first time buyer looking for advice

TheSenSibleOne

We will be in a position to buy a property in 2 years time (maybe sooner) but I'm struggling to find advice for first time buyer.

Went to see a mortgage adviser at the halifax who initially told me we could borrow £78,000 over a 25 year period. He then went on to say if we were to consider borrowing over 35 years the amount would increase to £104,000. I am unsure how accurate this is and would like some more advice in regard to this.

I also have a few dumb questions as listed below:

Initial mortgage rate would be around 4.8% and after 2 years would drop to 3.99% with a repayment of around 450 a month. Will the repayments drop over time? Or will they remain around the same ( not taking into account interest rates)

How fluctuating are interest rates? How high can they/ have they gone? And will this affect how much we repay?

As the debt decreases (and we become homeowners rather than homeloaners) will the amount decrease?

We have an excellent credit rating and should have no problems getting a mortgage, which are the best banks/mortgage brokers to look at? Hoping to borrow around £100,000

And any other advice anyone could lend would be most appreciated

ACG

No they wont. If anything they will increase, bank of england rates are 0.5% there is only one way theyre going and thats up - nobody knows when and by how much.

Not very - they tend to stay fairly stable (the last few years are excluded), they may fluctuate slightly but not hugely.

Not really, you make an agreement and that is in place for the term of the mortgage unless you change lender/deal.

Cant advise on whos best but maybe speak to an actual mortgage advisor not from a bank.

TheSenSibleOne

ACG wrote: »

No they wont. If anything they will increase, bank of england rates are 0.5% there is only one way theyre going and thats up - nobody knows when and by how much.

Not very - they tend to stay fairly stable (the last few years are excluded), they may fluctuate slightly but not hugely.

Not really, you make an agreement and that is in place for the term of the mortgage unless you change lender/deal.

Cant advise on whos best but maybe speak to an actual mortgage advisor not from a bank.

Will inflation affect repayments?

I thought I heard somewhere that as you repay the mortgage and the debt gets less the interest on the mortgage drops and so the repayment drops, is this not correct?

I understand that interest rates are going to go up, this will make repayments increase, correct?

Is it possible that they would lend more over a longer term? the £105000 over 35 years, does that sound ok?

Sorry for all dumb questions

ACG

If you take a fixed mortgage, its only fixed for the first x number of years (depending on the deal usually 2,3,5 or 10 years). After that it would revert to the lenders variable rate - unless you tie into a new deal. Either way the bank of england base rate would reflect in some way on the rates available.

It is correct but your repayments wouldnt drop because there is less interest to pay - the mortgage is done over xx years - its worked out how much it would cost and then split into however payments (depending on the term of the mortgage).

Most lenders would lend more if you increase the term, not all (Skipton for example wouldnt).

Theyre not dumb questions - the only dumb questions are the ones that dont get asked. I would suggest you speak to a mortgage advisor though, its hard to explain the answers in detail whilst typing as you cant emphasize etc. The questions your asking (arnt dumb) but its coming across like it might be a good idea for you to have someone on hand to help you through the process.

That might have come across a bit badly (im blaming the text and my great ability to put my foot in my mouth) but i mean it in the best possible way.

TheSenSibleOne

ACG wrote: »

If you take a fixed mortgage, its only fixed for the first x number of years (depending on the deal usually 2,3,5 or 10 years). After that it would revert to the lenders variable rate - unless you tie into a new deal. Either way the bank of england base rate would reflect in some way on the rates available.

It is correct but your repayments wouldnt drop because there is less interest to pay - the mortgage is done over xx years - its worked out how much it would cost and then split into however payments (depending on the term of the mortgage).

Most lenders would lend more if you increase the term, not all (Skipton for example wouldnt).

Theyre not dumb questions - the only dumb questions are the ones that dont get asked. I would suggest you speak to a mortgage advisor though, its hard to explain the answers in detail whilst typing as you cant emphasize etc. The questions your asking (arnt dumb) but its coming across like it might be a good idea for you to have someone on hand to help you through the process.

