Looking to buy my 1st home. :)

tantram

Hey Guys and Gals,

Here's my situation:

Just been promoted at my job and am now on a wage of £17250, also another promotion in 6 months up to £19000.

Have been looking around a few sites and I keep seeing '4x your salary', to me this is just silly as this won't even get me a low end house in my area.

Just as it looked hopeless I stumbled across the Natwest site, after putting in my salary details and how long I wanted I wanted the mortgage over it gave me some interesting results.

The 1st mortgage offered was - £ 105,000 5.39% - 2-Year Fixed-Rate 75% LTV £588.95 monthly repayments.

The 2nd was - £ 105,000 5.39% - 2-Year Tracker £588.95 montly repayments.

I've been reading various articles and have been told to stay away from high lending mortgages (this one is 6x my salary), though I am unsure why. £600 a month, plus all my bills is affordable and also leaves me with some money to spend on myself.

The property I was looking at is valued at £117,000 and the developer is offering to pay 5% of the deposit. This puts the mortgage up to £110,850 leaving only 5% to find, which is easily done.

As far as debt goes, I have borrowed money on credit several times and have paid it off early each time. I also have an overdraft of £1250 which may hinder my chances somewhat.

Being skeptical in nature, I figure there must be some kind of catch or 'trap' to this mortgage.

Just wondered whether this looks like a good deal to you, and if so also how feasible it will be for me to get this mortgage.

Thanks very much, hope someone can help.

andyboyo

The only catch I can see is that 75% LTV means that you need a 25% deposit !

tantram

Well that kinders my plan somewhat, what about the tracker mortgage? What kind of deposit is needed on that?

Also I was just talking to a colleague at work, he said that the developer will probably offer the 5% on a mortgage through them, rather than an outside lender... is that true?

kingkano

Wouldnt be surprised. They arent giving you 5% but making a 'gifted deposit'. Mortgage companies need to know this in advance and sometimes they dont like gifted deposit (as there isnt really any deposit, its a 100% mortgage with the asking price dropped if you think about it).

Is the payment you quoted Interest Only? What will you do if property prices drop? (new builds just about always do initially).

tantram

Interest & Capital, apparently.

As far as the price dropping, i'm not too worried my friend bought one from the plot next to it a few months back, furnished it, and is selling it on for a £15k profit.

Do you think the developers mortgage would offer a similar rate, based on the same monthly repayments?

Feanor

I would strongly suggest you go and see a whole of market fee free mortgage broker.

They will search across every lender for you and come back with the best possible deal for you, and then they get their comission from the mortgage lender, so it doesn't cost you anything.

I think it looks like a bit of a stretch to be honest. Those interest rates and monthly payments are low because you need 25% deposit, so effectively they are based on borrowing around £75,000.

If you dont have a deposit, you will need to borrow 100% of the value, even with the gifted deposit from the developer. Depending on credit history, you are looking more at rates around 5.5% to 5.8%.

So purchase price would be £117 minus gifted 5% so you need a mortgage of £111,000. This is over 6 times your salary. The payments, based on 5.5% would be somewhere in the region of £700 a month. Sorry its not very accurate, but it will be more than quoted on those mortgages.

You should be bringing in around £1100 a month, so you can allow £650 -£700 for mortgage, £70 a month for council tax, gas & elect £60, life assurance, buildings insurance, contents insurance, phone, internet, car etc etc..

I think it will be very tight. Dont forget you will also need upfront costs for surveys/solicitors fees and stamp duty. This could come to about £2000 for that purchase price.

I dont mean to put a dampener on things, i know how frustrating it is to want your first home.

have you considered the shared ownership schemes or something similiar?

tantram

Mmm, I figured it all looked a little too easy!

Thanks for your advice though, you're right £700 would be pushing it, i'd have very little money to myself... i'd have a home but no money to go out.

I've thought sharing, only problem is that I've just split up from my partner and have been living with her for 2 years, just wanted a space to myself, heh.

Can you recommend any fee free mortgage brokers?

ollyshaw

tantram wrote: »

Have been looking around a few sites and I keep seeing '4x your salary', to me this is just silly as this won't even get me a low end house in my area.

Are the house prices silly or the lenders criteria?

Olly

tantram

*shrugs* Seems that 4x your salary won't buy anyone in my position a house. Guess it could be either.

Feanor

Hi,

A shared ownership scheme is not where you share the house/flat with other people, it means you only buy a percentage, say 50% or 75% and then you pay a subsidised rent on the other 25%.Its usually on new build properties too. It can work really well for someone in your position, if you search for 'shared ownership' on these forums you will see some of the responses. Google will come back with alot of information.

I mean, does it have to be a new build house? Aren't there any nice flats/maisonettes which would be more within budget? As a first time buyer, you have to sacrifice on something as a starting point to get on the ladder. Also, much more value can be added to an older property, where with new properties you always pay a developers premium. If it is a house you are insistent on, it could be worth discussing with a broker about renting out a second room, as they may look at this as an income. Again its all worth discussing it with a broker who knows the ins and outs.

I can recommend a good fees free broker, but he lives in my neck of the woods (Surrey). I dont know whereabouts you are based?

Feanor x

tantram

Hmmmm, I didn't know you were able to do that. I will definately have a look into the shared housing route.

I'm up near Manchester in Crewe, the only problem with current places in my price range is that they're in quite dodgy areas. I know once you're in your house it doesn't matter, but i'd rather have my windows etc intact.

This new development is in a really nice area, close to all the local amenities I need.

If you're aware of brokers near me, I'd really apprecaite it.