FTB - No Deposit

fluff76

(My first post!)

My fiance and I have been renting for 5 years and really want to get on the ladder. We have about £3500 in savings but after paying fee's stamp duty, contingency for moving etc, we haven't got much left for a deposit, if at all

Can anyone offer advice as to if an 100% mortgage is the best thing to do or would getting a cheap loan to cover the deposit reduce the cost of a 100% mortgage.

Thanks

homer_j_3

Firstly, well done for saving up some money to help you get going.

Its very rare that loan for a deposit is beneficial unless its from parents and is interest free.

Providing that the repayments are comfortable and you can afford to pay both capital and interest back then you should be OK. You need to understand that property prices are not rising as fast as they have been doing so its important to understand that your equity will not build as fast and therefore interest only without a suitable investment vehicle should be avoided at all costs as you could be in trouble.

herbiesjp

Getting a cheap loan would be counter productive, as it woudl reduce the mortgage amount available to you.

Looking at 100% deals would be your best option, as long as the affordability is there for you.

What property prices are you looking at> What are yor two incomes? Do you have any other debts in the background?

For a 100% mortgage scenario, a good clean credit history will be needed to get the better rates

fluff76

Thanks for the replies.

Living in and working in London, we are doing ok, Joint Income is 72K, however house prices are relative and we are looking to realistically afford a payment of £1400 / month which is probably about 200K mark. Can just about get a 2 bed flat where we want to live.


Only debt that we have is an Abbey £6,500 car loan that runs out in January 09. Its £156 /month but unfortunately I cannot make overpayment unless I settle the amount in full. We do not have an credit cards.

Although the 100% Mortgage does seem probably right thing to do, I want some degree of contingency like paying for white goods, basic furniture. Should I get a loan AFTER getting a mortgage to pay for this or is it better to get is in the mortgage?

Our parents are not in a posistion to gift us a deposit so that is out of the question.

housebuyer_abc

The problem here (and most mortgage companies will see it too) is that you earn a very good wage between the two of you yet you can't afford to buy a car outright or even save a minimum 5% deposit for a house.

It doesn't show the two things that lenders want to see :

1) That your income and spending is stable and therefore you can really afford the mortgage. The big issue here is that 3.5K (your savings) is 2K less than your monthly income. If one or the other of you lost your job you'd be in debt in less than a month.

2) You aren't really showing that you really want to buy a property. If you did you'd be cutting back and saving like mad.

In your position I'd continue to rent and save save save until you've built up a three month joint salary contigency fund and a seperate 5% deposit. At this point you'll be in a better position to ask and get a mortgage.

I'm not saying this to be nasty, only to stop you making a very costly mistake if you are not truly aware of the financial liability you wish to take on is.

homer_j_3

i think that its no different to someone earning a joint income of 35k a year. Living costs in London is notoriously high, however the same rules apply and if you want to get on the property ladder then sacrifices need to be made and a review of your monthly expenditure may be required.

The op could do a 100%+ mortgage to get on the property ladder and borrow arouns 345k however this will clearly fall out of their current budget.

I would be interested in understanding their budget as it seems low but it could be based on what they pay in rent at the mo and they may have a sociable lifestyle and enjoy holidays etc.

That said, it would be better for them to try an pay their debts off and save more.

fluff76

housebuyer_abc wrote: »

The big issue here is that 3.5K (your savings) is 2K less than your monthly income. If one or the other of you lost your job you'd be in debt in less than a month.
.

I do not understand your calculation ? our monthly income is not 1.5K.

My posistion is that in the last 2 years my income has considerably increased, however the car loan was taken out before.
Using the extra income I am saving about 30% of net income per month but the posistion I am in is that we may have to move out of the house we rent as the landlord is considering selling (for a lot more than we can afford) so we want to buy rather than rent another place.

As someone said, it is expensive living and working in London, I have to pay for train fares, my fiance needs the car for her work and we are not extravagant in our lifestyle by any means. As we are in our early 30's the party lifestyle is a long distant memory:o

I do not want to stretch anymore than than a max multiple of 2.75 for lending due to the reason that I am the main breadwinner and that if kids came along we could still afford the payments/bills.

fluff76

sorry just read what I posted, I do understand the calculation!!

herbiesjp

It does sound like you are doing all the right things and looking at all the right areas

The london market is notoriously difficult to find something, but also expensive to live in ( as I also know!)

However it looks liek you are being foward thinking in terms of your outlook (affordability, children etc) and any purhase you make is being donw with your eyes open.

Not everyone is fortunate to have a deposit and all circumstances are different, but it's all about making sure that the decision you take is as well informed as possible