Dreaming our first home...

DreamerFTB

[long and detailed post=on; hope you prefer detailed posts other than generic ones ]
Hi all,

my girlfriend and I are planning to approach the mortgage market in the next few months, so we can buy our first dream home.
In the past weeks I have read a lot around mortgages (many thanks to you all guys for all the useful information you share in this forum!) and understood that I have to keep on eye on my credit score, so here is our situation:

- montly income combined of around £ 5300 after tax (64% me / 36% her; around 90k yearly before tax)
- credit cards: both of us use them constantly in the last 6 months, and we have always repaid them on time, so we are not charged for interests. Total credit: £ 7000 (1500 me / 5500 her).
- never applied for loan / payday loan / other financing products.
- we are Italian, so EU citizen and we have been living in UK for 2 years and a half
- I changed job recently and started working at my current company at the end of of August, whilst my girlfriend has been working in the same company since we moved to the UK.
- at the moment we are saving for our deposit, so we are strict on spending. We'll expect to have a deposit of around £40k for when we'll apply for a mortgage, and want to buy a house of around 250k (so with 16% deposit) around London.
- Experian score: around 800 for me, around 900 for my girlfriend(maybe because she's paying the mobile phone on contract?! everything else is the same but I earn more)
- we both have an "advance" account with HSBC.
- both of us have another bank account in our home country that is active but unused and we 0 balance (we use it just when we go for holidays)

Now here are the questions/doubts

What should we do to improve our credit score?
- I know that living in UK for 3 years is a requirement for a few banks. Would it be better to wait for 6 more months?
- if we wait 6 months we'll be also increasing our deposit to reach the 20% band, will it be worthy to wait, so we could get better rates? (we are living in a shared flat and really tired about it every month more is a pain!)
- should we decrease my girlfriend credit card limit? Not sure why they gave her such a high limit. But anyway she repays always on time what she spent (way less then 5k, like £500!) so no interests are charged. Anyway it could be a good resource when we move.
- when talking to my bank once, they offered me an overdraft of £ 500 that I actually do not need and will never use, should I accept in order to get better credit score?

Since we are both with the same bank (HSBC) and so the bank knows exactly our (I think good) banking history, is it a good idea to concentrate on their products?

Again, thank for your help and your patience reading our financial situation and dream of our first home

All the best!
[long and detailed post=off]

parksajj

Experian scores don't count for anything!

Don't decrease the card limit, it will look bad in the long run

3 years living is better PLUS having 20% deposit = lower interest rate.

Hsbc products are fantastic and with you both banking with with them it means they they will have the best picture of your finances

Don't bother with the overdraft. having a credit card and a healthy relationship with them is enough.

Use credit cards pay in full. keep saving. don't do any credit applications.

You'll be in your house in 8 months

nubbins

"and want to buy a house of around 250k (so with 16% deposit) around London".


Good luck!!

parksajj

nubbins wrote: »

"and want to buy a house of around 250k (so with 16% deposit) around London".


Good luck!!

I think by house they mean apartment tbh

DreamerFTB

parksajj wrote: »

I think by house they mean apartment tbh

Yes, definitely a small apartment
Thank you for your answer parksajj!

I was also wondering if it is worthy applying for a HTB scheme in order to add even more deposit, but I got lost between the offers since they are all different (and looks also more expensive!) than the normal ones.

kingstreet

You have too much deposit for HTB - Mortgage Guarantee and HTB - Equity Loan is newbuild only.

parksajj

kingstreet wrote: »

You have too much deposit for HTB - Mortgage Guarantee and HTB - Equity Loan is newbuild only.

Second that

DreamerFTB

Actually at the moment I have 16% deposit, so I think I could apply for the 4% remaining (or maybe more and keep the cash in the bank). But it looks it's not a good idea since the HTB mortgages I am seeing have higher interest rates and at the end you pay quite a lot more.

Am I wrong?

parksajj

Stick with a conventional mortgage

kingstreet

Am I wrong?

Yes you are.

HTB - Mortgage Guarantee simply increases the availability of mortgages over 90%, which you don't need.

HTB - Equity Loan (newbuild only) provides a Government loan of 10% or 20% of the purchase price, on top of your chosen deposit. You later pay back the percentage of the property value you borrowed, not the £ amount you got initially.

http://www.helptobuy.org.uk/docs/default-source/default-document-library/help-to-buy-equity-loan-buyers-guide.pdf?sfvrsn=4

DreamerFTB

Thanks for your answer guys.

kingstreet: where did you get that 90% information about the Mortgage Guarantee? I am really struggling to find detailed infos and the requirements I have seen so far are:
• be a residential mortgage, and not buy-to-let;
• be taken out by an individual or individuals rather than an incorporated company;
• be on a property in the UK with purchase value of £600,000 or less;
• have a loan-to-value of between 80 per cent and 95 per cent;
• be originated between the dates specified by the scheme;
• be a repayment mortgage, and not interest-only; and
• meet certain minimum requirements in terms of the assessment of the borrower’s ability to pay the mortgage, for example a loan-to-income and credit score test.

sorry to insist on this, I am just trying to understand it clearly.