Mortgage term for first time buyers

blink182_2

Hello.

Me and my girlfriend are in the process of saving up to buy our first home. I currently live with my parents & he rents. We have a deposit for a house in the price range we are after, we are now in the process of saving for the extra things like solicitors fees & money for decorating etc.

We haven't yet been for any kind of mortgage appointments yet since we are still saving. I am just wondering about mortgage term, when looking online they all seem to be 25 years as standard. I was thinking is it normal for first time buyers to go for longer terms such as 30 years or even 35? I am just thinking with us being young (24) having a mortgage term of 30 years is still a reasonable amount of time to pay off and would shave off some money each month for us to save for other things such as a wedding, children etc.

So I am wondering do mortgage advisors only ofer 25 years to first time buyers or are we open to changing this at all??

Any info would be great.

amnblog

You have a lot of flexibility with term.


Most lenders will do terms up to 35 years, some will do 40 year terms.


A 5 year increase in term will take something in the order of 11% off of your monthly payments on typically current interest rates.


Of course the longer it takes you to repay your mortgage the more interest you pay overall.


An issue to discuss with your mortgage broker.

northerner999

When I first took out my mortgage I went for a 40-year term with Halifax. This was pre-crash. I was 23 so they were happy to go for that length of time, and I wanted the lowest possible minimum payments for flexibility. I knew my wages and circumstances would change a lot over the years (pay rises are rare at the moment, but my salary is higher than it was), plus I wanted to rebuild a buffer zone after completing the purchase.

I have 32 years left, having remained with the lender for practical reasons when remortgaging (they don't require a fresh valuation, meaning I get better rates than going to someone who would knock £30K off the "value").

My advice is:

- if you want cash available for other things then go for the longest term you can, with the intention of re-evaluating when your initial deal ends and you a bumped onto the SVR. This is a time when I have twice made significant lump sum payments, wiping out big chunks of savings but getting my LTV percentage down so I got a lower interest rate.

- buying, moving, furnishing, bills etc. are expensive so make sure you've got all those covered before worrying about overpayments. I bought new-build and in my planning completely overlooked sticking carpets in throughout the property!

- but overpayments are good, once you're comfortable knowing you can get to every payday without running out of money, consider increasing your monthly payment just a little. Just round it up to the nearest £20 or £50 - depending on how soon you plan to get married or have kids. Unless you have credit card debts etc, this is probably the easiest way to make a huge difference to your later financial life with little impact on now (I'm sure someone will mention pensions).

amnblog

northerner999 wrote: »

I have 32 years left, having remained with the lender for practical reasons when remortgaging (they don't require a fresh valuation, meaning I get better rates than going to someone who would knock £30K off the "value").

Have you checked?

northerner999

Have I checked the valuation? Yes. I used L&C and wanted to switch to Nationwide, but after they sent someone out the valuation came back as down from what Halifax kept with by using their fancy computer calculation. I really had no idea what to go on when basing the initial calculations on, as was bought new build and no properties in development had been sold on.

Halifax use a formula tracking overall trends which obviously doesn't take into account other significant factors which would affect the real world price - I think Nationwide's figure is closer to what I'd get if I tried to sell in the current marketplace based on local knowledge, but Halifax's valuation puts me below 60% LTV which got me a rate I was happy enough with.

Mover555

Hello, well done you for getting a mortgage so young. That's good going.
From my own experience, 3 years into my first mortgage (25 year term), my monthly repayments don't seem anywhere near as daunting as they did 3 years ago. Wages go up pretty fast when you're in your 20s & early 30s, as you move jobs and gain experience. Comparatively we have so much more spare cash now that we did.

Personally I'd keep the term as short as possible so the mortgage is paid off as soon as possible. One of my siblings paid her's off in 10 years, plowing all her bonuses into it and overpaying. Mortage free at 33.

Or being able to remortgage with a much better ltv when one of you goes part time to look after children.

Unless there is something specific you have to keep cash aside for, don't put yourself behind in the race.

Thrugelmir

Will you have any plans to move up the ladder in the short term?

Little point in having a long mortgage term if your aim is to move from a 1 bed flat to a 2 bed house. As paying down the debt owed is the key to achieving this or something similar. The less you owe the less interest you'll pay.

blink182_2

Thanks for the replys so far, very helpful.

No plans to move up ladder in short term, looking at 2 bedroom semi's with garden & driveways so it would suit us for a long time really, even if a little one did come along.

Only reason I thought about the longer term is because I work full time with an OK wage 18,000 but partner does not work as they have a lifelong illness which means they are unable to work, she is on indefinite higher rate dla & mobility and receives housing benefit, I know when she moves in with me will loose her housing benefit. I will be getting the mortgage in my sole name as I don't think they will take benefits in account for mortgage & also she wont get life insurance.

So my thinking was the less we have to pay out for mortgage the more we can put into savings and other things for future.

Hope this makes sence..