1st time buyer,small deposit,complete newb...help!

philk1

ok.....so me and my wife would like to buy our first house together...our current rent will soon come to an end and it feels like the right time for us to buy our own place.We've started the ball rolling by viewing a few properties in our area, we've read lots of the FTB guides and i've contacted one well known 'whole of market' broker (initially!).

where we are at...

combined income of 40k p.a
savings of 20k
no children
no debt at all
no bad credit history (but not much credit history at all really)
looking at houses around the 150k range (which is about as cheap as property goes for around here!)

since our savings don't push us comfortably into the 85% ltv range then really we're looking at 90% ltv (which would leave us,at the moment,with 5k to spend on other fees/expenses and hopefully have some left over for any unforeseen circumstances).

The broker that i spoke to doesn't see any problems and has given us a 'decision in principle'.....based on us borrowing £135k over 25 years, fixed rate and with a £15k deposit the repayments average around £950 pcm.....This sounds like a lot to me... but it's do-able.

This weekend we viewed a property within our budget that we were kind of expecting NOT to like...a wild card. We DID like it (a lot):):eek:. It's not however,what i would imagine to be a straightforward purchase...it's a flying freehold (part of the property is built on top of another property), and part of the property is also grade 2 listed.
It all looks to be in good condition, just out-dated fittings (which is no problem since i'm a bespoke joiner and furniture maker).


should i....... chuck myself in, push things forward, and see what i can work out? speak to some more brokers/advisers? Forget it and look for somewhere less complicated? other?


I'm finding it all a bit scary tbh and am looking for any views/advice ,good or bad, on what to do next really!!

thanks to you all in advance!:)


p.s Phew^^ that's quite long......sorry!

beecher2

That sounds like a very high rate to me - is it 7%? Personally I'd keep saving rather than pay that sort of rate, or at least see another broker to see if there are alternatives.

philk1

beecher2 wrote: »

That sounds like a very high rate to me - is it 7%? Personally I'd keep saving rather than pay that sort of rate, or at least see another broker to see if there are alternatives.

thankyou for the reply Beecher2:)

...yes my initial thought was that it does seem an exceptionally high monthly payment for the amount borrowed. It was an average however so i'm assuming that some of the quotes that the broker 'scanned' through would be lower (and some higher!)......in fact looking through some of the 'best buy' rates it looks that i could reduce the monthly payments by up to £150 pcm.....that's a lot of money.

....as you can tell, i am completely green when it comes to buying property,so the thought of not going through a broker really does scare me.....like you say i think getting advice from some more brokers is the least i should do.

The predicament that we are really in, is that in the area that we are in (Cotswolds) the amount that we would spend on renting another property (as i said our current cheap rental will soon come to an end), would mean that saving more for a higher deposit would be difficult (since rent in this area is high and getting higher)........i know that we're going to be at the wrong end of the stick where rates are concerned:(

thanks again!

Procrastinator333

Personally. I would look to save like mad for a year. £40k combined salary, if you saved every penny for a year, I reckon you could add another £15k to the deposit. Why do I think that is so important? Because then you have £30k on a £150k property. 20% deposit is the magic number. You then have access to the likes of:

HSBC Tracker. BOE + 2.39%. At today's rates and assuming a £120k mortage, that is a repayment cost of £562per month. Of course rates may rise, but would need to rise by 5% before that mortgage would cost you £917 per month.

If you prefer the security of fixed.

HSBC 2 Yr fix 4.09%. Monthly cost £639 per month
HSBC 5 Yr Fix 5.19%. Monthly cost £715 per month

If you do wait, you are risking prices rising (though personally I'm skeptical) and the possibility that these products become more expensive. But for me, the cost difference of a 10% vs 20% deposit is so great that I think it is worth the risk.

Good luck whatever you decide!

philk1

Procrastinator333 wrote: »

Personally. I would look to save like mad for a year. £40k combined salary, if you saved every penny for a year, I reckon you could add another £15k to the deposit. Why do I think that is so important? Because then you have £30k on a £150k property. 20% deposit is the magic number. You then have access to the likes of:

HSBC Tracker. BOE + 2.39%. At today's rates and assuming a £120k mortage, that is a repayment cost of £562per month. Of course rates may rise, but would need to rise by 5% before that mortgage would cost you £917 per month.

If you prefer the security of fixed.

HSBC 2 Yr fix 4.09%. Monthly cost £639 per month
HSBC 5 Yr Fix 5.19%. Monthly cost £715 per month

If you do wait, you are risking prices rising (though personally I'm skeptical) and the possibility that these products become more expensive. But for me, the cost difference of a 10% vs 20% deposit is so great that I think it is worth the risk.

Good luck whatever you decide!

:)thankyou Procrastinator.....^^this is all good info....we are saving like crazy at the moment,if we could live in the cheap shared rental that we're in at present for another year, then saving an additional £15k wouldn't be a problem........but we can't, and the fact that this property has caught our eye has confused things even more!.....it's a case of heart or head.....my brain is 100% scrambled!

.....if we could at least get into the 15% deposit territory ,quickly, then we'd have a load of better options open up.....time to start selling stuff ...

thanks again!


edit: p.s. i've been waiting for property prices in this area to become more affordable for the last 15 years....even over the last couple of years they haven't by any significant amount (if at all ...they've just stopped rocketing up and anything on the lower end of the scale seems to sell pretty quickly)....honestly,i wish they would crash, but around here, i don't think they will.

