Mortgage wisdom sought!!

lambpuff

Hi everyone

I'd like to seek some advice re my mortgage prospects!

Story is, I live with my parents (I'm 26 and a proper grown up, it's getting embarrassing) and the time has come to move out. Rent is high, so I'd rather invest in a mortgage and I live in a part of the country where I'm on the verge of being completely priced out of the market. I can just afford a small one bedroom at the moment but, with a teeny bit of parental help (to the tune of £20k) I'd like to buy a small 2 bedroom. Plan is that best friend would stay in the spare room and help me with the bills. This would actually work out cheaper than staying in a smaller place on my own. I've done the sums and I can definitely afford it from a cashflow POV.

The only problem is, I don't know if a mortgage provider will give me the time of day. I have my eye on the Scottish Widows professional mortgage because I know they lend a lot relative to earning power. I'd like to borrow £140k on a property valued at £160k.

At the moment I am earning £30k p.a., due to go up to £33 in September (although I don't have this guaranteed on paper!) and then likely to increase significantly in the future (although, again, no guarantee of this). I have a personal loan that I am paying off at £200 a month (to be paid off this time next yr) and a credit card with a current balance of £2300 (which I can pay off by March 07, due to currently living at home). An interest only mortgage would be about £680 pcm fixed rate til 2012, and with my friend's help this is completely affordable.

My credit rating is good, altho obv I do have a lot of debt.

So really, I have 2 questions. (1) Will SW tell me where to go given my additional burdens and (2) if they do tell me to go, will this refusal seriously damage my future efforts to get a mortgage?

Hope you don't think this is hopelesslely naive. Would v appreciate your thoughts!!

Lambp

herbiesjp

Hi lambpuff

Welcome to the board

1) If you can clear the credit card, the you will be just short (i think) of what SW maw be willing to offer

2) If they refuse, it will not show up as a black mark against you.


There may however be other more flexible lenders that could look into this for you

HTH

Sooler

The mortgage lenders will probably throw money at you, convince you can afford to borrow more than you ever wanted to.
They don’t mention you’ll need money to pay other bills you’ll have – but those will be your problem.
At the end of the day they don’t care if you can afford it or not, if it comes to that you can’t pay they’ll take your house.

Personally I don’t think it’s too good an idea relying on a live in friend to fund your mortgage and living.
Do you really want to live with them – they may suddenly see the light and get peed off with plowing their money into subsidising your house purchase for you.

What use is an interest only mortgage? – after the 5 years fixed rate you’d have paid £40800 in interest - you still haven’t paid off any of the mortgage.

lambpuff

Thanks herbie! I had heard that SW will lend up to 5.2 times salary for the professional mortgage (since we lose our jobs if we go bankrupt!)? But I guess the personal loan throws a spanner in the works.

Increasingly wish had eaten a few more baked beans while at uni! Am a salutary tale for all young uns these days!

lambpuff

Sooler - the point is the gain in equity. Where I live property prices are increasing exponentially. Sure there's the chance of a crash but I don't see it happening. They've been predicting it for years and property that I could have bought for £60k a few years ago is selling for 3 times that now. A lot of first time buyers do it. It might not be worthwhile in other parts of the country, I dunno.

I'd rather live with a friend (would be lonely on my own) and if didn't work out there are plenty of others willing to take her place.

Plus I'm not in the privileged position of having much of a choice in the matter! If I rented with someone else it'd cost me just as much as owning and renting out a room, except I wouldn't have the investment ticking over in the background.

Sooler

lambpuff wrote:

Sooler - the point is the gain in equity. Where I live property prices are increasing exponentially.

Probably fuelled by interest only mortgages and help from parents.



So you’ve worked very hard to achieve a professional career with a very good salary and excellent earning potential and you’re struggling to afford something at the bottom end of the property market, a small one/two bedroom place.

Don’t panic and get carried away in a race to buy …

What if a rise in equity?
Then who’s going to be left who will be able to buy it – how are you ever going to sell it if no one can afford to buy it?

Rule No.1 – don’t buy anything you can’t sell.

Less and less people will be in a position to buy it ... less buyers = a buyers market = a race to sell.

When people sell they don’t want to be hanging around for months, years, waiting for a buyer.
Similar property will start going for less than you paid, the sellers can afford to as they bought earlier and haven’t paid as much.

Who knows what prices will do but consider equally your position ….
What if a fall in equity?

Will the mortgage company let you sell for less than the outstanding mortgage?

Other sellers can afford to sell for 130K – your mortgage co. will want their 140K paid off.

Will you have the spare 10K?
Would your mortgage co. loan it to you? … probably not!

You could be in a position where you can’t afford to sell.

How would being stuck with the property bear on the rest of your life?



Just my rambling thoughts.

MortgageMamma

Have you thought about getting a parent and child mortgage? this is where your current income is supported by the surplus income your parents have after they have paid their own commitments. This is one way you could borrow more and get on the ladder. Up to 4 people could go on the application.

Another way, as you are a professional is a guarantor mrotgage. This is where your parents guarantee your mortgage payments should you be borrowing a little mroe than standard income multiples would allow.

There are a limited number of lenders who will offer these facilities and its always wise to seek professional advice. Often mortgages aimed at professionals through companies such as sw, accord, IF, Standard Life etc are not much different from non professional products that can offer other features, such as affordability lending (where interest only/split/repayment choice can make all the difference to permitted lending maximums)