Advice please

lindseyh2

Hi

Just a bit of a query, my bf and i are going to start the dreaded mortgage process, he has just been left £25,000 by his nan and we have a further £15-£20,000 in savings etc, we want to put down £27,000 for deposit and keep the rest as savings, fees furniture etc, only problem is we only earn between us £28,000 plus about £1000 in bonus etc, is this enough to get £130,000 mortgage? we have no debt and I have a good credit rating although he has never had credit unfortunately (too well behaved)

Also he gets £1200 a year gifted from his dad, would they take that into account for extra income?, I dont want to get in a mess, we can afford about £750 for mortgage, we dont drive or anything and our expenditure is low

Thank you for any advice

djm1972

Hi Lindsay,

Assuming that the £130K mortgage required is after your £27K deposit then you're looking at a multiplier of 4.6 - certainly achievable in today's lending environment.

You're also doing the right thing by offering more than a 15% deposit as this will open up the next tier of rates to you from most lenders; and will almost certainly mean that you will have no problem getting accepted for a mortgage of £130K from the lender of your choice - so shop around!

djm1972

Forgot to mention;

As you will still have c.£15K in savings, think seriously about an offset mortgage where that £15K can be instantly available whilst effectively reducing your outstanding balance at the same time...!

lindseyh2

thank you very much for the advice, just to ask, would the additional gifted income be taken into account?

Thanks again

herbiesjp

The gifted income will not be able to be taken into account.

The scneario looks do-able. WHat is your prference fixed or variable rates?

lindseyh2

we would be looking at fixed preferably just so we know what we are paying every month, I am a very good at budgeting so we just think it would be best this way, I know you can miss out on interest rates being lower but I like to be safe rather than sorry, also if we know we are coming out of our fixed period, we can estimate how much we will be paying and due to the amount of savings we have we can dip in if really really necessary at any point

MortgageMamma

Hi Lindsay

As the other brokers said, it is doable but please remember this is an income stretch of more than 4.5 times joint income, and your partner will no doubt have quite a low credit score as he does not have any credit (odd I know, but true, get his ratings from experian and equifax to check). I would think carefully about stretching that extra bit further with your income, personally i would stick to 4 x joint maximum as FTBs, have you remembered to cost in your life assurance, critical illness, mortgage payment protection and buildings and contents?

Not trying to take the wind out of your sails chuck. I'm just trying to get you to think for yourself what is best.

lindseyh2

Hi

I did worry about oh lack of credit, I have heard it is worse to not be in debt when it comes to getting credit, we have looked at everything ingoings and outgoings etc, £130,000 would be our uppermost limit and I am not that keen on doing it, we have looked at possibly getting a house for £148,000 which would give us a more realistic stretch of 4.2 with a mortgage of £121,00 I think, I have budgeted in for insurance etc, and we can live reasonably ok, and still save, we dont have a car or anything and dont need to pay to travel to work so quite lucky, I know we cant take my OH gifted earnings into account, but it does give us an extra £100 a month to play with

MortgageMamma

Hi Lindsey

I think you would be on a better footing if you kept your purchase price to under 150k. I'm not sure where you live but up here in Lancashire thats quite a lot for a first time buyer to lend. You might want to consider getting a mortgage that allows for overpayments and put that gifted allowance to good use. If on a repayment basis keeping your mrotgage term above the usual 25 years will reduce your monthly payments even further. You need to budget at least £80 a month for insurance, more if you can afford it.

Have you thought about the kind of mortgage you would like? Would you find benefit in a flexible mortgage, for example, one where you could overpay, underpay, take payment holidays, borrow back overpayments etc? There are commonly mistaken to be linked to current accounts, but most are not.

Are you thinking of a fixed rate mortgage? if so, for how long? if not, how will you cope if interest rates rise by say an additional 5%? Have you budgeted for stamp duty?

lindseyh2

Hi

I agree with keeping the purchase price under £150,000 unless we can knock something down, you never know!, we are in wonderful cider land (somerset) and whilst not as cheap as up north(I wished I lived up there) we can get a reasonable two bed house for that either in village or town, we have no kids by the way (and wont be having any) so two bed is more than fine

we have a budget of £27,000 for deposit and a further £7,000 etc for fees and furniture (stamp duty etc) we have more in place if we need it, also have been begging for vouchers, money etc for xmas to help with furniture so that will help too, ,my OT will be keeping £12,500 back in savings so its there if we need it.

We would like a fixed mortgage for 3-5 years if possible, I know you do pay more in interest and rates etc, but I am a worrier and would prefer to know what I am paying every month if I can, we have no debt and never intend on getting any (if we cant afford it we dont have it simple!) so could afford a rate rise (i have a very sad spreadsheet i use to work this out on) also due to our savings, we could cut out saving for a bit if necessary and I can always cut down on other things if needs must, we also get at least an extra £2000 a year in bonus and overtime, its just not a guaranteed amount so this isnt taken into account thats all

MortgageMamma

Hi Lindsay

You've obviously been considering this at length and I'm impressed with your attitude to lending, you dont need to be told by me at how this will benefit you!
The only thing that really concerns me is the lack of credit history for your partner. some lenders can be sticky about this, so its best in my opinoin to approach a lender who does not have a "computer says no" mentality and who will assess your application on its individual merits. There are some very good three and five year fixed rates available at the moment, have you researched any? I think you are at the stage where you need to begin to do this, you coudl have a quick look yourself and see how you get on, but you would be wiser to instruct a whole of market (ask if you need this explaining) broker to do it for you. Just a word of warning though, some brokers call themselves whole of market when they are in fact restricted to a panel. Some brokers who are not restricted to a panel will only advise and recommend products on which they can earn a fee (for example, HSBC, Britannia and other lenders will not pay brokers commision for business referred). Both situations totally legal but not above board IMO. You need to talk to any broker you intend instructing at length, to see if they have access to EVERY UK LENDER and if they will advise/recommend on non commission paying mortgage companies, and if so if they charge for doing so

Hope that was not too much waffle, just ask for an explanation on any points you don't fully understand
MM