House Buying Questions

kev2009

Hi,

Considering possibly purchasing a 2 or 3 bed house and just after some advise if possible. What is a good % to aim to get a mortgage for based on salary? I know it used to be 3x salary ages ago but now I believe they may lend upto 5 x salary but that seems a bit high to me and almost asking for trouble financially should things go wrong i.e job loss etc.

I am a first time buyer, single. I believe I could get upto 20% help to buy which is free for first 5 years, then year 6 = 1.75% interest and after year 6 it is 1.75% + RPI + 1%.

So my question is... I presume this is therefore on top of mortgage repayments?

is it possible to pay off the money received from the help to buy scheme within the 5 years or at the end either buy paying a lump sum to reduce it or to pay it off in full and therefore avoid the 1.75% interest and 1.75 + RPI + 1%?

Also, is there like a rule which says your mortgage payments should be more than a certain % of your NET pay?

I current live at home so I have absolutely no clue as to how much bills would be etc so its pretty much all guess work.

In terms of outgoings, at the moment the only real out goings I have are:-

Another 2 years loan repayments
Monthly car warranty payment
Mobile phone
travel/fuel
money for lunch/eating out

Its a bit difficult to work it out as at present if i want to buy something and i know i can afford it, i will buy it as I live at home with parents, i pay them money each month but then apart for the above the rest is mine effectively.

I've tried to work the above out a bit and but need to basically go for a month living how I would do if i had a mortgage to see if it was doable.

Also with the help to buy, i realise it says you can't then let the property out but what if in say when I own the property, mortgage paid and help to buy paid off, can I then let the property if i wanted to or still unable to? I'm just thinking when I get older, maybe i'd want to move into a smaller place and maybe rent the house out and get additional income that way?

Thanks in advance

Kevin

piggeh

5x is pretty much the norm, you just need to look at whether you have other outgoings and be prudent in your predictions on outgoings. do you never get your hair cut, buy clothes, treat yourself to bits, etc? MSE has a good budget planner, work out realistic amounts. put £300 on top of the mortgage payments for other bills, plus probably more for service charges and ground rent.

With regards to help to buy when I enquired I was initially told that the help to buy criteria is no greater than 4.5 times salary, so I don't know if that's common.

Once you've paid off the help to buy element you can do as you wish (99% sure on that). Alternatively sell it in year 5 and use the equity and any savings to buy somewhere else.

The interest payments actually go up by 1.75% x (RPI+1%), eg

After this, the fee will increase every year in line with inflation. The annual increase in the fees is worked out by using the Retail Prices Index (RPI) plus 1%.

For instance, if the RPI is 5% at the end of Year 6 of your Equity Loan, the fee will increase by 6% from 1.75% in Year 6 to 1.86% in Year 7 (which is 1.75% + (1.75% x 6%) = 1.86%).

I would recommend paying off your loan first. Overpay on it if you have spare money (but be careful of any overpayment charges).

kev2009

Hi,

Thanks for your reply.

So the help to buy - can I start repaying that immediately or do I have to wait the 5 years? or could I wait till say 4.5 years and then pay the whole help to buy amount back in one lump sum?

Sorry for the questions - i'm new to this all and still trying to find it all out.

Thanks for the budgetplanner looks great but i'm unsure on things liek house insurance as i don't pay any of these and no doubt varies depending where the property is.

Cooking im useless at so will prob be eating out if i can... not cheapest i know but can get a carvery for say 9.50 with a drink and desert so would be prob 8 quid with no desert....

I'm considering doing this fairly soon if i can, so im trying to get idea for the help to buy stuff then factor that in with what i have saved.

Would you recommend i put all of my savings into it to reduce morgage or keep some back even if means mortgage repayment goes up?

Thanks

Kevin

chopper78

kev2009 wrote: »

Cooking im useless at so will prob be eating out if i can... not cheapest i know but can get a carvery for say 9.50 with a drink and desert so would be prob 8 quid with no desert....

So you'd need to allow for £300 a month just for evening meals if you're going to eat out every night. That'd be unlikely servicing a mortgage at a 4.5x multiple of your salary.

The key is to work out what life will cost you with a house (think £120 a month for council tax, £100 a month for gas/electricity/water, TV Licence (£12 a month), the cost of your existing loan, landline phone, mobile phone, broadband, TV, cost of eating, cost of fuel getting to work, road tax... How much do you have left over per month after all that? How much should you put away for rainy days, holidays, treats, clothes, haircut, gym...?

piggeh

kev2009 wrote: »

Hi,

Thanks for your reply.

So the help to buy - can I start repaying that immediately or do I have to wait the 5 years? or could I wait till say 4.5 years and then pay the whole help to buy amount back in one lump sum?

Sorry for the questions - i'm new to this all and still trying to find it all out.

