A little help for a FTB?

Shadowplay_2

Hi,

I really need some advice.

Basically my partner and I have seen a flat which we would like to put an offer in for. It is on the market for £132,500 and we would like to offer £120,000 initially with our maximum offer being £125,000. The flat itself is structurally sound but in need of modernisation (lovely old dark brown bathroom suite!)

Now for the problem, we are currently debt free but we are also savings free.

Which of the below is the best option and what are the financial implications?

1) We borrow around £4,000 for Solicitors fees, etc. and get a 100% mortgage (then save up to carry out the modernisation).

2) We borrow around £10,000 for Solicitors fees, etc (£4,000) and a 5% deposit (£6,000). Get a 95% mortgage of £119,000 (then save up to carry out the modernisation)

3) We borrow around £14,000 for Solicitors fees, etc (£4,000) and get a 100% mortgage. This will leave £10,000 to carry out the modernisation straight away.

4) We borrow around £20,000 for Solicitors fees, etc (£4,000) and a 5% deposit (£6,000). Get a 95% mortgage of £119,000. This will leave £10,000 to carry out the modernisation straight away.


some useful information

Joint income = £43,000pa basic / £45-46,000pa with OT

Monthly NET income (after Pension, SL, TAX & NI) = £2,558

Debt = £0 & Savings = £0

We do not own nor run a car.

Max Monthly repayments we are willing to pay on Mortgage is £700pm.


So what’s the best scenario?

kingkano

When you say max mortgage 700, do you mean that to include ALL borrowing (even the loan)??

I guess you'd have to weigh up the higher short term repayments against the interest saved. As always saving up is the best method, although you haven't got a deposit yet so does that mean saving up is difficult for you?

I'm pretty sure from other people's posts that borrowing for the 5% deposit would be frowned upon and might not help you much.

homer_j_3

could you offer full asking price but request that they pay your 5% deposit, legals and stamp duty?

You could then do the flat up over a period of time, one room at a time when you are in a position to do it without going into debt?

JoeK_3

It looks like a 125% mortgage could be the ideal solution here.

Depending on the property condition, there may be a retention of some of the money advanced by the lender.

JoeK

Shadowplay_2

Thank you for the replies.

kingkano - the £700 is the most we want to pay for the mortgage alone. Based on a 100% or 95% mortgage.

I have produced a budget and we have spare money each month to cover a loan or loans as well as save. If we hang on another 12 months and save the property will be gone and god knows how much property prices will have risen by :eek:

homer_j - I am really new to all this and didn’t even know this was possible

How common is this practice and how likely are they to accept? After very quick calculations this would mean the flat actually cost about £123,000?

JoeK - if we took out a 125% mortgage does this mean we are in negative equity?

Also I’m concerned about the rates on Mortgages above 95% hence the questions regarding taking out loans to cover the deposit, etc.

Maybe it would be best to save for 6 months to cover the Solicitor fees, etc. and get a 100% mortgage?

what do you think?

homer_j_3

its called a vendor gifted deposit and is a paper transaction which creates a deposit amount for you and the stampduty and legals will be paid upon completion.

Its not an easy sell but worth a try rather than offering to pay a lot under the asking price. Speak to the selling agent to see if they would consider such a transaction.

JoeK_3

Shadowplay wrote: »

JoeK - if we took out a 125% mortgage does this mean we are in negative equity?

Yes you would but taking out another loan means the same thing. A 125% mortgage is 95% secured and up to 30% is unsecured. The good thing is that the interest rate would be the same on both loans.

Shadowplay wrote: »

Also I’m concerned about the rates on Mortgages above 95% hence the questions regarding taking out loans to cover the deposit, etc.

With the 125% mortgage, there is no deposit required, as it is already built into the equation.

Shadowplay wrote: »

Maybe it would be best to save for 6 months to cover the Solicitor fees, etc. and get a 100% mortgage?

what do you think?

It is always best to save up if you can.

JoeK

Shadowplay_2

Thank you for the help,

It’s always good to a have a couple of options to pursue.

Can I check a few things?

With a 125% mortgage are there two payments, one for the Mortgage and one for the loan or are they combined?

Will the 30% loan be over the term of the Mortgage i.e. 25 years?

Can you make overpayments?

As an idea what is a good rate for a 125% mortgage? And which reputable companies offer this type of mortgage?

Sorry for all the questions, it’s just a big financial decision and I feel completely inept!

Mike & Lea

homer_j_3

with a 125% mortgage the payments will be one payment whilst both the secured and unsecured arein the same place.

You can have the unsecured over a different term to the secured normally.

Depends on the lender to whether you can make overpayments, to my knowledge there are no restrictions on the unsecured parts of the loan but there may be some on the secured.

The rates can vary from about 5.39 to over 7% dependent on the product that you choose.

No need to feel inept, this is what the forum is for.

JoeK_3

Shadowplay wrote: »

Thank you for the help,

It’s always good to a have a couple of options to pursue.

Can I check a few things?

With a 125% mortgage are there two payments, one for the Mortgage and one for the loan or are they combined?

Will the 30% loan be over the term of the Mortgage i.e. 25 years?

Can you make overpayments?

As an idea what is a good rate for a 125% mortgage? And which reputable companies offer this type of mortgage?

Sorry for all the questions, it’s just a big financial decision and I feel completely inept!

Mike & Lea

Payment are usually to the same lender.

The unsecured loan is usually over the same period as the mortgage.

Overpayments, that depends on the mortgage contract.

There are a number of different rates available from these lenders. As you will be going above the property value, you should get a good fixed rate.

Companies such as Norther Rock, Coventry Building Society, Mortgage Express, Birminham Midshires are to name a few.

Some of these lenders will only deal through mortgage brokers.

JoeK

MortgageMamma

Which part of manchester are you in? There are hundreds of mortgage brokers in Manchester - I would suggest you take some official professional advice - make sure they are whole of market (access to every single lender) and fee's free before you commit

Good luck

MM