First Time Buyer - 5 1/2 Times Salary

james10999

Hi there,

I live in Coventry and have finally found a house to purchase which was (i'm thinking!) within my price range. However I'm very concerned about the mortgage repayments and the interest rate rises.
I have had a mortgage accepted with HSBC for £111,000 over 30 years on a fixed rate of 5.79%. Application has been processed, all I have to do is send back the paperwork.

The house i'm buying I agreed a sale price of £136,000 for a 3 bedroomed end of terrace house therefore i'm putting down £25k deposit (my student loan which I didn't use and money invested in shares from my parents).
I live with my partner however has they have loads of CCJ's from 4 years ago, they would have never been accepted on any decent mortgage deal hence the sole purchase

The monthly repayments are £655. I'm on 21k a year and after tax and SL it comes to just over £1200 a month. I'm very concerned that after my 3 year fixed rate deal is over, what the monthly payment will be and would I be able to afford it? My partner will be paying half the mortgage to me also and was wondering if there are any implications of this?

We have thought about having a lodger in to reduce the mortgage payment as we have heard about the governments "rent a room" scheme.

Could anyone please advise me on these points? I need to send back my mortgage offer in a few days before the date runs out so any help would be really helpful!

Thanks in advance.:A

MortgageMamma

I think you need to consider how you will pay it if you and your partner split up

also make sure the mortgage is insured if you are unable to work/redundancy

a lodger is a possibility but do you really want someone intruding on your privacy?

JoeK_3

james10999 wrote: »

Hi there,

I live in Coventry and have finally found a house to purchase which was (i'm thinking!) within my price range. However I'm very concerned about the mortgage repayments and the interest rate rises.
I have had a mortgage accepted with HSBC for £111,000 over 30 years on a fixed rate of 5.79%. Application has been processed, all I have to do is send back the paperwork.

Have you asked them for a longer fix?
Have you considered an interest only mortgage during the first 5 years?

james10999 wrote: »

The house i'm buying I agreed a sale price of £136,000 for a 3 bedroomed end of terrace house therefore i'm putting down £25k deposit (my student loan which I didn't use and money invested in shares from my parents).
I live with my partner however has they have loads of CCJ's from 4 years ago, they would have never been accepted on any decent mortgage deal hence the sole purchase

The monthly repayments are £655. I'm on 21k a year and after tax and SL it comes to just over £1200 a month. I'm very concerned that after my 3 year fixed rate deal is over, what the monthly payment will be and would I be able to afford it? My partner will be paying half the mortgage to me also and was wondering if there are any implications of this?

Good idea not to include her at the moment

The only implications are that the lender will need to know of your partner and he/she will have to sign a consent to mortgage form.

james10999 wrote: »

We have thought about having a lodger in to reduce the mortgage payment as we have heard about the governments "rent a room" scheme.

Again, this is something that can be considered after the mortgage has gone through

james10999 wrote: »

Could anyone please advise me on these points? I need to send back my mortgage offer in a few days before the date runs out so any help would be really helpful!

Thanks in advance.:A

A £111,000 interest only mortgage at say 6% fixed for five years would cost you both £555.00 per month.

JoeK

sortofok

Have you considered extending the term to 50 years? That would bring the payments down.

james10999

JoeK wrote: »

Have you asked them for a longer fix?
Have you considered an interest only mortgage during the first 5 years?JoeK

I couldn't have a longer fix as the mortgage was on a special deal if I joined there bank account plus which the cost of it far outweighed the amount of interest I would be paying back as I got 5.79% instead of 6.19%. I also want to make overpayments when I can upto 20% which i'm allowed so bringing it to £750 once I have the lodger in

JoeK wrote: »

Good idea not to include her at the moment

The only implications are that the lender will need to know of your partner and he/she will have to sign a consent to mortgage form.

Again, this is something that can be considered after the mortgage has gone through
JoeK

She also wants to know if we split up, how she can get her money back what she has payed into the house. Should I just keep a record on say Excel on how much she puts in each month and then IF we split up and sell the house, give back what she has put in plus the propotion of the increase in the property she has gained on her money?
I have told the lender she will be living there and that is fine.

JoeK wrote: »

A £111,000 interest only mortgage at say 6% fixed for five years would cost you both £555.00 per month.
JoeK

I exactly what i DON'T want to do at this stage. I want to pay as much money off the property as possible in these 3 years before the interest rates go sky high! I was really wanting to know what the payments would be in 3 years time the way interest rates are going at the moment - but i guess this might be plucking at straws as we don't know how it's going to go?


I'm fine with a lodger moving in - we have done this in our rental property and don't mind renting to others. Are there any implications such as tax with this though?

JoeK_3

See http://www.direct.gov.uk for the tax implications of a rent a room scheme.

You could have a type of pre-nuptual drawn up with your partner before she moves in.

With regard to the fixed interest rate term, unfortunately, you can't cover both ends without taking a risk.

JoeK

MortgageMamma

There is a fine balance between a high income multiple on a mortgage deal and including a partner with less than perfect credit

either oe will impact the mortgage and present a situation where you are either restricted on how many deals you can choose from through a high income multiple, or you are restricted because one partner is credit impaired

Dependant upon how long ago the defaults were and whether they are repaid or not it may well be viable to include your partner on the mortggae.

The best way to analyse the possibilities is to get a mortgage broker (preferably whole of market and fee's free) to source and make a recommendation taking into account both scenarios, and then see what best to do

HTH

MM

Melissa177

Hmm - could you self-cert on the grounds that you'll be receiving half the mortgage payments from your partner?

Or is this not a good idea?

dollarjon

Dont forget if your OH is paying half of the mortgage it will ammount to almost no capital in the property in the early years, so if you do split after say 5 years she will not own much of the house, as above i would have an agreement in place detailing the ammounts etc.

homer_j_3

I dont think self certing is the way here as its not something that will resolve this issue that the OP has due to the fact that he can get the borrowing he needs.

The rate he has been offere doesnt seem too bad in todays world but it depends on set up fees etc.

The way I would do it is to get them to pay half of everything straight down the middle. You will get an annual statement telling you what your balance is each year and you can get interim balances at any point and you just half the benefit in the reducing balance and potential increase in property prices should you need to go your seperate way.

The money you receive from the rent a room scheme will clearly give you both the ability to reduce your mortgage a lot more speedily.

As MM said though, you need to be very careful about you being left on your own to pay it and you should protect your income.

james10999

Thank you for all your comments. To give you a bit more information:

My rate is secured at 5.79% for 3 years with HSBC who recently has a no fees deal in setting it up. I caught the rate just before all the increases and it's over a 30 year term (the maximum they give). If I go back to change it now, the rate will increase to 6.09% - not something i really want to do!

I tried out several Mortgage advisors covering the whole market, with no fee, however no-one was able to give me a decent deal and HSBC don't go through these advisors. I've been with HSBC bank for about 7 years and had a really good relationship with them, hence the large amount I can borrow (111k).

The rent a room scheme looks great, but not quite sure how I would write a contract? I guess you can just download them from the internet somewhere?

In regards to my partner, shall I just state down on a piece of paper that she will get all the money back she pays in to the mortgage if we split up plus a proportion of the profits that would be made from the sale? If I get her to sign and date, who do I give this to? Is that enough?

After reading everyones points, I have had a quote for mortgage protection insurance and I will be taking this up. it's only £10.64 a month so I guess thats worth it.

I know age isn't an excuse, but i'm only 22 and a bit concerned about the vast debt i'm going to be in!