Advice for FTB

typeractive

Hello everyone,

I am looking for a bit of advice when it comes to buying my first place. I know it's not so much a risk these days, more of a commitment. At the moment i live with my folks and I'm saving up as best as I can.

Bascially, I have a few options:

1. Buy a place on my own
2. Buy with a friend

Obviously, there are advantages and disadvantages to each. Sharing with a friend we could have a comfy place and save on bills, but it could all end in tears if not arranged properly with a contract and strong negotiation. I'm not worried about that too much as we're both good guys, but I would of course prefer my own place.

I have just spotted a lovely little 2 bed flat, that I would love to buy and make my own. It's on the market at £105k. I currently earn £18k (which is hardly rocking the world) and could put down a deposit of £15k...though I'd like to be able to put down £20k. I am currently debt free (with the exceptions of student loans)

Are there any mortgage guru's on here that could advise me (on paper terms) if it looks possible for me buy this lil flat and actually live in it. I don't smoke or drink, though I do like gizmos and gadgets and my car! I may be able to get the price down a bit - who knows?

There are cheaper places available, though I think this place also has good potential to rent in the future. I often think I would like to take a year out, but if this is the case I would like to be able to have something to come back to (don't ask for much do I?) lol. So I would like a place that I could rent out whilst away, as long as it covers my mortgage.

Any advice is welcomed. I have spoken to one mortgage advisor, but I didn't like his attitude very much, so was a bit hesitant with him.

Thanks very much.

lynzpower

Incidentally can I ask , what did the mortgage advisor say and what was it about his attitude you didnt like?

105 for a 2 bed flat seems v cheap, where in the UK is it?

typeractive

hi lynz,

thanks for the reply. I live in the north east, and 105k here is pretty expensive for a 2 bed flat! lol. I spotted another flat for 89k (near enough same location, private parking, it was in a grade 2 listed building that had been modernised, but I think I've missed out on it! D'oh!) Put it this way, I could buy a 2 bed house (which I also like) for 100k, in a nice little quiet area.

As for the mortgage advisor, he was constantly on and off his phone when I was there. He also didn't seem to be that bothered about looking realistically at the figures (well - in my opinion) I think he was wanting to push us out the door, and just give us an overall figure as quick as poss!

Anyway, back on topic does anyone think this figure of 105k is achievable on 18k and 15 - 20k deposit...(probably 15 as I will need money to buy furnishings etc).

Very greatfeul for any help!

ftbworried

Hi

I'm not a mortgae advisor, but I just typed your details into a few calculators and for example halifax give a guidance that they'll MAY lend you between 72,000 and 82,000. Although when I do this calculator for my figures they said £170,000 but we got a agreement in principle off them for 200k so it is really just a guide.

Assuming the top figure (£82,000) plus your deposit means that you could spend £97k. HOWEVER, you don't seem to have allowed any of your savings for solicitors fees/surveys etc.

Another thing to watch is the affordability of an £82k mortgage. At 6% interest rate, the repayments on a 25 year repayment mortgae are about £525 a month. You currently must bring home in the region on £1100 a month. Try using Martins budget calculator and see whether you can (comfortably) get by on £575 a month (council tax will be 80-100pcm, water&gas&elec =~ £60, so really it will be closer to £400 a month). You car will also swallow up a bit chuck of your leftovers too.

IMHO, things look a little tight although you could extend the term of the mortgage if you are ok with that.

Good Luck.

DavidHM

To be able to afford a mortgage, you're going to need to get a cheap car for a few years. It doesn't have to be a boring car but monthly payments on a car loan are out of the question.

The other thing would be that if you could get a two-bed within budget then you could look out at renting out the seond room (under ~£400 a month is tax free, additional income) and paying down the mortgage quicker. Your home insurance will be more though and your mortgage lender may have something to say about it, so make sure you're aware of those issues.

As for furnishings - reckon on £200 per room for carpets, £30 for painting, and then go round Argos being very stingy and you should get the rest done for under £2k all in. Hopefully any kitchen or bathroom can either be replaced DIY or will be okay to start with.

AndrewSmith

Be vary wary and sceptical of online mortgage calculators.

They are used by the lenders to entice you to make a mortgage application with them. How do they do this? by intimating that they will lend you the absolute maximum their criteria allows.

They are simply a marketing tool for the purpose of gaining new business and, as such, not too much reliance should be placed on some of the figures they produce.

AndrewSmith

@ the original poster.

We are in a period of rising interest rates and a slowing housing market (generally, yes I know there are isolated rises still occuring before you all jump in with the usual contradictary polemic).

What I am saying is that you must think very carefully about committing yourself right now especially on such a tight budget.

Don't be too hasty to jump on the bandwagon of home ownership only to find that the reality is not as affordable as you first thought once you have all the unaccounted for expenses as well.

ftbworried

AndrewSmith wrote:

Be vary wary and sceptical of online mortgage calculators.

They are used by the lenders to entice you to make a mortgage application with them. How do they do this? by intimating that they will lend you the absolute maximum their criteria allows.

They are simply a marketing tool for the purpose of gaining new business and, as such, not too much reliance should be placed on some of the figures they produce.

Yep and they vary quite wildly- don't just go for the top figure. When I was doing this a year ago Nationwide gave a stupidly high figure :eek: There is NO WAY on gods planet that we could have afforded the repayments on that- it did very much feel like a marketing tool to get us through their door. On the other hand, I personally found halifax's online calculator to be on the modest side. Like I said, the online calculator underestimated their offer by 30k for us.

typeractive

hi everyone,

thanks for the information for now. obviously I need to look into things further. luckily my car is all paid off, even teh insurance for the year. though reading through people's thoughts I think I do need to think it over a LOT more. I know there will be lots of hidden costs, and I like to be prepared with money saved for any contingency plan. I think having no money in my savings would scare me a bit too much! :S it's a shame because it's such a lovley little place!

rest assured I'll be back with LOTS more questions!

ftbworried

typeractive wrote: »

luckily my car is all paid off, even teh insurance for the year.

Yep, but you'll have to pay the insurance again next year!! Also what about tax/MOT/Service/Repair costs - not to mention petrol costs. Even those costs will eat into your disposable left overs.

sarah_elton

I posted here with my monthly bills for a 2-bed flat:

http://forums.moneysavingexpert.com/showthread.html?t=385026 (post #14)

On top of mortgage, you'll have a service charge if it's a leasehold flat.

My mortgage was for £115k, but at 4.99%, so repayments are £616, similar to your figures.

My take-home pay (after student loan and season ticket loan) is £1650. I don't run a car. If I'm honest I think it'd be a real struggle each month on your salary even if you could convince someone to lend to you. I think you'd have to rent out the second bedroom, and you wouldn't have much at all left over at the end of each month to build up savings with. I don't mean to sound harsh, it's just the reality.

Do the monthly sums, and work out what repayment on a mortgage you'd be happy with and see what loan amount that equates to, rather than just seeing what the maximum is to borrow. Bear in mind too that rates can always go higher, in which case your repayments will rise (unless you're on a very long term fix). There's a calculator here - put in different rates and see what happens to the repayments:

http://money.guardian.co.uk/calculator/form/0,,603156,00.html