not knowledgeable about buying, so need advice on buying and interest rates...

fitnessguy1

okay, so basically if i have 10-15k to put down on a deposit for a home that's worth 140,000, what would be a guesstimate on the interest rate i would have to pay? i read somewhere that the larger your deposit, the less interest you pay.

i am not very clued up on all this as it would be my first ever property buy. i was originally planning to buy a 2 bedroom flat and then have someone rent the 2nd bedroom, most probably a close friend.

sorry if this all sounds a bit simplistic or naive, i just want to clue myself up.

thanks.

Mallotum_X

Lots of factors come into play. Have you looked at any banks or building society websites yet?

A quick example http://www.ybs.co.uk/mortgages/fixed/index.html

Yorkshire building society with a 10% deposit is just under 3%, payment each month likely to be just under £600.

Your own circumstances will determine what products/rates are actually available to you.

But rates are extremely low at the moment compared to previous peaks.

Surrey_EA

The interest rates charged on mortgages will vary depending on how much of your own money you put down. Simply, the larger deposit you put down reduces the risk for the bank so the lower the interest rate they will charge you.

For a purchase at £140k, if you can put a £14k deposit down, that will leave you requiring a mortgage of £126k, or 90% of the property's value.

For a 90% LTV (Loan-to-Value) mortgage you should be looking at a percentage rate of between 3-3.5%.

There are a wide variety of different mortgage products out there, which can be quite bewildering for those entering the market for the first time. My advice would be to try and identify an independent mortgage broker who you can meet with and they will be able to advise you on what the best options would be for your own personal circumstances.

Malmo

Have a read of this MSE article which describes a simplified timeline and milestones of the buying process. It doesn't really factor in the complexities of a chain and the impact of that on the end to end process, but it is still useful as a guide.

Here is also a MSE guide that refers to the likely buying fees & costs to factor in and when they may be due.

Generally, the lower the Loan-To-Value ratio (LTV), in other words, the mortgage amount as a percentage of the agreed purchase price or surveyor's valuation (whichever is lower), the better the consumer terms, such as interest rate. So a LTV of say 65% (where you provide the remaining 35% as deposit) on a mortgage product would have better terms than a LTV of 95% (where you only provide 5% as deposit). The term (duration) of the mortgage also significantly affects the total interest you repay over the full term.

macman

For a property costing £140K you will need a minimum deposit of £14K if you are looking for a 90% mortgage. So you need to be a bit more precise about what deposit you actually have.
No one can possibly tell you what interest rate you will pay without knowing your financial position, but you can research the best rate for a 90% mortgage on any financial site you choose.

Malmo

As well as the above, I'd also urge you to take the time to thoroughly review your credit files/reports from all 3 Credit Reference Agencies (Experian, Equifax, Callcredit/Noddle).

I've read countless threads here where posters haven't done this in preparation ahead of time and have had problems either obtaining a mortgage agreement / decision in principle (AIP / DIP - they're the same thing) or have been refused at full application or underwriting.

Take a look at this post for what you should do.

fitnessguy1

ok thanks for the advice given. one more question, and it's regarding a lodger. i have read that sometimes banks don't always loan money for a mortgage if your income isn't acceptable, so would the bank accept me if i was able to secure a full time lodger? because at the moment i am not sure if i would be accepted for a mortgage based on my low income.

kingstreet

Nope. Only lodger income you can evidence receiving for a couple of years would be accepted by one or two lenders when you move.

For your first purchase, it won't form part of your income.