First Time Buyer - Mortgage Questions & Advice

coatsey100

Hi,

I'm a newbe to this forum and looking for some advice on mortgages.

My girlfriend and I are looking to buy our first property in January 2012 and are currently working hard to pay off all our credit card debts and to save approx. 12% deposit.

We are both graduates and will be looking at property valued between £160,000 - £170,000. Joint income is approx. £60K.

Questions:
1. 90% LTV:
Will a 90% LTV mortgage be a viable option for us? Is the market starting to offer more of these? I have seen a few at competitive rates for graduates - do you believe will more be available at the end of the year?

2. When to Arrange a Mortgage?
When will be the best time to visit a mortgage adviser? We plan to have our deposit by December - is it worth trying to arrange a mortgage before this so we are ready to start looking at properties ASAP or do we need all our deposit in place first?

3. Student Loans:
Though we will be debt free (credit cards, over drafts etc), we will still have student loans to our name. Will this have any negative factors in arranging a mortgage?

4. Mortgage Duration - 25 years or 30 years?
I believe the average duration of a mortgage is 25 years though i have seen them offered at 30 years, thus reducing monthly repayments. Is the 30 year duration a standard option on mortgages and are there any negative factors that may risk our application when requesting a 30year mortgage?
Any advice would be highly appreciated.

Many thanks.

originalmiscellany

Hi there:

I am by no means an expert but,

1) My girlfriend and I are looking to buy our first property in January 2012 and are currently working hard to pay off all our credit card debts and to save approx. 12% deposit.
Correct -clear all your debt (you don't say how much your debts are - if you've got combined debts of say 20k, then clearing that and getting say 18k on top of that will take some going!).

2) We are both graduates and will be looking at property valued between £160,000 - £170,000. Joint income is approx. £60K.
Good. I would say that realistically, you could aim to save between 2 and 3 k a month without many difficulties, especially if you don't live in London.

Questions:
1. 90% LTV:
Will a 90% LTV mortgage be a viable option for us? Is the market starting to offer more of these? I have seen a few at competitive rates for graduates - do you believe will more be available at the end of the year?
Who knows?! 90% always carries a much higher interest rate - which over the life of a mortgage could make a huge difference. Ideally, I'd save as much as I can, even if it means renting for 2 years, and focus on say Jan 2013 with a 35k deposit - or whatever you can afford.

2. When to Arrange a Mortgage?
When will be the best time to visit a mortgage adviser? We plan to have our deposit by December - is it worth trying to arrange a mortgage before this so we are ready to start looking at properties ASAP or do we need all our deposit in place first?
You can get a mortgage in principle which is valid for 6 months - ie. your bank says they will lend you money, and it normally is valid for 6 months, but it varies from user to user. I would get all debts cleared before you even think about getting a mortgage advisor visit, although it would be worth meeting up to see what is available to you, but I think the answer will be that you need to wait.

3. Student Loans:
Though we will be debt free (credit cards, over drafts etc), we will still have student loans to our name. Will this have any negative factors in arranging a mortgage?
Not really, they're a small percentage of what you pay at a low rate. The banks will be more concerned with say gambling debts or CC charges at 27.9 %!

4. Mortgage Duration - 25 years or 30 years?
I believe the average duration of a mortgage is 25 years though i have seen them offered at 30 years, thus reducing monthly repayments. Is the 30 year duration a standard option on mortgages and are there any negative factors that may risk our application when requesting a 30year mortgage?
Yes, a repayment mortgage by its nature means that for the first say 5 years, you're paying off mainly interest and not capital. I innocently thought that every year of a 25% mortgage meant that 4% of the house was paid off. No so.
If on a 30 year mortgage, you will spend so much more on interest. the only way it could work would be if you're going to overpay, thus although it's a 30 year mortgage, you will aim to clear it in say 22.


If you're serious, complete an SOA
http://www.makesenseofcards.com/soacalc.html

and this will identify what you're spending. if you're brave, post here and the friendly people here will identify loads of areas to save you money.!

Finally, you need to ensure both you and your partner are on board with money saving, e.g. saving small change/any money into a savings account/cutting back on sky/expensive gadgets. I wish I was more sensible when I was younger - I bought a laptop for 1k, really didn't use it well and wish I had 1k less off the mortgage than a duff laptop!

Any qns/response, post here, and let's chat.

coatsey100

Many thanks for your reply. Very useful to get your opinion. Cheers!!!