Could someone advise me on the best type of lending for my needs?

Nick2245

Hi,

I'm hoping I can get people's advice as I'm looking to purchase a flat and need to borrow around £25k.

I don't earn very much but I would be looking to repay this in under 5 years.

Do I try and get a normal term mortgage that allows overpayments? I have looked at offset mortgages but my salary appears to be too low for lenders liking.

Should I be considering alternative lending solutions such as peer to peer (Zopa etc)?.

Thanks!

ACG

How much is the purchase price?
How much is your income?
Is your intention to live in the property?

Nick2245

Hi,

I plan to live in the flat (FTB) and the total cost is £120k. Income is around £17.5k - thanks!

ACG

There will be mortgage lenders who will do a £25k mortgage at that LTV. Interest rates will be normal as your income is more than enough to support a £25k mortgage.

It could be worthwhile speaking to a broker, just to save you time trapesing around all the different lenders (on a £25k mortgage, I would also expect to pay a fee) - but I think there will be a lender for this.

The alternative would be to just get an unsecured loan, you can get them for £25k. But the interest rate it going to be around 3 times as much.

Nick2245

Thank you for your reply.

Do you think it is possible to get an offset mortgage on my income or one that allows early repayment?

The reason being is I could potentially repay the amount in 2-3 years.

Also I have checked on P2P lending sites and they appear to offer this amount at around 8% - naturally they allow early repayment without any fees etc.

Thank you!

ACG

Why would you pay 8% when you could pay maybe a quarter or a third of that?

I think obtaining an offset is going to limit your options down quite a lot. I think based on the mortgage amount, you probably want one without fees and the only lenders I know who would do offset mortgages of that amount would charge fees.

Why not get a 2 year deal where you can either make overpaymens/unlimited overpayments or if that is not possible just save the money up and make a lump sum payment in 2 years?

I think you are looking at P2P pointlessly. There are going to be far far cheaper options available.

Nick2245

Thanks again for your reply.

For some reason I believed the minimum term on a mortgage was 5 years. If I can get a 2 year mortgage then that is fine.

With rent payments it would take me about 4 years to save the amount needed and a flat has come up now that I like.

Thanks again

pjread

I think all the lifetime tracker deals I've seen allow unlimited overpayments, and wanting to borrow 1.5x income with a sub-25% LTV I'd have thought you'd have few problems...

if you're repaying within 5 years, I don't see you ever seeing a rate as high as 8% on a tracker (maybe 5% at worst...) but that's just a guess.

ACG

You can take out a 5 year mortgage, be tied in for say 2 years and at the end of the 2 years pay it off without penalty.

It might be worth speaking to a broker, the info i can give on this site is limited and very generic. If you speak to a broekr they can give you a lot more info aimed at your circumstances.

ethank

Nick2245 wrote: »

Could someone advise me on the best type of lending for my needs?

Yes, you should speak to a broker.

RedFraggle

Nick2245 wrote: »

Thanks again for your reply.

For some reason I believed the minimum term on a mortgage was 5 years. If I can get a 2 year mortgage then that is fine.

With rent payments it would take me about 4 years to save the amount needed and a flat has come up now that I like.

Thanks again

Can I just check that you're looking for a £25k mortgage to buy a £125k flat i.e. that you already have a £100k deposit to put down.