Unsure FTB

D55

Hi all,

My wife and I are looking to buy our first place, we're currently living with my parents.
We've had an offer accepted for a place we really like- it's £400k.
My parents are helping out with a deposit, we're looking to put down 25%.

I'm absolutely terrified about having a mortgage though. We've got a pretty good life at the moment, eat out, good holidays, nice cars etc!

Our monthly net income is £5k and we will probably be paying around £2k a month towards the mortgage (some overpayment included).

Will we be streching ourselves? I think we should be ok, but so unsure!

moesasji

Seeing that you are talking about a mortgage of 5x house-hold income I would personally think twice as your personal circumstances can change.

My advise: Use a mortgage rate calculator* and "play" with the interest rate you think might happen in the near future. In other words DON'T assume that you will have the same interest rate that you can obtain now in a time when the base rate is at 0.5% only (long term average is closer to 5%). Put in a worse case scenario that you might have to pay a mortgage rate of 7 or 8% in the very near future. Can you still afford that easily as 8% is a monthly payment of £2313 (repayment)?

*) Sorry still not allowed to post links....hence can't post a link.

D55

Thanks for your response.

Yes have thought about rate rises in the future. I'm planning to reduce the mortgage as much as possible while rates are low. I don't think we should expect rates of around 5% for a while........When they do return, I hope to have reduced my debt enough to not effect us too badly.

dimbo61

Even with a 25% deposit and I assume that your parents are giving you the money as a gift you will still struggle to get 5X joint income.
Do you plan on having kids ? enjoy the same lifestyle you have already ?
Why start on the property ladder at £400K ? why not £250K and save on stamp duty plus see if you can afford the mortgage as if it you were paying £300K !!
In 2 years if you have managed to overpay big style ( consider offset mortgages!) then you will have a much bigger deposit for the next property

moesasji

D55 wrote: »

Thanks for your response.

Yes have thought about rate rises in the future. I'm planning to reduce the mortgage as much as possible while rates are low. I don't think we should expect rates of around 5% for a while........When they do return, I hope to have reduced my debt enough to not effect us too badly.

My advise still stands....plug the interest rate you can now get in a calculator which includes repayments and see how much of the debt remains after the end of the mortgage. That to me appears to be the only way to do an "educated" guess on whether or not it makes sense.

A calculator including repayments you can find on this forum....just use google "mortgage-overpayment-calculator"

brit1234

Personally I would wait another year and enjoy the price falls. I would not want a 5xsalary mortgage on a house which is falling in value.

If you are going to buy get a cheaper property or haggle them down more, circumstances can change and you seem to be putting yourself at unnecessary risk.

GMS

If the OP has a net income of 60k per year then the mortgage is not 5 x income. Mortgage calculators would be based on gross income so more like 3.75 x income at a guess.

As for price falls who knows if and by how much. Plenty of people are waiting for the crash and have been for a long time. I assume a 400k house is a long term place so any falls in value should be made up with long term gains.

The predicted crash may well never happen, and in some places prices are rising so could be a good time to get in.

Whatever the outcome a home is primarily somewhere to live and be happy, raise a family etc, not something to make a profit from.

wymondham

D55 wrote: »

Hi all,

My wife and I are looking to buy our first place, we're currently living with my parents.
We've had an offer accepted for a place we really like- it's £400k.
My parents are helping out with a deposit, we're looking to put down 25%.

I'm absolutely terrified about having a mortgage though. We've got a pretty good life at the moment, eat out, good holidays, nice cars etc!

Our monthly net income is £5k and we will probably be paying around £2k a month towards the mortgage (some overpayment included).

Will we be streching ourselves? I think we should be ok, but so unsure!

whenever you buy you need to change your spending habbits to fit in with your new financial profile. Have you thought about reducing your leisure spending?

dan_l

brit1234 wrote: »

Personally I would wait another year and enjoy the price falls. I would not want a 5xsalary mortgage on a house which is falling in value.

If you are going to buy get a cheaper property or haggle them down more, circumstances can change and you seem to be putting yourself at unnecessary risk.

Please ignore any advice from this poster. When I was looking to buy a house about 2 years ago I used to come in this forum and he had a signature saying something along the lines of "house prices will drop 50% by Christmas", obviously this was completely off the mark and there has been very little drops and it's disappointing to see he is still here scare mongering first time buyers.

People like this will be waiting forever to buy a house, all the time years are going by where they could be enjoying having their own house.

I'm not saying their won't ever be a crash, infact looking at historic stats its pretty likely at somepoint there will be but where do you draw the line with waiting for one?

D55

Thanks for your replies.

I've taken on board what you have all said.

Why a 400k house vs a 250k ? The areas with the latter priced places are not very nice. We like the place, it ticks most of the boxes and we're planning on being there for around 10 years then move into something larger and rent out the place (good rental prospects).

Yes, we will have to adjust our spending- no more impulse purchases and endless eating out!

Offset is what we are going for- the flexibility is very attractive and although I do impulse spend I'm pretty financially disciplined- hate debt so reducing the mortgage will be a priority.

Regarding increasing rates- as I say, I will aim to reduce the mortgage while rates are relatively low.

House prices? I don't know where to start with this one- so much conflicting information / data. I know one thing though- I kick myself everytime I look at prices 10 years ago!

brit1234

dan_l wrote: »

Please ignore any advice from this poster. When I was looking to buy a house about 2 years ago I used to come in this forum and he had a signature saying something along the lines of "house prices will drop 50% by Christmas", obviously this was completely off the mark and there has been very little drops and it's disappointing to see he is still here scare mongering first time buyers.

Yes but two years ago interest rates were panic slashed from 5% to 0.5% delaying the crash. All what happened is prices were put on hold. However they are still overvalued and falling again.

If you think prices will rise ignore myself but be careful not to get burnt.;)