Does this seem sensible?

qualer86

Hi.

My partner and I just had an offer accepted on a house. Now the panic has set in!

I just wanted to run our figures by you knowledgeable lot to reassure myself.

I'm on 23k a year and partner on 16k. We are looking at buying a 125k house with 30k deposit. So mortgage of 95k (2.4x joint wage). We would be paying just under 500 a month mortgage.

We have a further 18k in savings account which would tide us over should the worst happen (ie i lose my job).

We have no other debt barring my student loan (2.4k remaining).

Also at the moment I am working flat 37hr weeks but when things pick up I could potentially be earning up to 33k (as I did last year) but there is no guarantee.

I have tried to do the online budgets but having never lived away from home yet I don't feel like I can put all my faith into the outcome of those. However positive they may look.

Thoughts please?

Gary123456790

Hi,

That should be fine - you'll be taking home over £2.5k a month by the looks of it, so a £500 mortgage should be OK. You'll find lots of other lovely bills like council tax and gas etc but it wont make it unaffordable.

Depending on the valuation you may be over 75% LTV - you might benefit from putting in a few more thousand and having a slightly smaller mortgage as it may well get you a better interest rate.

Gary.

martinsurrey

With a £32k deposit you could get a 75% ltv mortgage, and could go for an offset one.


there is a 3.25% 2 year fixed offset. If you put down the 25% deposit and then put your 18K savings into the ofset account you would only be paying mortgage interest on £76k which at 3.24% is only just over £204 interest a month (the rest of your payment would be capital repayment, dependant on the term of the mortgage, but under £500 is easy)

the benifit of an offset is that you would be able to access your savings if you needed them, while getting tax efficient mortgage interest relief.

this is easily affordable for you, and would be sustainable in the short term on a single income, which is always good!

dimbo61

Have to agree with Martinsurrey about the offset mortgage idea as you have savings.

Would consider a longer term as rates won't get any cheaper so the only way is UP.
3/5 year deals mean you would have a LTV of less than 60% if you overpay a little each month

qualer86

Thanks guys. I am going to sound completely naive here but I did not realise 75% was a threshold for lower rates. A few I've looked at (and admittedly our broker has done most of the looking) I've noticed lower rates kicking in at 80, 70 and 60 percent.

I also need to admit I've never fully got my head round offset mortgages and for reasons unknown to even myself I did not think we would be even eligible for one.

It sounds very interesting though. We have already had an agreement in principle for a 2yr fixed repayment mortgage and are due to meet our broker tomorrow evening to go through the specifics. If it's not too late to change our plans I should perhaps ask him about offsetting? I'm not sure he was aware of my extra savings else he may have suggested it himself.

confused_kid

Just going through a mortgage app at the moment, and from the sounds of it your affordability is similar to ours, our mortgage is around 20-25% of our joint net income...yours is around 20%. Without going into it - sounds affordable...

Would read what the posts above say with regards to offset mortgages...could be an option for you...would get some advice off an advisor if you're not sure.

Good luck!

kingstreet

qualer86 wrote: »

due to meet our broker tomorrow evening to go through the specifics. If it's not too late to change our plans I should perhaps ask him about offsetting?

Let him know you are thinking about this. If he's anything like me, he's preparing the reams and reams of paperwork for you for the deal you've already discussed. It's about sixty pages and takes loads of time and loads of ink.

If you don't want it, it all goes in the bin and you have to start all over again. You could save him a load of effort!

qualer86

Tried phoning our advisor but only reached the answerphone. He'll be cursing me for being a pain in the backside I'm sure.

Tried to run my figures through an offset calculator or two. From what I can gather we could potentially save around £40 a month going below the 75% threshold and quite a bit of interest on the offset.

dimbo61 you mentioned getting a longer fix? 3 years doesn't seem too bad but I'm struggling to find an offset mortgage with a reasonable rate over 5 years though.

dimbo61

You need to look at your long term plans !!!
If your plan is to stay in the property for at least the next 5 years and MAYBE kids happen the last thing you need is the O/H on mat leave having your first/second child ( One income and 3 dependants!!)
we have been with YBS for several years on an offset mortgage and have overpaid and built up savings in the offset account.
I am in a rush to clear the mortgage ASAP ( Mortgage Free gang)
You will pay more for a 5 year fix but rates are very low at the moment and can only go up YOUR CALL

qualer86

3 year fix at 3.75. 5 year fix at 4.99. How much would rates have to rise in those other two years to make the 5 year one better value?

I'm not disagreeing with you, just I'm terrible with maths.

kidmugsy

It would be 6.88% p.a. for years 4 and 5 for the two deals to be equal value.