FTB: Help needed if you can, PLEASE!!

nuttymummy

Hi Guys.

Ok so we are FTB, AIP from our bank, currently looking around properties, but I only want to look at ones we can really afford.

I've been playing around with rate finders and calculators, but after reading the very helpful mortgage section on this site, it appears I have been doing it all wrong!

I was comparing the overall APR's. To me, making sure we could afford the mortgage AFTER the initial rate ran out made sense. I.e I didn't want an initial rate of 1.6% for 2 years, only to find once that ran out we would spend the next 20+ years paying 7% which we couldn't afford. You get my drift!

I have been reading the part about swapping lenders after the initial rate period is up. But aren't there high fees to pay? and a percentage of the final value? Why would you pay around £3000 in fees to swap lenders just to save a few extra quid for a few more years? I realize I sound dumb right now...this is all new to me! But could someone give me advice on how you would go about swapping lenders?...aren't the fees high?
Do you all have low initial rates, and then swap to someone else once its deal is finished?

Please help me! I'm currently viewing properties, but now I am confused to how much we could actually afford! LOL

Thanks guys x

ACG

At the end of your deal - whether that be 2 years, 3 or 5 you then go the lenders standard vairable rate (currently around 4-5% depending on the lender).

Once you have come to the end of the deal you can ask your current lender if they have any cheaper products available or you can go a new lender. Typically when switching lenders or switching products with your current lender you would get free legal and valuations included. There could be arrangement fees typically between 0-£999 however not all deals include this fee. Its up to you or yoru advisor to compare what is out there and get the best for you. Typially if you have a large mortgage i tmay be better to pay the fees and get a lower rate - but you will onl know when you do the sums on the products available at the time.

elverson

Firstly the lender affordability calculations do factor in a future rate rise (a 'stress test') as it's generally assumed that the base rate will rise from 0.5% in the future.

This page should help explain how remortgaging works.
https://www.moneyadviceservice.org.uk/en/articles/remortgaging-to-cut-costs

When you come to switch lenders, you may have to pay fees but the saving over the rest of the mortgage term should exceed the fees (assuming you still have a large amount to pay) so you would expect to save money overall.

Also, at the point you remortgage your LTV percentage should be lower than it is now, which will give you a cheaper rate on the mortgage.

maria000_2

have you tried to give London and country mortgages a call? they have been really helpful to me. they give free advise; you dont have to go with them but so far they've helped me with my mortgage process

MFWannabe

Hi
You say you have an AIP from your bank? This should tell you how much you can borrow. The actual property you can afford will depend how much deposit you have compared to the amount you can borrow. i.e You have 20k deposit and your AIP states you can have a mortgage for 120k then that means you can look at properties up to 140k.
I think if you're getting yourself stressed about future rates after initial 2 year fix period then consider starting with a 5 year fix. Then you won't have to think about it for 5 years and you will pay the same every month for the first 5 years. This you should only consider though if you don't want to move again in the next 5 years as you could incur early repayment charges. Also during this 5 years you could make overpayments to reduce your mortgage amount (and future LTV) and the mortgage term.
As FTB I would highly recommend using an independent mortgage broker. They are so helpful when you have no idea what to do and will talk you through everything. They will also know which lenders are the best to approach for you


Good Luck; its exciting buying your first property!

csgohan4

maria000 wrote: »

have you tried to give London and country mortgages a call? they have been really helpful to me. they give free advise; you dont have to go with them but so far they've helped me with my mortgage process

I'm glad I didn't go for a conveyor belt firm like L+C. You get what you pay for.

nuttymummy

Thanks for replying guys!

I guess I'm just looking at all the mortgage options and just getting flustered at which to choose!
The mortgage calculator from my bank was coming up with £450 per month, and I thought, yeah I can afford that! I have been working off this number for months whilst house hunting, only to then realise this number was only the initial rate of like 2%, and in fact it would rise to 4% after 2 years...which made it jump to almost £600...which I can't afford.
So that's why I was then starting to compare by all banks OVERALL APR - BUT MSE said not to...and to look at initial rates instead, then switch after initial period is up. So didn't know what to do for the best - especially at the thought of all the fees incurred to switch.

