first time buyer help pleaseeee :)

Annisele

OP: I appreciate I might be teaching you to suck eggs, but here's some (very approximate) figures that might help show why you'd be paying back £231k for a £115k house.

Firstly, let's assume the world has gone mad and you can borrow at an interest rate of 0%. In that case, if you borrow £115k over 35 years, you pay no interest at all - so your monthly payments are £115k / (35*12), or about £274. In my magical world with 0% interest, if you borrowed £115k you'll always pay back a total of £115k no matter how long the term is.

Now lets get a bit more realistic and assume interest rates are 5%. In the first year, you'll pay something like 5% of £115,000 in interest - in other words, you have to pay £5,750 (£480 ish a month) before you make the slightest dent in the amount you borrowed.

For a 35 year mortgage at 5%, I make the monthly payment about £580 - a total of £243,764 over the term.
For a 30 year mortgage at 5%, the monthly payment will be about £617; £222,244 over the term.
For a 25 year mortgage at 5%, the monthly payment will be about £672; £201,683 over the term.

So...if you choose a 35 year term rather than a 25 year term on a £115k loan at 5%, you'll save about £92 a month now. But you'll pay for it later; the total cost of the 35 year mortgage is about £40k more than the total cost of the 25 year mortgage.

Things get even worse if the interest rate is higher. If the interest rate was 15% on a loan of £115k, I think you'd pay back a total of £607k over a 35 year term and £442k over a 25 year term.

(I know that you're not talking about necessarily borrowing £115k; you already have some of the purchase price. And I don't promise that all of my arithmetic is sound! But even if my maths is dodgy, the overall point - that 35 year mortgages are much more expensive than 25 year ones in the long run - is still valid).

Meatballs

caylansmummy wrote: »

we dont have any debt, i.e dont have credit cards or loans, we have a car which is £176 a month with only 2 yrs left to pay of it..we are both in our overdrafts me £400 him £600

Taking a mortgage is a very big financial risk and you need to fully understand your situation. Being in your overdraft and having outstanding car finance means you are in debt.

On top of your mortgage deposit you will need money set aside for legal fees, moving costs, new furniture. If you are still living with parents (do they charge you rent?) then you may need to budget for more outgoings like water, elec, gas, phone, internet, food etc.

1399steve

Just a thought but if affordability is an issue, why not consider selling the car?

Let's say u could get £10k for the car now, you could pay off the loan, get a decent used car for £3k-£4k (if that) and still have £2k-£3k to reduce the mortgage or the term

satchmeister

1399steve wrote: »

Just a thought but if affordability is an issue, why not consider selling the car?

Let's say u could get £10k for the car now, you could pay off the loan, get a decent used car for £3k-£4k (if that) and still have £2k-£3k to reduce the mortgage or the term

A guy called Sam Walton apparently drove a 10 or 15 year old pickup truck even when he could afford a better motor. Yes he was the founder of WalMart.

franklee

Have a play with the mortgage calculator Don't forget to put in realistic interest rates to see what happens of rates go up.

http://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator

DannyboyMidlands

"its terrible trying to get onto the property ladder...they dont give anyone the chance to make a go of things"

Who are they? You're not giving yourselves a chance.

Looking back now you should have bought a car for £900! Why the hell would you want to spunk half your combined pre-tax income on a car?

Putting it bluntly you need to stop wasting money and save hard for a number of years. Throwing all the money you have left on a 95% mortgage for a new build is madness.

mcc100

https://forums.moneysavingexpert.com/discussion/2622401=

I assume your BTL idea did not proceed ...........

gerry_mc

Annisele wrote: »

OP: I appreciate I might be teaching you to suck eggs, but here's some (very approximate) figures that might help show why you'd be paying back £231k for a £115k house.

