My advice to First Time Buyers...

MyHouse75

Interesting read, thanks for sharing your experiences with us and good luck with the rest of the house-buying journey! We also opened the bubbly after our offer was accepted, but didn't realise how many times the bubbles lose their fizz until you get to completion stage.

barnaby-bear

paule wrote:

Meanmachine, you're being very mean!

What's so wrong with a 100% mortgage?

What I don't get is if £150k mortgage the deposit is £15k which you can't draw down from the mortgage so do all these people do exchange-completion same day or just take a personal loan for £15k or borrow £15k from family. A lot of vendors won't compelte and exchange same day as want to know definitely will happend before boooking removals...

maryjane01

Hi Martin_OB if you have thoroughly thought through a 100% mortgage don't listen to anybody that implies you "aint very smart". I also just got a 100% mortgage and while fully understanding the risks of negative equity, think I would have been taking a greater risk as my capacity to save in relation to house prices would have continued to erode (BTW I am in London and house prices are still rising here). My partner and I are still young, also both realistically expect bonuses and payrises, and even if house prices do fall we can afford our mortgage, our house is our home, and if interest rates continue to rise we will be squeezed but will manage. We are more then comfortable with the possible risks and the decision we made. I am glad the 100% mortgage product was available and we are prepared to ride out any storm that may come.

We have bought a house that needs a few improvements, and we think we will be adding value, we have a lodger and all of his rent all goes to over paying the mortgage, and we have made additional overpayments. I am feeling positive that in 2 years we will be remortgaging with 90% LTV.

maryjane01

Barnaby-bear I realise there are risks for a seller accepting a buyer with a 100% mortgage, but in our case I think the seller benefited. The house was vacant, and from viewing the house th completing was only 6 weeks as we were not in a chain and could move immediately. Completion probably would have been dragged out by a few weeks if we had a deposit. I nkow mot all sellers are selling a vacant property but in the house buying/selling game there are pros and cons with everything. You might have a buyer with a deposit that is stuck in a chain and the chain and it falls apart. I am not trying to advocate 100% mortgages, in fact I belive they are a suitable product for very few people, but why give people a hard time if an individual assesses the risk and deems it a suitable risk considering their circumstances.

I would say 100% mortgages are good for young graduates with good career prospects and no dependents that are financially savvy and don't run up credit card debts.

cupid_s

paule wrote:

Meanmachine, you're being very mean!

What's so wrong with a 100% mortgage? Not everyone is blessed with a large deposit to put down. OK, if house prices fall then you are in negative equity, but you're not far from that with a 95 % mortgage, and negative equity only hurts if you want to move.

Meanmachine did say best of luck (after a bit of a snidy comment admittedly)! Though really the OP was offering their experienceas and advise and whether someone thinks they were silly or not isn't really relevant!

I too wish the OP all the best. We have friends who have been gazumped several times and they feel they'll never get their first home. I hope they'll be very happy in their house.

But in response to the post above. I worry about people taking out 100% mortgages because of the affordability issue. If you're buying a property with 100% repayment mortgage for 150k, your repayments will be in the region of £875. If you can afford repayments of £875 per month, why haven't you got anything saved up until now? Obviously if your rent was above and beyond this it's a perfectly valid excuse, but with most first time buyers I know they are currently paying about £450 in rent, have very little deposit, yet think they'll be able to afford £900 per month in mortgage! If they could they'd have been saving that extra £450 every month previously! However if they've only just got a job/graduated this isn't an option and why shouldn't these people be able tobuy sooner rathr than later if they are sure they can afford repayments?

Saying not everyone is 'blessed with a large deposit' is a bit strange. No-one came to me and said 'there you go cupid_stunt, I'm giving you this 22k towards your first house'. Me and my hubby worked hard to save that money and many others could do the same and even a smallish deposit would make a difference.

Regards to negative equity. Now I'm sure the OP has accounted for the fact that interest rates will probably rise, they don't seem to be going into this with their eyes closed and as they are both working they can probably comfortably afford small increases in the mortgage. However I speak to so many people who are taking out 100% mortgages and really stretching themselves. I ask can they afford the mortgage if the variable rate was to be, say 7.25%, which is not completely unrealistic. They said they were hoping they didn't go that high and if they did they would sell! But if they cannot sell for what they paid they're a bit stuck really. So while negative equity is only a problem if you are selling, sometimes interest rate hikes mean that selling is the only option.

