Getting a deposit for a mortgage

reihtec

Hi

We have been renting for the last 7 years and currently pay £600 a month. Unfortunately with only one salary in the house, 2 kids (another due in June), foolish credit card debt before I knew how bad they were and started budgeting (and now on track to pay it off), supporting my mum and grandma, and supporting my sister in law and her husband living with us - we have been unable to save up any deposit.

But we are wanting to buy a house instead of renting. But with £3,000 of current debt and no deposit, is there any hope? We have seen houses in our area for £95,000 - £110,000 and I currently earn £33,000 a year. Unfortunately all that salary is VERY tightly budgeted and I just can't see how I could save any more.

We have now asked the sister in law and her husband to move out. They were contributing a bit, but not enough. But it has now cut down our income to an extent that my budget is much lower and the amount to pay towards the credit card is less because we are paying for a private mid-wife until June. The experience we had with our first child in the hospital compared to the home birth with the second, makes this a very worthwhile and important "investment".

I have thought about getting an extra job, but my primary job has me "on call" so this isn't very easy.

I am thinking that paying off the debt and saving will be the only way, but that could take another 3 - 4 years at this rate. So I would be most grateful for any ideas and advice please.

MoneyMagic01273

reihtec wrote: »

Hi

[snip]

we are wanting to buy a house instead of renting. But with £3,000 of current debt and no deposit, is there any hope?

[snip]

I am thinking that paying off the debt and saving will be the only way

I believe that's a "Bingo!" right there...

Some genuine questions....

Is buying really the right thing for you if your budget is already this tight - and with another child on the way, likely to remain as tight or even get tighter?

I ask because, even if you could magic up a deposit, do you think you would meet the affordability criteria that lenders set if your budget is so tight that you are unable to save anything at all?

Would mortgage repayments (assuming you could scrape 10% deposit together - probably resulting in a fairly unattractive interest rate) be lower than your rent now and do you trust that this would still be the case down the line, in the event that interest rates increased?

How do you think you would you adjust your budget if you bought a house but interest rates went up (at the end of any promo period). Would you be relying on assumptions that you're income will go up in that time? If so, wouldn't this same assumption mean that you could potentially be in a position to save more quickly?

Lastly - how old are you? I only ask because to my mind its not unusual for many people to have to pay off a few debts and save for a few years to get a deposit...

There is rarely a magic wand.

_Andy_

As stated above, unfortunately there's no quick fix to this and you'll need to concentrate on saving up the deposit (unless you can get a gift from family etc).

Thrugelmir

We all have choices at to how and when we spend our incomes. Very little comes easily to most people. So keep chipping away at the debt and managing your money well.

eschaton

So you have just cut off some additional income, currently in debt and another child on the way.

You want to pay the debt off, save for a deposit of approx £10k and finance another child.

In the middle of this, you are already on a tight budget.

Where is the money going to come from to do all this?

reihtec

Thanks for all your responses. I'll try and respond to all the questions as best as I can.

MoneyMagic01273 wrote:

Is buying really the right thing for you if your budget is already this tight - and with another child on the way, likely to remain as tight or even get tighter?

Ideally I'd rather use the rent money to pay off a mortgage. If we can find a way around the deposit requirement, then yes I believe it could be the right thing for us.

MoneyMagic01273 wrote:

I ask because, even if you could magic up a deposit, do you think you would meet the affordability criteria that lenders set if your budget is so tight that you are unable to save anything at all?

Honestly, I don't know. I've never been through the process and the articles I've read don't really go into detail about these requirements, hence I'm here picking peoples' brains so I can put my plan together.

MoneyMagic01273 wrote:

Would mortgage repayments (assuming you could scrape 10% deposit together - probably resulting in a fairly unattractive interest rate) be lower than your rent now and do you trust that this would still be the case down the line, in the event that interest rates increased?

From what I've seen for a 95% mortgage on a £110,000 house, the repayments would be about £50 more than what we pay for rent at the moment.

MoneyMagic01273 wrote:

How do you think you would you adjust your budget if you bought a house but interest rates went up (at the end of any promo period). Would you be relying on assumptions that you're income will go up in that time? If so, wouldn't this same assumption mean that you could potentially be in a position to save more quickly?

At the moment, we are paying at least £270 towards the credit card. If we are disciplined and don't get any more debt (other than the mortgage). Assuming we go for a capped rate for the first 3 years, by then our baby will be old enough for nursery/school and my wife can go back to work and this money can go towards savings/higher rate. There'd also be the option of moving to another mortgage with a better rate at the time right?

