm suprised that you think you'd cope by doubling your mortgage yet you have saved nothing in the last 3 years and only paid back £5k on a relatively small mortgage (and suggest you are frugal).

The repayments would likely be £1k a month which doesn't leave you much on a £25k salary.

Sorry!