Procrastinator333

philk1 wrote: »

edit: p.s. i've been waiting for property prices in this area to become more affordable for the last 15 years....even over the last couple of years they haven't by any significant amount (if at all ...they've just stopped rocketing up and anything on the lower end of the scale seems to sell pretty quickly)....honestly,i wish they would crash, but around here, i don't think they will.

I don't think they are going to crash either. I just don't like overpaying for something and interest expense is as much part of the cost as the ticket price.

You were quoted £950 per month. I would be surprised if you couldn't find 6.5%. That is £912 per month. However, due to majority of charge being interest early on, it would be 6 years before you paid off £15k of the capital on that mortgage to get to the same £120k.

If you waited for 12 months, got the extra £15k deposit and then got a £120k mortage on 80% LTV on a 5yr fix at 5.19%, at the end of that same 6 year period (so 5 years in to this mortgage), you would have a mortgage of only £93k.

Yes there are numerous variables, maybe prices rise, you get to the lower LTV sooner and the effect is reduced. Maybe they fall and it takes longer. Maybe interest rates change. But again, they can go for or against you.

Each to their own, and perhaps moving now is important enough to outweigh this extra cost, fair enough. Reading your latest post, sounds like you have made your mind up, in which case, I wish you all the best!

philk1

...i wish i had made up my mind!!.......eveything you are saying makes perfect sense to me....i could save some really serious amounts of money by having a bigger deposit than i have now.

...i know that if i make the move now, then theres a chance that we'll get the house that we've seen ,but we'll be getting well and truly hammered for having the minimum deposit required....

...if i don't move on it now, then we'll be living in somebody elses house and we'll be getting hammered for a much higher rent than i'm paying now,meaning it could be longer before we move into the more favourable LTV brackets.

either way, i'm in for some large degree of hammering.:j

Biggest dilemma i've ever been faced with by a long stretch (and a dilemma that i'm guessing a whole load of others are in too).

appreciate your time,advice and input:)

Yorkie1

I suppose the other thing to bear in mind is what your salaries are due to do in the next couple of years. For example, if you're a civil servant then you're in all likelihood on a 2-3 year pay freeze with no increments. This means that your money won't go as far when other costs go up e.g. heating, petrol, insurance etc. Only you can tell whether this will be a greater drain on your resources / threat to your finances if you buy the house by cutting yourself very fine with monthly repayments, or whether it will not have a great impact on your ability to repay the mortgage but will seriously prevent you saving more.

philk1

Yorkie1 wrote: »

I suppose the other thing to bear in mind is what your salaries are due to do in the next couple of years. For example, if you're a civil servant then you're in all likelihood on a 2-3 year pay freeze with no increments. This means that your money won't go as far when other costs go up e.g. heating, petrol, insurance etc. Only you can tell whether this will be a greater drain on your resources / threat to your finances if you buy the house by cutting yourself very fine with monthly repayments, or whether it will not have a great impact on your ability to repay the mortgage but will seriously prevent you saving more.

hi Yorkie....thankyou for your thoughts.....

....you raise a valid point and although we're both lucky enough to be very secure in our jobs (me being employed in a business thats been very busy in the last couple of years, and my wife being self-employed and also fully booked),whether our wages will rise in line with the inevitable rise in the cost of living that i see coming for everybody,i just don't know.This i guess, is the main reason that i've only really been considering fixed rate (rightly or wrongly?)if i was to go for a mortgage i'd like to be sure that i could afford the repayments.

Interesting that nobody has said "go for it" yet (except for my parents,who come from the generation that did ok out of buying their homes with not a lot of equity)......how times have changed!

Orkatec

The broker will be getting cut so why not approach the lenders direct or through this site.
Sounds like you found a home rather than a house and dont want to let it get away, its not always about the money and if you are in the trade you should be able to add value to cover any more depreciation in the market if any.
We just sold our Box and bought an old cottage and all the problems that go with it, bought with the heart.
I am on my second mortgage and was advised not to take it by my lender, because I am a contractor it suits me. I have a basic payment but it allows me to over pay, pay in lump sums any time and is off-set. I have a bit of savings right now and instead of getting interest I am paying virtually no interest on the mortgage, it also allows me to port to the next property saving the expense of setting up a new one.
Just looked at my Bank you can get £135000 Mortgage 10% Deposit for £845 a month 2 yrs fixed.


Its not always about the money its about what suits you.


James

Procrastinator333

philk1 wrote: »

Interesting that nobody has said "go for it" yet (except for my parents,who come from the generation that did ok out of buying their homes with not a lot of equity)......how times have changed!

I'm not saying don't go for it. Cost is only one part of the buying decision. I just think it is better to make your decision with a better understanding of the implications, one of those being financial.

Me, personally, we could own a place sooner by living with the in-laws for the next 12 months. But we don't, we rent atm. After bills etc, that is maybe £16k we are spending out of choice that could have gone to the deposit. So we could have done it more cheaply. £16k is a lot of cash. But we have decidied to spend that cash anyway. That is a slightly easier decision as I know pretty much the exact numbers and the choice we are happy with.

Your decision is more vague. It may cost you around £200 a month extra for 6 years if you move 12 months early. It might cost more, might cost less. If prices and mortgage rates rise, it might even be cheaper buying today. I don't think that likely, but it is possible. We are waiting until we get the 20% deposit and better rates. For some, buying now, avoiding the uncertainty and getting the next 12 months in the right house is worth that £200 a month extra. if that is you, then go for it. Money should be part of your decision, but not your sole criteria.