MoneyMagic01273 wrote:

Lastly - how old are you? I only ask because to my mind its not unusual for many people to have to pay off a few debts and save for a few years to get a deposit...

My wife and I are both 30. Our oldest is turning 8 and our second is turning 4. We would like to have our own place where we can make changes like doing up the deco, garden, even a shed etc and knowing it's ours and not having to worry what would happen if we have to move. If it's our own house and we have to move to another house of our own, we can at least be happy knowing that the changes would probably add to the value of the house.

_Andy_ & Thrugelmir - Thanks. I will continue to chip away at the debt. But I also want to start planning/saving/researching from now so even if I can't buy now and have to wait a couple of years, I know I'll be ready with a plan when the time comes. Rather than wait for a year or two to pay off the debt and save, and THEN start planning etc and only think to myself "I could've done this a few years ago". Because that point where I am thinking "I could've done this a few years ago" is actually now.

So you have just cut off some additional income, currently in debt and another child on the way.

...

Where is the money going to come from to do all this?

I'm sorry but I think you've missed the question a bit. The problem is not really about how I'm going to pay off my debts and mortgage, but if there is a way to get a mortgage without the deposit. I'm sure there must be some schemes that can help etc. I was even wondering/considering if getting a 10k loan and using that as a deposit would be possible. There are many ways to to get some extra money, even if it means that my wife would have to go back to work. Getting the money is possible if one works hard enough and puts their mind to it. My issue is if there is a way to get a mortgage or if I need to improve my debt situation first.

I'm really after advice and experiences of people in possibly similar situations who have managed to get a mortgage.

Thanks again for all your responses and I look forward to hearing any further responses.

_Andy_

Getting a loan isn't viable for two reasons - 1) Mortgage companies won't accept a personal loan as a source of deposit funds and 2) No loan company will lend for that purpose.

Gary123456790

Hi,

The general flavour of responses so far is right - there are no quick fixes and no 100% mortgages anymore.

Even if 100% mortgages existed and I were in your situation I would not take one. Several people have posted threads on here about buying on 100% mortgages in the past and now find themselves with a 25+ year commitment, perhaps either in negative equity or struggling to repay (whilst having no equity cushion to rely on).

Your deposit is as much about protecting yourselves and your family as it is about protecting the bank's money. High ltv mortgages come with very high interest rates, adding many years to the mortgage. If you save and buy in the future you'll get a better interest rate, and circumstances may have changed requiring a different property.

Think about it this way - currently you have no worries about the boiler breaking or changing mortgage deal or house prices, estate agents, solicitors etc... It is not a bad place to be. Some countries dont have a hangup about renting, its just us Brits that will bankrupt ourselves to "get on the housing ladder".

Gary.

InMyDreams

reihtec wrote: »

Assuming we go for a capped rate for the first 3 years, by then our baby will be old enough for nursery/school and my wife can go back to work and this money can go towards savings/higher rate.

Quite risky in today's climate (and you don't know that it will be any better in 3 years time) to assume your wife will be able to (or want to) walk into another job (and that you will be secure in yours, but at least you can insure against that). Also, anything can happen in that time to change your circumstances.

reihtec wrote: »

There'd also be the option of moving to another mortgage with a better rate at the time right?

Lots of people have fallen foul of that one... assuming they'd be able to remortgage but due to falling prices find they don't have enough equity and are stuck at the mercy of their current provider.

reihtec wrote: »

My wife and I are both 30. Our oldest is turning 8 and our second is turning 4. We would like to have our own place where we can make changes like doing up the deco, garden, even a shed etc and knowing it's ours and not having to worry what would happen if we have to move.

I'm not sure this is necessarily a path to worry free security. You may well have to move if you can't keep up repayments and that's anything but a worry-free scenario.

FWIW, I think what you are trying to achieve, even if it is possible, is extremely risky. In the past these sorts of risks have paid off for many, but in more recent years the stories aren't so happy.

If I were you, I would spend the next 3 years, until your wife has actually gone back to work, continuing your serious efforts to sort out your debt, then start saving for that deposit. If you manage that, then at that point you might then be in a position to start thinking about mortgages.

Mrs_Z

In short; no deposit = no mortgage butWhy the obsession of owning a house?To be honest, you are already very stretched with your current situation and another kid on the way. Your money management so far does not come across as responsible.Even if you could afford the mortgage repayments (at the moment), where is your provision for increasing interest rates and what about maintenance? No savings to fall back on what about if you lost your job?I think in the current circumstances, renting IS the best option for you.

Suarez

Sometimes the easiest way to up your income is to cut bills and spending...