FTB - Are our circumstances okay?

HouseFTB

We've been reading this forum with great interest for a while now but this is our first time posting. We're currently renting privately, but we're looking to buy in the near future and would appreciate any hints, tips or advice.

We've found a new build house we love, which will be available soon for £260,000. We'll be looking to use the HTB-EL scheme, and have a 5% deposit through our own means. We also have £13,000 as a gift from grandparents to go towards the associated fees. The only incentives that we intend to take from the builder are fixtures and fittings, to approximately ~1% of the sale price.

We have a joint gross income of £70,000, however my partner has only been in his new job for five weeks and therefore has a month or two left in his probationary period (he has however been in continuous employment for well over a year). We are using a total of £3,400 on our credit cards with a total limit of £8,700 - these will be completely paid off before completion.

I am currently out of my overdraft, but I haven't been for long. For a significant period of time we have been utilising my interest-free overdraft on my student account as cash-flow whilst using my partner's account for saving. Now that we're actually looking at buying I have paid the overdraft off fully. My partner has never had or used an overdraft. Neither of us has any history of adverse credit.

In the past we have also eaten out frequently (a few times a week) and although we can happily change this lifestyle, it is obviously reflected on our past bank statements. Due to our income this hasn't affected our budgets, and we've been safely able to save >£750 each month.

A final important point to make is that we will both be commuting a significant distance, with season tickets totalling £1,550pm.

Our (extensive) budgeting indicates that after all bills (mortgage rate of 5%) and a reasonable amount of 'fun' spending we will be able to save ~£500pm. Stress-tested at 7% we will still be able to save >£300pm.

To summarise:

• Looking for a mortgage of £195,000 on £260,000 property under HTB-EL.
• Gross joint income of £70,000pa.
• Grandparent gift of £13,000 towards fees.
• 1% fixtures and fittings builder incentives (no cash incentives).
• Past usage of overdraft, fully paid off and was interest-free.
• Probationary period for partner.
• Travel costs of £1,550pm.
• Budget indicates 'leftover cash' of ~£500pm.

We believe that we should be okay, but just want some second opinions. Should we be able to find lenders for these circumstances? All thoughts are much appreciated!

Thrugelmir

I would suggest negotiating the property down to £250k. As that extra £10k will cost you an additional £5k in stamp duty. Something a surveyor is highly to factor in when valuing the property.

You need to factor in the Equity Loan Repayment to your thinking. As you are deferring another £50k of debt. 5 years soon comes around.

amnblog

This isn't just about the lender. You also need to make affordability under the equity loan scheme.

Consult a good broker.

kingstreet

I've just run affordability with one high street lender and the calculator output is £155,500 over 25 years. That travel cost is eating into your affordability.

It only creeps up to £172,000 over 35 years.

You also have to factor 3% of the equity loan into affordability, so that's another £130 per month. Hopefully, this isn't a leasehold property with ground rent & service charges, as I haven't allowed for those.

As amn has suggested, you are going to need detailed attention to affordability both on the HCA and lender calculators and lender selection will be key. A broker would be the best source of help with this.

questionss

Is there anyway you could negotiate house to 250k?
If you did that could you put the saved stamp duty money towards an annual travel pass - when I commuted into London it worked out a lot cheaper than weekly or monthly passes (about 25% cheaper than monthlies even accounting for holidays etc) - our circumstances changed and we got a refund for the unused portion.

roubaix

Is the season ticket a typo and meant to read £1550 a year rather than month? I don't live in south east so am quite likely ignorant to the costs of commuting but that seems extreme. Nearly £19000k a year

kingstreet

I was reading the other day on here that a ST from Ashford to London is £5k a year.

We've also recently had a client spending £1,000 each month on train travel, so two people and £1,500 a month is not beyond the realms of possibility.

amnblog

Someone has to pay for HS2

Zoology_Dragon

I suspect the season ticket cost is correct, my husband's ticket between London and Bath was ~£850 per month. An annual ticket was about £8k.