First time buying - Mortgage options

rich.mike

Hi All,

First time poster here. I am really interested in owning my own house so have started looking at the option of buying however I am a little confused with what my best options are in terms of a deposit.

My salary is £34,500 pa, with about £4500 of overtime and bonuses a year, although I'm not sure if this will count towards my mortgage application?

I currently have £13,000 for a deposit and I am looking for a house at £200,000.

I'm a bit confused with options. I have looked at the option of the help to buy scheme, using my £10k as a deposit and £30k of the scheme leaving me with a mortgage of £160k. I should be able to pay off the government loan within the 5 years. With this scheme, is it realistic I would be able to borrow £160k? And would this be my best option with the current deposit/salary I have?

I am currently paying £400 a month on rent with £100 bills a month. I have a mobile phone contract at £11 a month which I can cancel any time, and no loans or credit card bills at all. I cycle to work so outgoings are fairly low and I am quite frugal with my money.

Thank you for your help, I am really excited to own my own home.

Rich

HappyMJ

You could do it...but I'd just be careful you don't overstretch yourself at the expense of being able to do anything else but work and staying at home. You do need some spare cash to be able to enjoy yourself.

How many people does your salary of £34,500 support? Is it just yourself? Is the property one in which you feel you could live in for a long time. It's no good buying a small property which you need to sell to upsize at a later point in time.

You say you could pay off the government loan in 5 years. You have to save that money whilst also paying off the mortgage...

I'll try some calculations...An annual incomeof £39,000 brings home on average £2,470 per month after tax and NI.

The mortgage payment on £160,000 at 5.5% over 25 years would be around £982 per month. You say you want to pay off the help to buy loan of £30,000 over 5 years. That's another £500 per month needed to be saved to make the payment in 5 years.

You are left with £988 a month to pay your council tax, gas, electricity, water, tv license,mobile, home phone and broadband, groceries, travel expenses and have enough fun money left over. It's not really that much. You will also have buildings insurance and possibly life insurance. If there's just you then you might just have enough but I don't think so.

edit: I've used an interest rate of 5.5% for a 5 year 90% LVR fixed rate mortgage as you might need certainty in payments. You could go for a low 1 or 2 year rate but then you'll be on the banks SVR which could be anything. It's better to calculate for the SVR adding at least 1% onto that rate just in case....

rich.mike

Thanks for your help - much appreciated.

My income only supports me. I'm 26 and can see my salary increasing a reasonable amount in the next few years so there is always the temptation to overstretch myself slightly initially, I don't like the idea of 'wasting' money on rent and see a house as an investment. Having my own place to make my own would also be fantastic.

I am looking at a 2 bedroom house so have the option of renting out a room, do banks take this into consideration when taking out a mortgage?

libf

We are in similar circumstances, although I have extra for my deposit thanks to the sale of my shared ownership flat, and I'm currently using Help To Buy to get a 3 bed house at £242,995. Mortgage (£170k) isn't done yet but the broker was satisfied enough with my circumstances to put in the HelpToBuy application and it was approved.

I'm taking the mortgage over 30 years, but will be overpaying to 25 year level until the 5 years of my planned fix is up, at which point I should have enough to pay 10% back and hope to have the other 10% from re-mortgaging to pay off the loan and start overpaying more, depending on the financial climate at the time.

chanz4

don't forget its not just £30k you pay, its a percentage of the value when you come to pay it off

Maelwys

HappyMJ wrote: »

I'll try some calculations...An annual incomeof £39,000 brings home on average £2,470 per month after tax and NI.

Employer Pension Contributions would come out of that as well.

The other thing to note would be the Overtime and Bonuses. Are these guaranteed? If work hits a rough patch and cuts them would you be able to survive on just the 34k?

It seems to me that there's a bit of stretching involved here. I'd be a little bit wary of spending any more than a third of your monthly take-home pay on your Mortgage. It might seem doable NOW, but you'd have very little in the way of a safety net - especially whilst repaying the loan. As the sole earner in the household and all of your savings tied up in the house, you'd have nothing to fall back on should you suddenly find yourself out of work. Or what if the house just needs essential work done? Roof repairs? A new boiler? not to mention other non-house-related unplanned expenses that could crop up.

I was on about £32k four years ago when I took out my first mortgage on a house worth much less than yours - £130k. I had a deposit of 20% and no loan to pay off... and I still found it a big stretch having no real savings buffer for the first 12 months. Just fitting the house out with basic IKEA furniture and paying the initial mortgage payment and first month's worth of bills easily gobbled another £3k. There're all sorts of expenses you don't think about until you're confronted with them for the first time...

I'm not saying don't do it, but just be careful and make sure you've enough of a buffer in place before you take the leap!

getmore4less

How much are you saving a month.

Do you have a budget/SOA that has your current costs planned out.

Have you assessed the extra costs of ownership.

£400pm rent is like renting £120k @ 4%


NO car gives you one less high risk high cost spend from many people and diverting that money to housing I a reasonable choice. .