Firstly, let's assume the world has gone mad and you can borrow at an interest rate of 0%. In that case, if you borrow £115k over 35 years, you pay no interest at all - so your monthly payments are £115k / (35*12), or about £274. In my magical world with 0% interest, if you borrowed £115k you'll always pay back a total of £115k no matter how long the term is.

Now lets get a bit more realistic and assume interest rates are 5%. In the first year, you'll pay something like 5% of £115,000 in interest - in other words, you have to pay £5,750 (£480 ish a month) before you make the slightest dent in the amount you borrowed.

For a 35 year mortgage at 5%, I make the monthly payment about £580 - a total of £243,764 over the term.
For a 30 year mortgage at 5%, the monthly payment will be about £617; £222,244 over the term.
For a 25 year mortgage at 5%, the monthly payment will be about £672; £201,683 over the term.

So...if you choose a 35 year term rather than a 25 year term on a £115k loan at 5%, you'll save about £92 a month now. But you'll pay for it later; the total cost of the 35 year mortgage is about £40k more than the total cost of the 25 year mortgage.

Things get even worse if the interest rate is higher. If the interest rate was 15% on a loan of £115k, I think you'd pay back a total of £607k over a 35 year term and £442k over a 25 year term.

(I know that you're not talking about necessarily borrowing £115k; you already have some of the purchase price. And I don't promise that all of my arithmetic is sound! But even if my maths is dodgy, the overall point - that 35 year mortgages are much more expensive than 25 year ones in the long run - is still valid).

You are right they are more expensive. But in the short term they help people who want to get on the property ladder cut their initial outlay.

Why do people go on about 15% interest rates as if they are all around the corner? We would have to move 14.5% to get to that rate. As I have said before, why not tell everyone it might go to 100%?

As long as they can afford the monthly mortgage payments and the rest that goes with it then there is no reason not to go for it. Having an overdraft of a couple of hundred is no big deal as long as it isnt costing you too much to service. Not everyone, especially younger people,are in the situation to be debt free and have massive savings! I thought the point of these forums was to give advice and not tell people how stupid they are?

gerry_mc

BitterAndTwisted wrote: »

Look, these are not financially astute people making sensible long-term plans. They have savings but both are running overdrafts. OP claims it will take too long to clear their overdrafts of less that £1k each. They are running a car for which they paid £9k in cash and financed the balance of £3.5k which is costing them £176 a month with "only" 2 years left to pay. Who really needs to buy a car for £12.5k when you have a combined income of only £30K?

Never mind that loan-deposit thing from the developers which will need to be paid back. These are people who cannot afford to buy this particular property with that particular deal. Not in a month of Sundays

Why is the fact they bought a car for 12.5k a problem to most? I would assume that the car is new? So in that fact they are reducing the risk of not having to get the car repaired and taking a bad risk. Not everyone knows enough about cars to go and buy a 2nd hand car confidently.

Having an overdraft of £400 + £600 respectively shouldnt be a problem as far as the mortgage goes. It wasnt when I was in mortgages. as long as it is not costing too much to service thne its not a problem. What would be the point in paying off the overdrafts and not having money sitting there incase they need it ie deposit?

Please remember the OP reads this as well and everyone gets so high and mighty!

eschaton

gerry_mc wrote: »

Why is the fact they bought a car for 12.5k a problem to most? I would assume that the car is new? So in that fact they are reducing the risk of not having to get the car repaired and taking a bad risk. Not everyone knows enough about cars to go and buy a 2nd hand car confidently.

Having an overdraft of £400 + £600 respectively shouldnt be a problem as far as the mortgage goes. It wasnt when I was in mortgages. as long as it is not costing too much to service thne its not a problem. What would be the point in paying off the overdrafts and not having money sitting there incase they need it ie deposit?

Please remember the OP reads this as well and everyone gets so high and mighty!

If they are living in an overdraft, have a car loan and a deposit that probably doesn't even meet 5%, nevermind not a penny for fees and start up costs.....

Then they can't afford to buy a house yet.

I hope the OP does still read this thread as they then may think again.