Newbie mortgage question

ravravrav

Hi All

I've never taken out a mortgage but I will consider doing so when I have saved up a deposit and ready to buy a house for my family.

I have done a little research online but I was wondering if someone could help me with figures:

1. If I work out 4x my salary I get 68K. So I'm presuming this is the max I can borrow.

2. I have savings of 25K.

I'm thinking of buying a property around 75K so if I put down 10% deposit (7500) that will leave me savings of 17500. That leaves 67500 left for which I can take out the mortgage. Do those figures make sense?

Also I wondered how much would this work out to paying back each month (if it was a 25yr mortgage, repayment)?

All help appreciated,

blueberrypie

10% is the minimum you will need as a deposit - a higher deposit will give you access to better mortgage deals.

Yes, if you put down £7500 on a £75000 house, you would need a mortgage for £67,500 - the other 90%. You also need money for fees (solicitor, possibly lender, valuation, etc) and other items which will need to be paid - moving costs, insurance, and so on.

The monthly payment will depend on your interest rate. £67,500 borrowed over 25 years on a repayment basis will cost about £395/month. At 8% it would be about £520.

ravravrav

Thanks for that - it's a good starting point.

I definitely plan on having a bigger deposit than 10% because I know it will let me have lower monthly repayments.

I guess from what you say it may be worth having an extra 5K on top of my deposit as starting money.

blueberrypie

Yes, bigger deposit and extra savings is good.

The larger deposit means you need to borrow less (lower payments), get access to better deals (lower payments) and have less chance of ending up stuck in negative equity. Only disadvantage is that it takes a bit longer to save! - but then if you use that time wisely to keep an eye on the market in the areas where you might buy, you'll quite possibly also get a better deal on the property.

Phil_GT

if it helps i bought a 80k hours with 20% deposit, 35 years to keep cost down £345 a month on a nationwide 2yr fixed..

ravravrav

Thanks for that - I was always confused about that!

One final thing, I've seen some good mortgage calculators but I always get stuck on the 'interest' sections. I usually make it up - is that supposed to be the bank of England interest rate or the interest rate charged by the mortgage provider?

Anyone have an example of it?

blueberrypie

ravravrav wrote: »

Thanks for that - I was always confused about that!

One final thing, I've seen some good mortgage calculators but I always get stuck on the 'interest' sections. I usually make it up - is that supposed to be the bank of England interest rate or the interest rate charged by the mortgage provider?

Anyone have an example of it?

The interest-rate is whatever you signed up to with your lender. It could be a fixed-rate for a certain period - which means it (and your monthly payments) will stay where it is until the end of that period, or it could be a tracker, which means it will go up and down as the base-rate does, or it could be a variable rate, which means the lender can do pretty much whatever it wants with it.

You should probably start with this page, including the downloadable Mortgage Guide: http://www.moneysavingexpert.com/mortgages/

dimbo61

You have savings of £25K and you plan on putting down £7500 plus maybe another £5000 to get a better deal !!!!
So what will earn in the savings account

herbiesjp

I would suggest looking at putting down a 25% deposit.

This way you borrow less.

And the cost of borrowing those funds would be lower.