Just came back from the IFA, is this good?

Gareth83

Just been to the IFA with my partner.

We are buying a house for £101k and we need a 100% mortgage

We would also like a loan to cover all associated fees and some money for improvements. We are looking for £110k

We have a combined income of £45k (£30+£15), no deposit

We are going for fixed interest, interest only as we need to keep the payments the lowest as possible per month over the first 2 years (we may rent out at a future date)

Our IFA has suggested we go for a 95% mortgage, 5% deposit with a loan up to the remainder.

The loan would be repayable over 35yrs and would be a repayment type loan. This will be much cheaper (per month) than getting a personal loan over 7yrs.

The policy will be from A&L.

It will work out at £560 per month.

We need to keep the mortgage below £575-£600 as this is what we may be renting out at in the near future.

Does this sound okay??

We may have to pay the first 2 months mortgage out of our own pocket (£1120), would it be better to just up the overall figure to £111,000 or £112,000, that way it may only cost us an extra £400-£500 over the course of 2 years?

Hope you can help

homer_j_3

did he credit check you to gain a decision in principal for the A&L? Why wasnt a pure 100% deal better for you?

Gareth83

yeah

what do you think of that plan?

it was either that or Northern Rock

homer_j_3

why not someone like portman for pure 100% or a c&g on 100% for example?

homer_j_3

Just to clarify, Im not saying what I have suggested are better but I am not sure why he has given you this choice and only northern rock or a&l

Gareth83

because we can't get a pure 100% for £110k when the house will be bougt for £101k.

We need some extra cash to do things with.

Surely going for a £110k mortgage would mean that all of that would have to go the seller??

Can you explain if this is possible?

homer_j_3

sorry - very tired and didnt read your thread correctly.

There are 5 lenders that currently do more than 100% lending and I believe that the A&L are doing some good rates and the acceptance level is low in terms of ratio of people applying to be accepted. If you have been accepted then great!

There is no way of borrowing more on a pure 100% mortgage - I should have read your post with a little more concentration.

Gareth83

ah right, that'll explain it.

So would that be the best option then seen as we need £110k??

Also, would it be better to lend £112k and pay the first 2 months of the mortgage from our "extra" borrowing.

We are only concerned in cost per month over the first 2yrs, so it would be better to spend the extra £2k on the first few months rents, rather than paying out of our pocket. reason being it is interest only.

So paying £2k for 4mths rent out of our own pocket would be more costly than using the extra £2k lent assuming it would only cost us marginally more per month over the first 2 year period. Perhaps £4-£500 more??

homer_j_3

i cant tell you if its the best deal for you - its fact that A&L's rates are better than NRs rates for this kind of lending at the moment.

Are you buying this house out for a buy to let? If so, I wouldn't like your chances of the lender agreeing to that. I don't think that by borrowing extra to cover your first few months payments is wise either.

What if your rennovations run over, what if they cost more than expected?

Gareth83

yes the plan is to buy the house to rent it out (but on a residential mortgage basis)

I don't wish to get into the ins and outs as to whether this is bad or not.

We can get the house renovated in less than 5weeks, it's basically decorating.

The aim is for the rent to cover the mortgage and we make money on the fact the house will be worth more wehn done up and the hope that prices will rise.

I'm just not sure on the best method to take if for eg. 4months out of 24 are empty. Should we use our own funds? So a cost of £2140 to us, or use £2k from the extra mortgage that may only actually cost us £240 in interest (24x£10)

Or am I missing something here? Surely paying the interest payments of £240 is better than us stumping up £2140 which we will never get back as it is interest only.

Gareth83

forgot to mention there is no way the renovation will cost more than what we have budgeted.

I have mates in the trade for all work that may need doing, however the only work that we'll need help with is plastering all the rest is superficial. windows are good, electrics are good etc.