First time buyer advice

steffimartin89

Hi, new to the forum. Although myself and partner aren't looking to buy until next summer i wanted to post to get peoples opinions about the plan we have in place to buy our first home.

We've set our goal at a purchase price of £200,000, with a LTV of 80% to keep the interest rate down. So would be borrowing £160,000.

The plan is why were in a good position to save a decent deposit is to skip the first rung on the ladder and save ourselves the moving costs of upscaling in say 5 years. My first question is this a good idea? I know I won't know for sure until we speak to a broker, but my calculations seem like its feasable. The way I understand it, is that its the deposit that is the biggest deciding factor for first time buyers. As we're fortunate enough to save what we can its given us more options.

My basic salary is £32500 but including shift premiums and contractual O/T its circa £50k. (Voluntary overtime is also readily available). My partners salary is £24,000 basic and with shift premiums / overtime earns between £25-30k. Also does anyone know if Nationwide recognise nursing pay progression?

My second question is about mortgage term. I'd like to get it over as long a term as possible (40 years if allowed) to keep the payments down. But at the same time overpay. I've been looking at the 4 year fixed flexclusive mortgages with the Nationwide. Is there any disadvantages to this? I'm struggling to see (if age is in your favour, ours is) why anyone would get their term over 20/25 years these days? Sure getting over a longer term and overpaying is the most sensible option. Obviously safeguarding yourself for those occassional months where you may need some extra funds. Most articles i've read seem to give them bad reviews but providing you have the financial discipline to keep on top of over payments, they're advantegous.

Any advice is appreciated,

Thanks

ACG

At this stage im not sure why you are deciding on a lender. Rates/deals/products can change - nationwide may not be competitive then.

40 years is probably a bit too long. 30-35 is more common as a maximum.

People say they will overpay but never do, so reducing the term ensurers they stick to it as they do not have the discipline otherwise.

steffimartin89

ACG wrote: »

At this stage im not sure why you are deciding on a lender. Rates/deals/products can change - nationwide may not be competitive then.

40 years is probably a bit too long. 30-35 is more common as a maximum.

People say they will overpay but never do, so reducing the term ensurers they stick to it as they do not have the discipline otherwise.

Thanks for the reply ACG

I haven't, I was using Nationwide as a guide as thats who my current account is with. If at the time better deals are available I would consider those too.

Ok thanks for the advice on the term I did orginally think 35 years but only recently read into some lenders offering 40.

Yeah I can imagine alot of people are like that but luckily one thing I don't lack is the discipline

Thrugelmir

As a straight comparison. A £160k borrowed over 40 years at an average of 7% interest will cost you £317,259 in interest.

Whereas over a 25 year term the interest will be £179,254.

That's an extra £138,000.

Borrowing over a shorter period saves an enormous amount of money.

steffimartin89

Thrugelmir wrote: »

As a straight comparison. A £160k borrowed over 40 years at an average of 7% interest will cost you £317,259 in interest.

Whereas over a 25 year term the interest will be £179,254.

That's an extra £138,000.

Borrowing over a shorter period saves an enormous amount of money.

Thanks for the reply but you missed the bit about overpayments. My plan is to start on a 4 / 5 year fixed deal and hammer the over payments to bring the LTV down by the end of the period.

For arguments sake instead of paying £750pm on a 20year deal, get the term over 35 years and pay £500pm + £250 overpayment (plus more). But like ACG said though its having the discipline to maintain that, but I'm more than confident I could.

ACG

Just ensure you are able to overpay by that amount.

Some cap the overpayments to a set amount, some say 10% of the balance in any one year, others say £500 a month, others have unlimited.

It COULD be worth looking at an offset mortgage... if you use a broker they can go through the options with you.