Overwhelmed FTB - thanks in advance!

FTB1234_2

Hello moneysavingexperts

I’m a long-time reader, first-time poster on this board and would really value your sage advice….

Myself and my partner are in the early stages of buying our first flat together. We have a deposit of at least 15% and are looking at properties in the region of £200K, so a total mortgage of between £160-180K, depending on the property.

The number of mortgage options out there is a little overwhelming, to say the least, but we have been doing our research and are confident that we want a 3-year fixed term mortgage.

We have an agreement in principle (“mortgage promise”) with the bank I have banked with all my life, and the deal they have offered is 5.09% with a fee of £995 to be added to the mortgage. This is based on a 85% LTV.

We know this is not the best deal out there by any means, but this particular bank has the advantage of only requiring one month of payslips (my partner has been freelancing at the same company for 18 months but is only now in the process of getting a permanent contract), and I feel a (probably irrational) strange affinity with them and somehow like the neatness of having almost all my dealings with one bank (my partner’s bank requires 3 months of payslips which pushes our hoped-for schedule back a bit).

So, my questions are: is there any benefit to having a mortgage with the same bank as your other accounts? (aside from the fact you get a small discount on their usual interest rates). Are you more likely to be given a mortgage if the majority (not all) of your credit history is with them? Does a 0.5% difference in interest rate (I haven’t seen many 85% LTV/ 3 year fixed term deals offering a lower rate than 4.5%) make a significant enough difference that we should continue to shop around for another lender who only requires 1 month of payslips? And does anyone recommend the best way of finding a (reasonably priced!), unbiased, whole of market mortgage broker?

Many thanks in advance for any suggestions you have,

_Andy_

Hi

To clarify, does your partner have the permanent contract now?

Thrugelmir

An AIP is not an offer. The issue of your partner freelancing will arise during the full application process. So better to wait until a permanent contract is in place.

Having a relationship with a lender is a plus point. As they obviously know far more about you and your credit history (within bounds). Though will not give preferential treatment when it comes to underwriting. As will still complete the necessary formalities such as 3rd party credit checking etc.

Try the FSA website for some unbiased advice as to possible alternative lenders.

http://tables.moneymadeclear.org.uk/Comparison-tables-home/Mortgages/Compare-mortgages/

Ms_Scarlett_2

OP - get friendly with the mortgage calculator, and also the overpayment calculator on this site.

£180,995 over 25yrs @ 5.09% = £1,068
£180,995 over 25yrs @ 4.5% = £1,006

So far so "£62 a month for it all to be neat and tidy. What's the big deal?"

BUT if you can AFFORD to pay £1,068 a month off your 4.5% mortgage, eg. overpaying the £1,006 repayments by that same £62 every month, overpaying would save you £13,943 in interest alone, and mean you pay it off in full 2 years and 7 months earlier.

I'm now obsessed with overpayments. Even tiny small ones like this make a huge difference over the life of your loan, so are not to be sniffed at. A 0.5% difference doesn't sound much, but in real terms it's massive. You should definitely shop about as there is no real advantage to staying with your own bank, they'll just pretend it is and try to make you feel all warm and cosy to get your business.

Mansfield would (might - obviously subject to the usual bumpf) do you a mortgage with your figures at 4.10% for three years. You repay £965 per month. Add to that the extra you'd have been paying on your bank's mortgage each month (now a very healthy looking £97) and overpaying would save you £17,995 in interest alone, and mean you pay it off in full 3 years and 9 months earlier. Bargain!!

Hope that's useful and good luck.

GMS

Is the flat a new build?

Many lenders restrict the LTV on these.

Requiring only 1 payslip is a standard request but the lender will always reserve the right to ask for further information as required.

You also need to make sure the payslip and bank statements (if requested) do not give any information to the underwriters that the job is new.

Have you told the lender of the change in employment?

FTB1234_2

Thank you so much for all your advice, it is very helpful and much appreciated. To clarify - we are not going to apply for a mortgage until my partner has his contract all signed and has received his first proper payslip etc. The bank we have spoken to so far is well aware of the situation and so we have been completely transparent. He won't have a probation period either, which is obviously a plus. Despite this, might the newness of the job still be a problem? If so, it might be easiest for us to apply for the mortgage in my name only. Thanks all! It is truly nerve-wracking, this (attempted/possible) housebuying malarkey....

FTB1234_2

Sorry, there is one other thing I wanted to ask about. We have an AIP, which I know is in some ways meaningless, given that they have not done full credit checks etc yet, but I have also read that this is necessary/preferred by estate agents when you come to start viewing properties. If we were to see a flat and want to put an offer in, at what stage should we actually start the formal mortgage application - at that point? It isn't possible to have 'more' than an AIP in place before actually finding a property is it? Many thanks (again!) in advance...

GMS

Which lender have you applied to? Some are ok with new jobs, some want a minimum time of current employment.

Is the flat a new build?

Doshwaster

It's always worth talking to your own bank for their opinion but I wouldn't put any value on loyalty. I have been with HSBC (nee Midland) for over 25 years - they were my first port of call and they gave me an AIP in minutes. In the end I went to a local independent mortgage advisor as HSBC can only offer their products and I found dealing with their in-branch advisors frustrating and I didn't want to arrange something as big as a mortgage with a call centre.

The AIP from HSBC was still useful though. It helped me set my budget for what I could afford and showed estate agents that I was a serious buyer.

FTB1234_2

Hello

Bank is Lloyds. The person we spoke to said one month of payslips would be enough but then he was trying to sell us a mortgage I guess....! Flat will be a period conversion - not new build - so LTV ratio should be OK in theory.

I suppose the normal process is for us to view properties, whilst at the same time getting our credit reports, and then, when we find somewhere, start the formal mortgage application? At which point it could all fall down of course! I know this is a probably a VERY stupid question, but it's not possible to have secured a mortgage before finding a property is it?

Thanks,

GMS

FTB1234 wrote: »

Hello

Bank is Lloyds. The person we spoke to said one month of payslips would be enough but then he was trying to sell us a mortgage I guess....! Flat will be a period conversion - not new build - so LTV ratio should be OK in theory.

I suppose the normal process is for us to view properties, whilst at the same time getting our credit reports, and then, when we find somewhere, start the formal mortgage application? At which point it could all fall down of course! I know this is a probably a VERY stupid question, but it's not possible to have secured a mortgage before finding a property is it?

Thanks,

If the flat has just been converted they may well class as new build which will mean restricted LTV.

You can have a mortgage agreed in principle prior to finding a property but you will not get a formal offer as part of the offer process would involve valuing the property.

Do you know when the flat was converted? Has it been occupied?