I think that is what meanmachine meant. However you cannot tar all first time buyers with the same brush. When we bought our house 2 years ago, we worked out that we could still afford to pay (and overpay for that matter) the mortgage if the interest rates went up to 20%! I would not have bought our house had we not been able to comfortably afford at least a 2.5% rise mortgage interest. Not all first time buyers are as thick as some people seem to think we are!

sarah_elton

barnaby-bear wrote:

What I don't get is if £150k mortgage the deposit is £15k which you can't draw down from the mortgage so do all these people do exchange-completion same day or just take a personal loan for £15k or borrow £15k from family. A lot of vendors won't compelte and exchange same day as want to know definitely will happend before boooking removals...

With a 100% mortgage you have to exchange and complete on the same day. That's standard practice for it, and my solicitor told me she was coming across it more and more. My vendor had no problem at all with it, although they'd already moved out.

I suppose there is a question over whether you should tell the vendor when making your offer - if they don't find out till further down the line from their solicitors, and they're against it, they may get upset I guess......

If you can get a 100% mortgage at a reasonably competitive rate (i.e. not from Northern Rock), and you're aware of all the risks associated with it, and additional costs, I have no problem with them and don't regret mine at all.

sarah_elton

maryjane01 wrote:

I would say 100% mortgages are good for young graduates with good career prospects and no dependents that are financially savvy and don't run up credit card debts.

Seconded. Mine was a risk at 4.2 times my salary when I took it out (Feb this year), but between the capital I've repaid so far and salary increases in that time, it's currently at 3.4 times my salary and I can afford the repayments up to a rate of 8.5% (higher if I let out my second bedroom but I don't want to ). I'm comfortable with that situation, especially as by the time my fixed rate ends I'll have further professional qualifications.

So long as you know your situation and what you're getting into they're not always a bad thing.

olly300

cupid_stunt wrote:

But in response to the post above. I worry about people taking out 100% mortgages because of the affordability issue. If you're buying a property with 100% repayment mortgage for 150k, your repayments will be in the region of £875. If you can afford repayments of £875 per month, why haven't you got anything saved up until now? Obviously if your rent was above and beyond this it's a perfectly valid excuse, but with most first time buyers I know they are currently paying about £450 in rent, have very little deposit, yet think they'll be able to afford £900 per month in mortgage! If they could they'd have been saving that extra £450 every month previously! However if they've only just got a job/graduated this isn't an option and why shouldn't these people be able tobuy sooner rathr than later if they are sure they can afford repayments?

Lots of graduates are in careers where for the first two-four years they earn very little but once they get their professional exams and/or relevant industry experience their salary increases a lot in a very short period of time. Especially if they change employers. OK most of the people I know who this has happened to have been lawyers and accountants but it happens in other careers as well.

Of course the intelligent ones only start looking for property once they have the salary increase, and have calculated even with their debts they can afford a large mortgage.

toontastic

It's scary Martin_OB, because in terms of finance, insurance etc I seem to be doing the exact same thing as you even down to the exact same mortage. I must admit HSBC are very good for the graduate mortgages. My only difference is I felt I shouldn't go over the 100,000 mark for my first house since I am also getting a 100% mortage and I wanted to make sure I could afford extra cash if rates go up and to pay for all my new things. It meant it took a lot longer to find the right house but I've found it now and hopefully should be moving in to it soon. FYI it cost £90,500 and will only be costing me about £450 for the first 3 years (obviously depending on interest rates) and then moving up to £570. I'm planning on over paying all the time though in the hope I can pay it off much quicker.

Martin_OB

Toontastic...if I was buying on my own then there would be no way that I'd go over £100k. Fortunately, I'm buying with my girlfriend (who has a very good job), so we have been able to split the costs right down the middle. They are also paying relocation expenses for us - which is taking another weight off our shoulders!

We've gone for a three bedroom semi, at £141.5 - the national average for a three bedroom semi is around £160 (correct me if I'm wrong)...so we feel extremely happy with our deal.

Our of interest, who did you get your buildings/contents insurance from?...