First-Time Mortgage Advice

TomAshford

Hello MSE,

It's my first post although I have browsed the forums for a while.

My partner and I hope to soon buy our first home and I am hoping to receive advice on mortgages.

We live in London and our property price range is £250,000-£300,000 depending on how much we are allowed to borrow (we have a meeting soon with a mortgage provider).

We have a deposit of 12-14% of this amount. The building society (Nationwide) has told us that, theoretically, we could borrow up to £270K.

My concern is that if we borrow the maximum amount and stretch ourselves we will be okay for any fixed period but would be hard pushed if we reach the end of this to find that the BoE base rate has risen and the standard variable rate means that the mortgage becomes unaffordable.

I am keen for us to get as much 'house' (read one-bedroom flat!) as we can, but equally don't want to struggle 2 or 3 years down the line.

On the plus side, we both have good jobs and *should* see our income rise substantially in the next 2-3 years. Also, we have no plans to marry or have children within that period.

I'd be grateful for any advice....

GMS

Try to squeeze your deposit to 15% either by getting more or reucing the property to allow it. This will open up better rates as the Loan to Value will be 85%. Over 85% and rates tend to jump quite sharply.

You are right to be concerned as to rates at the end of the period, not everybody looks at this.

Why not look to a 5 year fixed rate. This would give greater security and if you are expecting pay rises look for a lender who would allow overpayments without penalties. This would allow you to reduce your mortgage balance in readiness for any change of rate at fixed term end.

After 5 years, and more so with overpayments you should have begun to make a hole in the balance. If property prices rise (don't place any reliance on this as a strategy) then you would be looking at a lower LTV again and hopefully a reduced interest rate.

Look at Nationwide but search the market too. Look at the total cost, not just the rate. Arrangement fees can make cheaper rates more expensive than a higher one overall, with valuation fees varying wildly too.

A broker may be worth a chat to assist you.

Good luck

**Juice**

I'd recommend trying to push up to to 85% too - we bought our first house in April and there was a real different between the payments if we borrowed with a 15% deposit or a 12%ish deposit. A mortgage broker came in handy too at this point!

The other thing to keep in mind is that when your fixed rate period ends, you can remortgage to a different lender and get another fixed rate period - I know someone who has managed to reduce the term of their mortgage by doing this.

Don't forget to take into account all the additional costs like solicitors fees, valuation fees, stamp duty if over £250k etc. I used an interest free credit card to buy all our furniture to make the financial shock a bit easier (which I'm now pleased to say is fully clear).

Thrugelmir

Over £250k is a 3% jump in stamp duty on the entire purchase price. So only offer £249,999.

First time buyers have an exemption from paying stamp duty on property up to £250k until next March.

TomAshford

Thanks to everyone for their helpful advice.

We met with Nationwide on Saturday and we have been approved so all set now really, just the small detail of actually finding a property!

Yes we are going to stick within 85% LTV as the rates are massively different, I was surprised just how big a difference this makes but we will definitely do our best to get every penny for a deposit now.