Will we be stretched?

Zola.

My partner and I are on the hunt for our first home. We have between us around £40k at our disposal at the very most.

I have about £17k saved and she £23k.

We earn £50k a year between us as a base salary (pretty much 25k each exactly), she can get extra from commission of sales, sometimes its very good, other times not so good. We don't want to count that in our budget really as we want to be very strict.

We went to see a few semi detached houses, some were quite nice but they all had a few major drawbacks. We then went to see one detached house which is listed at £180k and it was amazing. Wouldn't need to touch it really, sitting ready and very spacious. We both loved it.

As a rough guide from the site, an interest rate of 4.5% and dropping down a deposit of £25k, our monthly payments would be £860. Council rates for the year are just under £1k.

The rest of the money would be used for legal fees (estimating £2-3k), and a few thousand for furnishing.

Neither of us are lavish spenders, we both have cars but don't do big miles other than going to work (200 miles a week at the very most). I would spend a bit of money on gym memberships, supplements etc, but thats about it!

We are to meet with a broker again to discuss this house, but I just wanted a few more opinions on what you think.

Is this all too much for a first time buyer?

princeofpounds

It sounds reasonable. You'd be in a better position to get a cheaper mortgage if you could bump up your deposit (AFTER moving and legal costs) to 20%. I reckon you fall just short right now.

2.9x joint salary is ok as long as you both plan to work for the foreseeable future. It will be a stretch on one salary.

Regarding interest rate risk, I would see if you think you can afford it based on a long-term fix rate (10yrs+). Even if you take a shorter term mortgage - which may be a good idea if you plan to save and refinance sooner - it provides a sense check to see if you have a buffer for expected higher rates in the future.

Paully232000

I would do the figures myself to see if i was stretched. When we took out our mortgage last year we had a mortgage for just under 2.6x joint salary and are in no way stretched. Also have a considerable savings cushion which helps, but live comfortably within our salaries.

List all, and I do mean all, of your potential outgoings for a month in the new house and see what is left over for luxuries/emergencies/saving.

Baxter100

Have you taken a look at the HSBC lifetime tracker mortgage? It tracks the BoE base rate + 1.89% for the length of the entire mortgage, so at the current rate would be 2.39%. It does however need a 20% deposit.

Based upon putting down £36,000 deposit on a £180,000 house, you would have monthly current repayments of just £561 (.5% rise interest rise would go up to £599). Obviously this is a lot bigger deposit then you had suggested, but might lend itself to you saving something in the region of £500 a month between you owing to the much cheaper repayments. Over a year this would be £6,000 in savings, so the figures could stack up well.

retepetsir

Perfectly manageable if you're sensible. We have a similar income and on a more expensive property in the South East (£250k). It's actually fairly common in the SE of England due to house prices!

caprikid1

To be honest last mortgage I would be looking at personally is any kind of tracker, there are some great fixed's out there.

I have a base rate track of .5% above base so hisitorically a base rate tracker of that level is quite expensive.

Baxter100

caprikid1 wrote: »

To be honest last mortgage I would be looking at personally is any kind of tracker, there are some great fixed's out there.

I have a base rate track of .5% above base so hisitorically a base rate tracker of that level is quite expensive.

Sorry not sure if I am mis-understanding....

You have a tracker mortgage .5% above current base rate (.5%), so effectively a mortgage with an interest rate of 1%?

caprikid1

Sorry an error my tracker is .9% above base so 1.49%

Baxter100

Wow that is an amzing deal! Have you got any more details? The lowest we could find was something like 1.29% above base, but that was just a two year tracker, and then you revert to the 5% SVR.

The great thing about the HSBC offer is that it tracks the BoE base rate for the lifetime of the mortgage, so no re-mortgaging hassles etc. That's under the assumption that 1.89% above base is about as good as you would ever get for a long term mortgage rate, which may or may not be true.

Mattygroves2

I too have got a lifetime tracker of 0.99% over base with Woolwich and it's an offset too. It was taken out in either 2007 or 2008 though at 60% LTV. We've never been able to find anything to match that since.

The current HSBC tracker rates are good but historically they are high. The rate before our current one was something like base -0.13% and before that we were on standard variable rate -0.99% when SVR was much closer to base than it is now and base rate trackers didn't really exist.

It depends on your attitude to risk and ability to pay a much higher repayment - I remember the 15% I paid in the early 90s so know what it feels like to have a hike in rates. In our case we've always been on a low income multiplier so haven't needed the security of a fix and have gambled with trackers / discount mortgages and it has always worked out cheaper.

[Deleted User]

How much do you spend on rent+bills now, and how much do you have left over at the end of the month to go into savings? That's how much you can afford to put into 'housing costs' in your new place.

Don't forget there's a few more costs as an owner, not just mortgage and your normal bills, but housing and contents insurance, water (which may have been included in your rent, but will obviously not be when you own, and can be pretty pricey). If you look at leasehold houses, there's ground rent too.

Good luck though!