Getting confused!

Fleeting_Glimpse

Ok

Went to a local adviser this morning. My circumstances are:

Self employed

Last years books have not gone in yet but accountant says it'll be about 14K Nett.

2005's was 10500K Nett.

My wife earns 5500K

Our house should sell for 100000K and we owe Bristol & West 32500K which was int only from 1998. £1600 redemption penalty.

The legal & General endowment is £50 a month

We pay B&W £179 @ 4.75% fixed until 2008

The house we are buying is 150000K.

The broker came up with the following figures:

We need a mortgage of 100000K plus £695 fee's ( 70695K repayment and 30000K int only ) keeping the endowment.

Lender is 'Accord Mortgages' on a fixed rate 5.33% until 2010.
Max LTV 75%

Monthly payments over 25 years £560.23 (fixed rate)

Broker fee £95


Does this sound ok?

I am confused...we don't need 100000K....do we???

Thanks for help guys!

Fleeting_Glimpse

Is there anybody who can tell me if this ok?

Thanks

Rick62

First question, why you paying a penalty to B&W rather than 'porting' (transferring) that good rate and taking a further advance?

If you current house is selling at £100k with £67.5k equity (£100k less £32.5k) and new house is £150k then the new mortgage you need is surely £82.5k plus if you need extra for fees, so about £85k?

UK007BullDog

I just looked at the figures and did not even add them up with a calculator. But what I did see is that you should not sell up and should forget moving.

You probably cannot afford it. You are going to struggle.

Sorry to be so harsh, but that is the truth.

In fact you might need more than £100,000

OK your house is worth around
£100,000

You owe on it
£32,500

You have equity of £67,500.

You want to buy a property of £150,000

£150,000 - £67,500 = £82,500 new mortgage
monthly interest only at 6% about £413 per month.

Then there is stamp duty of 1% (£1,500), solicitors costs (£1000), Estate agent costs (selling your house 1.5% fee?), early repayment fees from the old lender if you are not able to port the mortgage over to the new property, booking fees, survey fees, moving costs......

Your Total income of £19,500 lets you borrow around £50,000 to £70,000 (depending on lender). As you do not yet have trading figures of at least 2 - 3 years and you would probably go self cert the interest rates would be higher. With more rate increases on the horizon......

Your monthly income is around £1,625 minus the mortgage payments leaves you around £1,212 per month, then you have insurances, council tax, utilities, food, car, travel costs, any Kids?

Sorry & HTH

Fleeting_Glimpse

Thanks for the replys.

You are right...we may struggle but but we need that extra bedroom.

The house we have been 'offered' is in a good area with some of the best schools in the country and is being offered to us at around 15K under its value.

My accounts maybe don't show much but anybody self employed knows that these accounts are not a 'true' showing of earnings. Last year was not a brilliant year but my turnover was 30K.

We have had a loan for the past 4 years of around £200 a month which finishes soon which will help. Like anybody else we understand that we will have to 'draw our oars in' somewhat. Less takeaways.

So we thought it was too good to miss out on.

As for porting the mortgage...B&W can't help.

You mentioned interest only mortgage...is this recommended? We do need to keep the monthly payments as low as possible and although its not nice to think about, in 30 years time we would be in a position to pay off any shortfall...if you know what I mean.

PoorDave

Isn't your turnover irrelevant though? Surely your borrowing as self-emp can't be based on the overall income, as who knows how much of that is eaten by costs/expenses, and how much is left.

Are you taking all your self-employed earnings as salary or are there some dividends to (Ltd Company?)

Why is the house being "offered" to you?

Fleeting_Glimpse

The house was occupied by an elderly customer of mine and she passed away. The family asked if I was interested at that price..I said 'ok'

Rick62

We need a mortgage of 100000K plus £695 fee's ( 70695K repayment and 30000K int only ) keeping the endowment.

Lender is 'Accord Mortgages' on a fixed rate 5.33% until 2010.
Max LTV 75%

Monthly payments over 25 years £560.23 (fixed rate)

Broker fee £95

So this sounds like a good deal, the rate is reasonable, it is fixed for 3 years giving certainty of payment the product fee is reasonable and the brokers admin fee of £95 is fine (he'll also get commission from the lender).

BUT what I dont understand is why he is saying you need £100k. Current mortgage is £32,500 and the new proprerty is £50,000 more, so you need £82,500 plus costs. Costs:

Penalty 1600
Stamp duty 1500
Lawyers 1000
EA fees 1500
Product fee 695
Broker fee 95
Moving 500

This comes to £6890. Plus £82,500 gives total about £89,390. So I could understand saying £90k, but not £100k. What on earth is the extra £10k for?

Fleeting_Glimpse

Thanks Rick...thats all I needed to know.

I saw that he'd put down 100K when I studied the info printout...I'll query that.

Also keeping the endowment...will that have to be paid on top of the £560 a Month?

What do you think about going interest only. This will lower the repayments a little won't it?

I'm still very confused about what to do !

Thanks

Rick62

If you keep the endowment that is in addition to the £560, yes.

If you do all on interest only then you are not reducing the capital and will not pay off the mortgage. It can sometimes make sense for a limited period, if for instance you have just started your business and your income will realistically be increasing for the next couple of years then it could make sense to start interest only then switch to repayment in 2 years. But speak to your adviser about this to see if it is suitable for your circumstances.

toonfish

seems like a reasonable deal, as long as you borrow the right amount but, as someone else said, I would see what Bristol & West will offer you first.