MORTGAGE ADVICE please

back2square1

Hi
I have found a brilliant house today to buy but am worried about risk of taking big mortgage. I have looked at cheaper houses but as I have 3 children they are just not big enough and will need to be extended. The house I have seen today is perfect size but in need of re decoration.

We have got £37k deposit. I have been self-employed for the last 17years and earn £29000 nett pay per annum. My girlfriend gets £500 pcm plus £350 maint for 1 son.

The house we have fell in love with today is on market at £229950 and they will accept £225000 (corporate owns it due to part exchange for previous occupants). It did sell for £227950 at christmas but unfortunately that sale fell through hence new instruction.

I have checked on Nethouse prices for this road where all 20 houses are of same size and in 2005 3 houses sold for £250k. The house I am looking at does need alot doing (large concrete backgarden to be ripped out!) probably biggest job.

Anyway, I think I have put enough info down about my predicament can anyone please advise about best mortgage deals, or am I mental to be looking at taking out £188000 mortgage.

Also I am due to inherit £18000 in about 5-6 months.

Regards

herbiesjp

YOur incomes are:

You - £29k profit
OH - £6000 pa job and £4200 pa maintenance (is the mainatenace supported by a court order, if so how long has it got left to run?)


You would be looking at 4.8 times your joint income which is towards teh higher side of income multiples.

At this point only you know what your monthly outgoings are and if you have any other debts, credit cards, loans HP etc.

What would you be comfortable paying each month as a mortgage payment?

The £18k inheritance would also help cover the mortgage payments for some time, or you could even make a lump sum overpayment if you wanted to into the mortgage (unless you were going to use the £18k to do up the property).

Also think about whether you could take out more profit from the business if you needed to, would your OH increase her work and get more income? Are any more children likely (you never know)

These are all things you need to consider before taking the plunge, however on the face of it, it does look possible.

HTH

back2square1

Thanks for your response, currently we have no debts, loans etc as I have just paid them all off.
My OH maintenance is for a 5year old so it should run for another 11years min. It is not by court order but part of her divorce does outline that he would always pay minimum 352 pcm.
I am committed to pay £180 maintenance pcm for my daughter who is almost 7yrs old. Our current monthly outgoings have been £1000 plus £130 council tax, £100 utility bills, £180 maintenance plus all the other extras such as food.
Currently we are in rented accommodation so we dont have house to sell.

back2square1

Yes my OH is looking to increase work, no we definitely are not having any more children, we have thought that £18000 would be used very wisely to do up the property, any left over we would like to pay off mortgage. However I am aware some mortgages do not allow for this. Also realistically with all good intentions to want to pay off mortgage with a lump payment there is usually another need for the money due to lifes ups and downs, for example, car dies and have to buy another one, washing machine needs replacing, etc.

My self-employment is where I work for my father who owns the business. My only outgoings are work phone bill. My wages can vary from week to week, but minimum would always be £400 nett. There are times when I have earned £2000 in a week (this happens occasionally throughout the year) but usually I fluctuate between £500-£700 nett weekly pay. I can increase my wages if I was to do more work at weekends which I am currently looking into.

herbiesjp

Having cleared all your debts will mean you will get maximum income multiples - they may make a deduction for any maintenance payments that you have to make.

As the maintenance you OH receives is not supported by a court order some lenders will not take in into account, however others will.

It looks like you have got a good control/grasp of you income and expenditure which will make it easier for you to understand the implications of taking out such a high mortgage.

On an average fixed rate (not lowest or highest) a £188k 25 year repayment mortgage would work out to approx £1165


HTH

back2square1

Yes I worked it out for roughly £1160 pcm, do you think we are mad to take out such a big mortgage???

We are currently placing offers on this house that is on market for £229950, so far we have been refused on last offer of £217500. I am going to go into the Estate Agents later and place another offer for £1000 more and hopefully be able to witness the conversation she has with the corporate who currently own it due to part ex. The estate agent insists that the corporate co paid £225K part ex for it, and want £227K but I am sceptical.

I am awaiting a call from a gentleman at L&C mortgage brokers at 4.30pm today to try and look at getting good mortgage agreed in principle.

I have looked on internet and so far Nationwide BS are coming up with 5.34% fixed for 1, 2, 5 or 10yrs, no possibility of lump payment due to incurring charge tho.

herbiesjp

As long as you are comfortable with the commitment and have looked into the "what if" scenarios you should be fine assuming a lender will agree the mortgage for you.

L&C may not be able to help if you do not have an offer agreed on a property

back2square1

I have entered all honest figures into budget planner and did it worst case scenario. It came up with being £150 in credit pcm.

As our children are fairly young it would be another 5years and then my OH could work fulltime but then looking at it relatively our children will have bigger appetites plus want more expensive clothes and items in 5yrs time too.

Also I don't know if I am being really stupid but don't the agents take you more seriously if you have mortgage agreed in principle? I am aware that doing so will affect credit score which is why I left it until we had found the right property.

back2square1

Sorry forgot to mention I have been scouring the internet all morning trying to understand the best mortgage deal for us. I believe we would be best to opt for a fixed rate mortgage prob 2 or 5yr period. I have noticed on email today from MSE that some lenders have reduced their fixed rates however I am unable to find who these lenders are.

I have just entered my details on MoneySupermarket.com just to see what they come up with, the best one is below:

ING direct with product called Flexible mortgage which is variable. Initial rate is 5.14%, APR- 5.2%. True cost over 5yrs £71,423.60, monthly repayment £1144.06, valuation fee is refunded (£350) there is no cashback, no ERC, No arrangement or booking fees.

What should I be looking for when trying to assess the best mortgage deal? I presumed it was true cost over 5yrs, plus whether I can afford monthly repayments. I hope I am doing this right.

kingkano

Yes Id say affording the payments and truc cost over 5yrs is correct. but check that it includes all the fees in the comparison etc.

INGs rate has just changed....

back2square1

Hi thanks for your replies to my dilemma regarding large mortgage. I have looked into ING direct and they have come up with a good mortgage however I have spoke to an advisor at L&C this afternoon. They got me an even better deal with Abbey which I did consider.

This afternoon I received telephone call from local estate agent about a house that has been put back onto market today for £214950. The sellers are planning to move mid May therefore desperately need to sell and move within the next 6wks.

We went and had a look round and this house is in perfect condition, ok size, nicely decorated. We are now seriously considering this house because the asking price is £15000 cheaper and it doesnt need any major refurbishment.

We are the only viewers of this house and we are planning to place offer tomorrow. I cannot believe what a turnaround, I feel happier that I will need a much lower mortgage if our final offer is accepted.

Once again, thanks for all your advice, it was very much appreciated.

:A