Clueless about buying... Help please...

darren_5

Hi,

Me and my partner are more-a-less there with our deposit and with our tenancy running out in April next year we are really in need for advice.

Please note that:

- We have around £16-18k for a deposit.
- We earn around £39k between us.
- My partner is on a permanent contract I am on a fixed term contract subject to renewal next Sept.
- I have a graduate loan of 3k (£110 per month) and my partner 1k on a credit card.

So now what, we have identified that we are close and looked on a few different websites, however they all seem so different. For example, nationwide has their mortgage calculator and i have put in my details there and it comes out we can lend around 150k. However, we input the figure on MSE mortage calculator and it says 115k?

The other thing we are looking at is shared equity on new builds. But again, where do we start? Also, if we want a house for April when do we look? now? later?

Please could anyone provide any advice.

Kind Regards,
Darren

drummer_666

I would personally stay away from shared equity. They are generally not good financially and not flexible (say you needed to relocate, you couldn't rent out the house easily, and making alterations to the house... well it's not just your say)

First thing is you need to clear the credit card. I would clear the graduate loan too. These are all debts and will effect the amount you can borrow and how easy you can get a mortgage.

Look up your credit score for both of you. Make sure you're both set up on the electoral role at your own homes. This can take time to show up, so best to do now. If you have information on your credit score that might not be correct you have time to sort it

I'd also speak to a mortgage broker soon, maybe wait until January, they'll be able to tell you more accurate figures for the amount you can borrow.

I would say around £135 would be the amount. But that's me taking you r joint wage and multiplying by 3.5.

What's the wage of your partner on the permenant contract? How long have you been employed on your fixed term contract?

Also remember that it will cost around £2k for legal fees and your survey.

darren_5

Hi Drummer,

Many thanks for your reply.

So you would say concentrate on the credit card first and then the graduate loan? What is the chances getting a mortgage with a grad loan As while we maybe able to clear the credit card it would be a little harder to clear the 3k one quickly.

I also have a credit card but cleared the 1.5k off it so it is currently at £0. Is it worth closing it or keeping it open?

I have been in my role 8 months, my partners wage is around 16k and she is permanent.

Darren

Fire_Fox

Why is your deposit not a fixed amount, are you referring to your actual savings or the money you can access? A deposit should be 'no strings attached' not a loan or debt. Unless you are getting a better rate of interest on your savings than your debt pay off the graduate loan and credit cards in full immediately with your savings. http://www.moneysavingexpert.com/savings/pay-off-debts

Many lenders will take your gross deposit and subtract your debts to get your net deposit, ie. as if you had already done this so you 'only' have £12K to £14K. You therefore do not have anything like a large enough deposit to borrow £150K and probably not enough for £115K just yet. You need 10% PLUS legals, survey, mortgage application, money for one sale to fall through, removals, three months mortgage payments, money for repairs repairs, redecoration and furniture.

IMO the three months mortgage payments in case of illness, injury, redundancy, end of contract, difficult pregnancy and sick baby are particularly important given one of you is not on a permanent contract. The state will not pay your mortgage for this time period only perhaps £70 a week JSA or ESA, and this situation could worsen. The last thing you need is to be getting into mortgage arrears by September if the new contract does not materialise.

http://www.moneysavingexpert.com/loans/credit-rating-credit-score

darren_5

We have 16k in savings and then possibly lending 5k off our parents so that is why i said 'around' for the deposit.

Which should we clear off first, credit card/
or graduate loan, graduate loan is the 3k one and i cant see us clearing this quickly but i could make a dent in it. Is it possible to get a mortgage if i still have a loan outstanding?

Fire_Fox

darren_5 wrote: »

We have 16k in savings and then possibly lending 5k off our parents so that is why i said 'around' for the deposit.

Which should we clear off first, credit card/
or graduate loan, graduate loan is the 3k one and i cant see us clearing this quickly but i could make a dent in it. Is it possible to get a mortgage if i still have a loan outstanding?

A loan from your parents will count as a debt in the eyes of the lender, they would have to gift it for many lenders to count it as a 'real' deposit. As already stated clear BOTH the loan and credit card immediately using your savings. Why can't you clear them quickly when you have money sat in the bank? Have you read the articles I linked to?

