How much can I borrow?

NoNoDrama

Salary 18,300k.
Credit Card "Debts" - 6K.
Credit Rating - Excellent.
Current Available Credit - 20k

How much deposit would I be looking at and how much could I borrow? I would have no deposit so would use my available credit for deposit (or just save a few months salary and live off credit card then balance transfer).

Been renting for 3 years get a very good deal on my place but just worked out I have paid 10k in rent during that time, :eek:money down the drain or what.

What about interest only mortgage? Or governments 5% scheme?

Some clear, concise and accurate info would be great. Not after a lecture of my methods of obtaining deposit.

Thanks

ShALLaX

You can usually borrow around 4..4.5x your salary, so around the £80k mark. You are unlikely to be able to use your credit for a deposit (you have to state the source of your deposit and I believe that lenders won't allow credit cards to be said source).

You should be able to take advantage of the government schemes, which would allow you to get a mortgage with a 5% deposit. However, you need to work out if even this would be affordable for you - remember to factor in monthly outgoings (food, fuel, clothing, nights out); bills (gas, electricity, council tax, ground rent/ maintenance charges, insurance) as well as unforeseen expenditures (car breaking down, medical bills, boiler breaking, etc.) Remember that you also need to fund the purchase of the property, which includes conveyancing fees, searches, funds transfer fees, stamp duty and possibly a deposit/ reservation fee. I'd set aside about £3k for all of this. Then, once you're moved in, what about furniture, white goods and decorating provisions? I'd set aside £5..10k for this.

If you were to borrow £80,000 for 25 years at 5% with a £1000 arrangement fee, which is not unrealistic if you were to go for a 95% mortgage, then the repayment would be around £468 per month (of which £333 would be the interest portion - if you opted for an interest only mortgage, then this interest portion is the only amount you would pay per month). However, keep in mind that if you do opt for interest only, you need a way of paying off the entire principal amount by the end of the term. Lenders will almost certainly ask you about your plans/ repayment vehicle for achieving this. If you don't have a viable plan, then they're unlikely to lend.

My advice would be to clear your debts first, save up a healthy deposit (20% will get you onto the "better interest rates" rung), then start thinking about buying. I'm not sure any potential lender would look favourably on your debt being around 1/3 of your (pre-tax?) income. It'd start ringing affordability alarm bells.

Don't rush into what is arguably one of the most important decisions of your life. However, well done for wanting to do something about getting your first property. I'm of the same opinion that renting is largely akin to throwing money down the drain (sure, you get somewhere to live whilst you're paying the rent, but have nothing to show for it thereafter).

00ec25

sorry but you will get a small lecture - lenders do not accept "deposits" which are based on borrowed money, that includes cash drawdowns on credit cards
the only form of deposit acceptable is cash from savings (or the bank of mum and dad)

_Andy_

1) no lender will accept deposits obtained from unsecured borrowing.

2) no lender will do interest only without a repayment vehicle in plcae

hazyjo

They definitely won't look favourably on that credit card debt - and will deduct that and a further amount allowing for interest payments, etc from what they'll lend you.

Personally doubt you'd be offered much more than £70k. With no deposit saved, you'd probably be lucky to get that.

Save, save, save. Get that credit card balance to zero, and try and save at least 10% deposit.

Good luck

Jx

DRP

How much can I borrow?

It sounds like you're already close to the limit *without*the mortgage...

Seriously, take on board the advice to clear your debt and save first. Also do some research by calling a bank and speaking to their mortgage people.

Good luck and let us know how you get on with the bank. It would be very useful to know exactly how they deal with such a situation.

J_i_m

To answer the question from the supplied information.

The amount you can borrow is zero.

You can't take out a loan to buy a mortgage, you can't put down a deposit on a credit card.

If you could, on an £18k salary it would be insane to.

LeafGreen

NoNoDrama wrote: »

Been renting for 3 years get a very good deal on my place but just worked out I have paid 10k in rent during that time, :eek:money down the drain or what.

I have a mortgage with a pretty good interest rate (2.8%ish, that was with a substantial deposit) but I still pay over £300 per month in mortgage interest alone at the moment - money as dead as rent, and going to the big bad banks rather than a local business - all that adds up to a similar amount over 3 years as your rent.

Sounds like you have a very good deal on your rent - make the most of it... if I were in your position I would hold off buying for the foreseeable future but keep saving as much as you can.

R_P_W

The 10k spent on rent isn't money down the drain though is it. There are always living costs.

pinkshoes

A mortgage is just renting from the bank, so you need to compare mortgage interest to rent.

At the moment you need to pay off your debt, then save at least a 10% deposit anx about £1000 for solicitors, costs etc...

ShALLaX

R_P_W wrote: »

The 10k spent on rent isn't money down the drain though is it. There are always living costs.

Disagree. Imaging spending £10k on drinks, or shoes, or going to the cinema, or gambling. It's great whilst you're doing it, but after the alcohol is processed, the shoes wear out, after the memories of the cinema fade away and after the gambling losses (assuming you don't win big!)... what's left? Nothing but a lingering feeling of "Imagine what I could have done with that money if I'd invested it..."

Maybe it's just me, but I feel much happier knowing my house is mine and nothing (hopefully) can take that away. Renting gets you somewhere to live immediately; owning gets you somewhere to live immediately (maybe at a slightly higher cost) but also gets you equity in a property that you can sell later, or keep for a comfortable retirement.