Thanks for the budgetplanner looks great but i'm unsure on things liek house insurance as i don't pay any of these and no doubt varies depending where the property is.

Cooking im useless at so will prob be eating out if i can... not cheapest i know but can get a carvery for say 9.50 with a drink and desert so would be prob 8 quid with no desert....

I'm considering doing this fairly soon if i can, so im trying to get idea for the help to buy stuff then factor that in with what i have saved.

Would you recommend i put all of my savings into it to reduce morgage or keep some back even if means mortgage repayment goes up?

Thanks

Kevin

You can get most things like insurance etc quoted online so that you have a budget price.

Keep a log of what you buy each month and then add on the £300 for eating out each day and other expenses. Maybe £50 a month for a cleaner if that's something you want to spend money no. Maybe £80 for the full sky sports package. Just make sure everything is accounted for and then if you can easily afford it then it looks like you can afford to buy. What you are compromising on is how quickly you can pay off the help to buy equity loan (fyi I think theres a minimum payment you have to make when paying chunks off but the help to buy advisors would be willing to give you all the details) or using the money for other bits like decorating, getting those fancy LED spotlights you wanted in the lounge, etc.

concrete_kid

I've looked into what I'd spend and I'm looking for a 2-3 bed terraced house. It would be band A council tax (cheapest) with best deals on energy etc, being sensible, here are my figures (north west of England)
Mortage £400-500? (80-100k mortage)
Council tax - £70 (over 12 months, single person discount
Energy £80 (less in 2 bed, being sensible)
Water £40
TV licence £12.18
Internet £18
Insurence £20

Food £150 (I cook all meals from scratch)

So they are your basics which total £790-890

On top of that you need to add dentist, haircuts, debt payments, phone, going out, holidays, clothes, birthdays, savings, christmas, TV package etc etc.

There is a lot to consider it would be worth trying to make a detailed budget attempting to guestimate all of the above.

You need to be realistic, moving straight out of parents to buying a home can be a shock. Your lifestyle is going to take a hit and you probably won't be able to do all the things you are used to.

Good luck!

dgtazzman

My total monthly bills for a 4-bed semi (I do live by myself, all praise the mighty divorce) come to £1050 a month, excluding food, though I have expensive tv/phone/internet and mobile phone packages included in that and I'm well insured. I could probably shave around £150 off that if I wanted to. £663 a month of that is mortgage payment. I budget around a tenner a day for food etc.

Hope that gives you some indication.

Also, you can repay the HTB equity loan at any time, BUT you either have to pay 50% or 100% of the loan off when you pay and don't forget you need to have an independent valuation survey done before repaying, which costs around £400, as the repayment is based on current market valuation at time of repaying.

kingstreet

Newbuild?

The HTB - Equity Loan scheme you are describing is newbuild only.

HTB - Mortgage Guarantee is non newbuild, but there is no loan, it's simply a true 95% mortgage as far as the borrower is concerned.

As pointed out earlier, 4.5 x income applies to HTB products and after certain outgoings are taken into account (credit, dependents, ground rent & service charges etc) it will be lower.

kev2009

Thanks all for you replies... wow this is all soo expensive lol

Thanks for the breakdown of costs guys, I've tried to fill in the budget planner with pretty much all guesses as I havn't found a place yet so hence don't have the price of the property and therefore I've taken a guess and then tried to work out what i could put towards it etc o try and come up with a mortgage amount.

I'm not bothered about sky etc, I don't have that at home now so not something i would miss etc and as has been said my life woudl change considerably so probably wont have as much time for watching tv anyway...

Is the H2b a good idea or should I try stay clear of it? i mean I naively thought it they gave me 20% interest free for 5 years and then I just repaid that about with interest rate on top if I hadn't repaid it within that 5 years... If its going to be on value when i sell it etc then they getting money for nothing essentially say i keep it 20 years and property triples - they get 3 x the money they gave me.... wondering if i should maybe avoid it?

Yes, have been looking at new houses which come with varying years warranty etc.

Here is a rough budget I've come up with (unsure how accurate it is etc as i say mostly all guesses/based on replies in this post):-

I've listed everything as monthly even though some are paid yearly, I've just listed the amount to save each month for them effectively.

Mortgage: £600 p/m
home Insurance: £20 p/m
Countil tax: £120 p/m
Water: £40 p/m
Gas: £50 p/m
Electricity: £50 p/m
Internet: £18 p/m
TV License £12.18 p/m
Mobile: £25 p/m

Food £100 p/m
Eating Out: £50 p/m

Roadside Cover: £5 p/m
Travel: £150 p/m
Car insurance £50 p/m
Car Tax £1.67 p/m
Car Fuel: £70 p/m

Car loan: £236 p/m (for next 2 years)
Opticians: £16.67 p/m
Hair cuts: £2.50 p/m


Does this seem anywhere near accurate or in the right ball park?

Thanks

Kevin