Please Advice on 125% Mortgage for a FTB

knaresbrook

I am First Time Buyer looking to be on the property ladder preferably looking to buy a 2 bed house. I don't have a desposit only have 1k in my bank account. I earn 40k and partner earns 12k totally joint income of 52k. I have a personal loan of 35k and credit card debt of 6k totally 41k. I got arranged for a 95% mortgage and 30% unsecured loan which consolidates my current loan and the extra money at an interest rate of 6.11% for 2 years fixed from Northern Rock Lender for a property price of 225k. I am not sure whether to take the risk having an existing 41k debt. Please advice whether to go ahead with the 125% Mortgage.

Market_Oracle

pay off your debt first.

Save a decent deposit

then look to buy a house, yuo should aim for total debt to be no more than 3.5X joint earnings, or 182k instead of the 266k your looking at.

greencat_2

Personally I wouldn't as you'll be making yourself pretty vulnerable. What happens after the two year fix for example? Definately concentrate on paying down your existing debt.

Might be worth checking the Debt Free Wannabe board for advice on how to make savings on your expenditure.

http://forums.moneysavingexpert.com/forumdisplay.html?f=76

I found the following a salutary read:

http://www.thisismoney.co.uk/credit-and-loans/debt-news/article.html?in_article_id=415162&in_page_id=62

seven-day-weekend

You will be starting in 25% negative equity. What if the house prices drop? Or interest rates go up?

Pay off a substantial proportion of your debts before even thinking of buying a house.

maninthestreet

Your unsecured debt is more than your annual income - you need to reduce this debt significantly before you consider taking on any further debts, secured or unsecured.

lynzpower

Having bought a property with debt ( not as much as you- in terms of amount or proportion to salary) I would NEVER in my life recommend that any one does this. Looking at your situation you wont be able to afford it.

If you have only 1k how do you expect to pay solicitors, stamp duty, searches? Removal men? Associated costs ( of which they are vareid & many)

Pay off your debt- save some money, by the time you will have sorted yourself out, hips will be in, there may well be a different landscape in the property market- at the very least you will save the searches money whicyh is a few hundred if I remember correctly?

mustrum_ridcully

Start living within your means, and learning how to manage your money. It's shocking that a couple earning a combined income of over £50k are £41k in debt without having a mortgage.

The CC debt, isn't brilliant but can be lived with if you switch cards to a 0% deal.

The £35k loan, I'm jumping to conclusions here but did you really need that new car, BMW or 4x4 was it?

meanmachine_2

OK, this is why house prices are crazy.

Responsible lending from Northern Rock? Do me a favour.

To the OP, I say heed the advice of others. Taking on more debt is not a way to get rid of debt. All you're doing is extending the repayment term from, say, 5 years to 25 years.

That ain't clever. But the bank will love it.

char9

I have this exact mortgage, but also know I took a risk in doing so and would prob not recommend it. We bought somewhere far cheaper than the maximum we could borrow and following the improvements we made, the property is currently worth more than the total loan.

However I still know it was a very risky thing to do and i could still end up in a sticky sitch, which is why I waited until other debts were paid off and am now overpaying the loan.

One thing that is worth bearing in mind is that if you decide to look for a new mortgage deal elsewhere after the two years are up, the interest rate on the loan part of the mortgage rockets to something like 12%, so you would either see a massive increase in your payments, have to lose all your equity by getting a bigger mortgage, or transfer to another personal loan, which would likely not be over 25 years and therefore your payments would still increase.

knaresbrook

Thanks for all your advice mate. But i am already 33 now all my friends at my age have a decent house, which i am the one without a property. I am not jealous. I too want to be on the property ladder If i look for a property price of about 175k will that be something a good choice but bit far from where i am currently live. Please advice.

BettiePage

knaresbrook wrote:

Please advice.

We did. Pay off your debt first, THEN see about buying a house.