Realistic Borrowing & Income/Deposit Questions

jtr2803

Hi All,

Apologies for the number of questions here, I thought it would be easier to put them all in one post rather than run separate threads. Husband and I are currently renting but hoping to start actively looking to purchase from mid October onwards. This leads me into a few questions;

Realistically, what are we likely to be able to borrow?

I have had a variety of answers from online calculators, Halifax said £240k, Santander said up to £310k based on income and deposit details shown below.

We are currently looking to borrow in the region of £275k if possible, unfortunately we will only have a £15k deposit for a property of that value (so £290k purchase price).

I earn £41k (rise due 1st Nov), Husband earns £25k. We have one dependent and are in receipt of Maintenance and CB of £220 per month for the next 4 years. I also have an annual bonus which in the past 4 years has paid out circa £10k+ per year based on Company performance so not guaranteed but regular. We have committed expenditure of £330 per month and no debts, excellent credit history.

I have tried to run a realistic affordability budget based on a 30 year mortgage and projected outgoings which leaves us with around £1,100 per month spare but I am unsure of how much weight such calculations will hold in the application process.

Deposit Question

We have some savings already but the rest (majority) will come from this years bonus payment and also the sale of shares I hold in the company I work for. Is there any issue with the deposit being funded in this way? I know gifted deposits are not always accepted so thought best to ask.

The properties that I am basing these calculations on are what I would call our 'forever' home and the last thing I want to do is to find ourselves in a position where we get turned down during the application process. We are desperately trying to save more for the deposit in the mean time.

Thanks

HappyMJ

It's not a gifted deposit. You earned the shares and are selling them so it's part of earnings and your savings.

If you can I'd wait till November pay rise shows on a pay slip and save as much as you possibly can...to the extent of not going on holiday until after completion. You need to really cut back for a few months.

You should be able to borrow what you require...very close to it anyway.

jtr2803

HappyMJ wrote: »

It's not a gifted deposit. You earned the shares and are selling them so it's part of earnings and your savings.

If you can I'd wait till November pay rise shows on a pay slip and save as much as you possibly can...to the extent of not going on holiday until after completion. You need to really cut back for a few months.

You should be able to borrow what you require...very close to it anyway.

Thanks for confirmation of the share sales, obviously I will have a full on paper trail if there were ever any questions about it.

Hmm, holiday - tough one! We have one booked for March (a big one) but we have already discussed cancelling it if need be. We may still go for something more affordable with a view to extending/converting space long term but it would be nice to be in a position where we can do either.

HappyMJ

After moving in you could put the holiday onto a 0% on purchases credit card and pay for it over the next year. It seems like you have the money to be able to afford it later. You can take out credit after you have the mortgage and use all your cash now to pay for the house deposit.

jtr2803

This is true, it makes no sense to tie up a serious amount of cash right now so I think we'll postpone.

We have an ast on our current property until mid Feb so may need to pay that if we end up moving sooner also.

Thrugelmir

Keep one eye on the future. A debt of £275k would leave you exposed to future rate rises. Stress test your budget at 7% interest rates. Better to have a degree of comfort than take unnecessary risk.

jtr2803

Thrugelmir wrote: »

Keep one eye on the future. A debt of £275k would leave you exposed to future rate rises. Stress test your budget at 7% interest rates. Better to have a degree of comfort than take unnecessary risk.

Very valid point and noted.

My rough budget includes some contigency in regards to utilities, food etc and we currently also pay £150 p/m each into our pensions, certainly not a long term solution to reduce or pause those contributions but that, along with cancellation of rolling contract gym membership could happen if absoluely necessary. Our committed expenditure would also have reduced by then by at least £80 p/m as our bed will be paid off. My lease car is also due for renewal next year and I will be looking for something slightly cheaper so that would also help.

I based the calculation on hubby's basic wage but in reality he has more months with overtime than not, we also intend to save half of my annual bonus take home to overpay or pay off on remortgage.

I will go back through the budget again later and see if I have missed or over estimated anything to make it as realistic as possible.

Thrugelmir

jtr2803 wrote: »

and we currently also pay £150 p/m each into our pensions, certainly not a long term solution to reduce or pause those contributions

On a personal level I would factor a reasonable level of pension contribution into any decision.

dimbo61

£66,000 joint income plus overtime, £2500 in maintenance and CB, £10,000 bonus a year and you have just £15,000 in savings.
Why not look at property at £250K max taking into account Stamp duty at 3% over £250,000

jtr2803

dimbo61 wrote: »

£66,000 joint income plus overtime, £2500 in maintenance and CB, £10,000 bonus a year and you have just £15,000 in savings.
Why not look at property at £250K max taking into account Stamp duty at 3% over £250,000

Thank you for your constructive input.

We were looking at houses sub £250k but things change and if we can afford a bigger mortgage with contingency for future interest rate rises then why shouldn't we? That was actually the question in my post, not whether I should, or could have saved more.

Edit - And if the answer to borrowing that sum is 'not possible' then clearly we will amend our plans or save longer.