Mortgage Advice - Super newbie

[Deleted User]

£50,000 pre-tax between 2 people is probably £40,000 after tax. £40,000 / 12 is £3,333 PCM. Your rent is £700 PCM which leaves you with ~£2600. Utilities, council tax and misc. running costs of a (rented) home comes to probably about £400 per month, then add on costs of food that's probably another £400 taking you down to £1800.

You should be able to save at least £1000 per month, maybe even more. 2 years of saving £1,000 per month would give you over 10% of a deposit on a £200k house (with fees included).

Where are you spending your money? A statement of affairs may be an excellent start, you may wish to address your expenditure issues before looking at help to buy schemes. If you can adjust your spending down it will pay dividends over the years, trying to squeeze a house into your high expenditure situation will just make it more work.

If you're living pay cheque to pay cheque at the moment (or thereabouts) then you're going to have huge problems when children come along, addressing your spending is definitely where you should be focusing now. With some hard work and sacrifices you could potentially be saving £2000 per month, just a year of saving that much per month would give you a massive head start on your future and would give you the financial skills to possibly be mortgage free before you turn 40.

Strikeman

To be fair that is a valid point and we do live within our wage but theres little left at the end of it, but it gets spent because its there. We've been putting small amouts away but havent been on a real deposit push. I think realistically we could save £600 - £700 a month between us, so not quite your forecast but still a good chunk.

Is there an easy formula to calculat the monthly mortgage repayments? For example:

Mortgage Value £100,000
Introductory Rate 2% (24% per year?)
After 2 years rate 4% (48% per year!?)
Term 25 years/300 months

Ignoring initial fixed costs and set up, how is the mortgage calculated on a monthly payable basis. Is it as simple as:

£100,000/300 = £333 per month excluding any interest
£333 x 12 = £3,996 x (12 x 2%) + £3,996 = £4,955 a year after interest or £413 per month?

So a £100,000 loan would in effect cost:

Year 1 & 2 - £4,955 (£9,910)
Year 3 - 25 - £5,914 (£136,022)
Total Payable £145,932

I know this is hypothetical, but is this all you need to do or do I need to factor in something else as well??

Also I keep seeing introductory rates, can I move the mortgage to another provider when those rates run out, effectively like tarting around a credit card debt to take advantage of lower interest rates or are there penalties and arrangement fee's involved?

kingstreet

If you use Help To Buy, you'll be looking for a 75% mortgage and that's going to be in the region of 3% per annum.

Over a 25 year term, assuming a £187,500 mortgage on a 3.19% product, you'd be paying £907.79 per month. I've used that figure as it's 75% of £250k. If you go above that, stamp duty trebles to 3%, so instead of paying £2,500 on £250k, you'll pay £7,800 on £260k.

A broker who understands the HTB process will handle the process for you;-

- establish what you can borrow, what the fees and other costs will be
- get you a mortgage agreed in principle with suitable lender
- co-ordinate reservation with builder
- finalise reservation and property information forms and submit them to HBA
- chase up HomeBuy Agent to get ATP back
- handle mortgage application through to completion.

Please find yourself a good independent or whole market broker. This level of detail is too much for on here.

Strikeman

kingstreet wrote: »

If you use Help To Buy, you'll be looking for a 75% mortgage and that's going to be in the region of 3% per annum.

Over a 25 year term, assuming a £187,500 mortgage on a 3.19% product, you'd be paying £907.79 per month. I've used that figure as it's 75% of £250k. If you go above that, stamp duty trebles to 3%, so instead of paying £2,500 on £250k, you'll pay £7,800 on £260k.

I think we are going to look into a mortgage broker this week/weekend sometime.

Just out of interest what calculation did you do to reach the £908 per month? Im really interested in how this is all calculated, I have the government equity element sorted I think...

£187,500/300 = £625 per month excluding interest

kingstreet

You use a repayment mortgage calculator and you put in the amount, the term and the rate and it tells you the monthly payment. I use the one in Mortgage Brain which is proprietary software for brokers.

It is not a set amount of capital which is repaid. For example, mostly interest is paid in the early years while the outstanding capital is higher, then as time passes, the balance falls and the emphasis changes so that there's less interest to pay as you owe less. Around half the capital is repaid in the first 17 years of a 25 year mortgage, with the other half being repaid in the last 8.

amnblog

kingstreet

I like that.

Strikeman

Theres me thinking it would be an easy formula :rotfl:

Think I'll stick to the online calculators for this one!