With no permanent job and debts you may not get a mortgage or you may only be offered a high interest rate. The larger your 'no strings attached' deposit (greater than 10%) and all your debts paid off gives you the best chance. Please don't rush into home ownership, too many did that in recent years and are now tens of thousands of pounds out of pocket.

IMO a better way to do it would be for your parents to hold onto their money, for you to save up enough for the deposit and all the other costs, then if the worst happens and you are out of work you parents to loan you that £5K to pay three months mortgage and other priority bills until all the means tested benefits kick in.

hazyjo

If you borrow (not lend - sorry!) money from anyone, the repayments will also count against what any mortgage provider will lend you. Plus, some don't look on it particularly favourably as it's not money you've saved.

Chances are any lender will actually deduct any debt owed plus more (due to the interest charged on that amount). Wouldn't affect the loan from family (presuming it's interest free!), but might well affect the other debt.

Would definitely be clearing any debt in your shoes before applying to borrow any money. And think carefully about whether you want to borrow money from family. How long would it take you to save that amount without borrowing it?

Jx

cmace2

I may be wrong but whenever I've been enquiring about a mortgage they have said that the student loan doesn't count as a contributing factor. I successfully got a mortgage with the majority of my almost £10k student loan left. They never even enquired as to the value of the student loan.

ETA: unless a graduate loan is different to a student loan!

darren_5

Fire_Fox wrote: »

A loan from your parents will count as a debt in the eyes of the lender, they would have to gift it for many lenders to count it. As already stated clear BOTH the loan and credit card immediately using your savings. Why can't you clear them quickly when you have money sat in the bank?

With no permanent job and debts you may not get a mortgage or you may only be offered a high interest rate. The larger your 'no strings attached' deposit (greater than 10%) and all your debts paid off gives you the best chance. Please don't rush into home ownership, too many did that in recent years and are now tens of thousands of pounds out of pocket.

Thanks Firefox,

Sorry to be a pain but the situation is:

The 16k is going to be given to us by my partners mother, then the 5k is possibly given to us by my parents. So, my parents want the money back but thats just a personal family commitment that i pay them back as and when i can. Does the lender got to know this?

As its for the house its a little tricky to use it to clear the debt, which i guess is where the slight issues come in. I will work to clear the debt!

Fire_Fox

cmace2 wrote: »

I may be wrong but whenever I've been enquiring about a mortgage they have said that the student loan doesn't count as a contributing factor. I successfully got a mortgage with the majority of my almost £10k student loan left. They never even enquired as to the value of the student loan.

ETA: unless a graduate loan is different to a student loan!

Student Loans Company loans are different to graduate loans. The former are paid directly out of your wages, only paid whilst you are earning enough to afford them and only at a rate that is deemed affordable. They behave in a similar way to income tax: a graduate loan is a debt much like any other commercial debt.

Fire_Fox

darren_5 wrote: »

Thanks Firefox,

Sorry to be a pain but the situation is:

The 16k is going to be given to us by my partners mother, then the 5k is possibly given to us by my parents. So, my parents want the money back but thats just a personal family commitment that i pay them back as and when i can. Does the lender got to know this?

As its for the house its a little tricky to use it to clear the debt, which i guess is where the slight issues come in. I will work to clear the debt!

Either it is a 'no strings attached' gift or it is a strings attached loan, I cannot be any clearer than I have been. Yes some lenders want to know if the deposit is saved or gifted, they should all be told if the deposit is loaned or if it is to be ringfenced in case of your splitting up. Remember this is the lender's security in case you are repossessed.

So you haven't saved up anything? Please don't underestimate the costs and risks associated with home ownership. If you have not even paid off your debts let alone saved up your own deposit you really are a long way from being ready to buy in April. Lenders like to see evidence that you have good money management skills and you have 'rainy day' plans, particularly since you are not on a permanent contract.

What do you mean your tenancy runs out in April, has the landlord already served you notice to quit and advised you he will be actioning this? Or are you on a six month/ one year fixed term which expires in April? If the letter and you stay you simply go onto a statutory periodic tenancy.