That might have come across a bit badly (im blaming the text and my great ability to put my foot in my mouth) but i mean it in the best possible way.

That makes sense, like paying for a fridge in installments

It's easier to understand when put in simple english. I will consult a mortgage advisor closer to the time, I'm just trying to get my (young) head around these important things and what they mean in lehmanns terms.

It didn't come across badly, it came across properly, I do need to speak to a mortgage advisor and I am a bit dumb (through lack of a better word.... inexperienced? ) with these sort of things.

To clarify- the only variable which affects mortgage payments is bank of england base rate? I would like to be in a position where I would know if they were going to go up and down.

I have also been trying to work out the maximum ever the repayment would be (as I want to make sure I will always be able to afford it) I have done a few calculations (using a simple mortgage calculator) and have gone up to 10% interest rate and can still afford it. Would there ever be a time when the interest COULD become this. I have always been a worrier :P

SUESMITH_2

TheSenSibleOne wrote: »

I have also been trying to work out the maximum ever the repayment would be (as I want to make sure I will always be able to afford it) I have done a few calculations (using a simple mortgage calculator) and have gone up to 10% interest rate and can still afford it. Would there ever be a time when the interest COULD become this. I have always been a worrier :P

well they went higher than that in the mid 80s early 90s but hopefully that won't happen again, in fact they went up to 14% at one point

http://www.houseweb.co.uk/house/market/irfig.html

Thrugelmir

What you need to consider is the likelihood of your income increasing.
A 25 year mortgage term is a relentless month in month out process of making repayments. The larger the deposit you can put down at the outset the better the start you'll have. Life has a habit of throwing the unexpected just when you least need it.

In no way trying to put you off buying a property I should add.

ACG

Well...not all banks rates are linked to the bank of england base rate - some are linked to libor (i cant think of how to explain that so you would need to google it - its to do with how much wholesale money costs), or the banks base rate.
Both of these are independent of the bank of england base rate - depending on the lender will depend on which it follows. However it would be unlikely a bank would increase their rates to 5% if the bank of england base rate was 1% (they have a bad enough reputation as it is)...but it would be possible. I wouldnt let it be a major worry though.

Interest rates havnt been above 7% for a long long time. My grandad told me they were about 20% at one point but that was well before i was born. I think the highest its been in "recent" history was in the 90s under margaret thatcher - so you can see how long ago that was.

If your ok at 10% then i would say your safer than probably 90% of the population - if rates go that high anytime soon then i think you have other things to worry about.

opinions4u

The links at the top of the page are very helpful and well worth a read.

Two things I'll add:

1) Work your budget out as if rates are 10%

2) Don't borrow for longer than 25 years and never extend the term when you move house

TheSenSibleOne

Thrugelmir wrote: »

What you need to consider is the likelihood of your income increasing.
A 25 year mortgage term is a relentless month in month out process of making repayments. The larger the deposit you can put down at the outset the better the start you'll have. Life has a habit of throwing the unexpected just when you least need it.

In no way trying to put you off buying a property I should add.

do you mean income decreasing?

We are currently paying rent which is around the same as we would be paying for the mortgage

We would be looking for a 15% deposit, don't like the 6.5% or whatever interest rate on the 10% deposit


@ACG- I understand libor pretty well (have a business studies A level) but I would hope not many banks are linked to it.

Thats encouraging to hear, I'll still worry (probably till my last mortgage payment haha) but for now I'll worry about scraping every penny towards this deposit and hope house prices stay low for the next 2 years or so

Thanks for all your advice, I have thanked all your posts

TheSenSibleOne

opinions4u wrote: »

The links at the top of the page are very helpful and well worth a read.

Two things I'll add:

1) Work your budget out as if rates are 10%

2) Don't borrow for longer than 25 years and never extend the term when you move house

Why would you say not to borrow more than 25 years? Is 35 too much?

if we borrowed over 25 years they would lend 78000

if we borrowed over 35 years they would lend 105000

Do you not think it is worth it?