I have managed to get my LTV to 85% (JUST!) so now its a case of either going for a low initial rate, and HAVING to switch and pay fees when its up, due to the high standard rate.

OR going for a slightly higher initial rate where the banks standard rate isn't quite as high afterwards.

Being an adult is hard work LOL

getmore4less

I was comparing the overall APR's.

With mortgages this has very low value for comparing, best ignored.

there are two key stages to evaluating any mortgage that has a promotional rate for a short period(like a fixed or discounted rate).

The initial period with that you compare using rates and fees and ERC an overpayment allowed.

Then there is the follow on rate.
There are quite a few unknowns at this point like new deals, what will the rates and fees be and the big one can you get a new rate, retention deals are usully ok but a remortgage may not.

So when looking at a lenders option, you have the headline rate the followon rates and the retention offers to consider.

a lender with a low followon and a good reputation for retention might be worth a slightly higher initial rate.

To complicate further you have the LTV factor, a low rate might let you overpay a bit more and get you into a new LTV so you have to factor that is as well a lender might not be top for a 80% but their 75% are great so worth taking the 80% as the switch later will be more beneficial.

Lender change their deals, if they want more business they may reduce the fees for a while less they may put them up.

if affordability is the key here then I would look at te followon rate add a bit and think about that as a way to get a borrowing limit estimate.

if that buys you something you like then you can factor in overpayments on you promotial rate and review where you will be at the change time, this might give a bit more borrowing.

eg say you have £500pm and want to go for 25years.
there is a 2year fix at 2.5% with followon 4%(stress at 5%)

£500pm@5% over 20years is max borrowing £85530

after 2y on 2.5% paying £500 you owe £77619
over the remaining 23years your 5% payment will be £474pm

£500 will take a rate of 5.58% that means by giving yourself an initial safety net of 1% rises over 2y and overpaying you give yourself an extra 0.5% safety net.

maria000_2

csgohan4....
Well that's your opinion and i gave mine..... There's no need to get too worked up about it.
As a FTB they have been really good and helpful, i know there are others who have used them again and again because they have good rates.
So far ive not had a problem with them they have always answered my calls and replied to my emails.
As their service is free theres no harm if people give them a call to get FREE advise.:money:
This site is to help people save money; why are you on this forum if you believe 'You get what you pay'

megaginge

maria000 wrote: »

csgohan4....
Well that's your opinion and i gave mine..... There's no need to get too worked up about it.
As a FTB they have been really good and helpful, i know there are others who have used them again and again because they have good rates.
So far ive not had a problem with them they have always answered my calls and replied to my emails.
As their service is free theres no harm if people give them a call to get FREE advise.:money:
This site is to help people save money; why are you on this forum if you believe 'You get what you pay'

csgohan tends to get too worked up about most things

megaginge

nuttymummy wrote: »

Hi Guys.

Ok so we are FTB, AIP from our bank, currently looking around properties, but I only want to look at ones we can really afford.

I've been playing around with rate finders and calculators, but after reading the very helpful mortgage section on this site, it appears I have been doing it all wrong!

I was comparing the overall APR's. To me, making sure we could afford the mortgage AFTER the initial rate ran out made sense. I.e I didn't want an initial rate of 1.6% for 2 years, only to find once that ran out we would spend the next 20+ years paying 7% which we couldn't afford. You get my drift!

I have been reading the part about swapping lenders after the initial rate period is up. But aren't there high fees to pay? and a percentage of the final value? Why would you pay around £3000 in fees to swap lenders just to save a few extra quid for a few more years? I realize I sound dumb right now...this is all new to me! But could someone give me advice on how you would go about swapping lenders?...aren't the fees high?
Do you all have low initial rates, and then swap to someone else once its deal is finished?

Please help me! I'm currently viewing properties, but now I am confused to how much we could actually afford! LOL

Thanks guys x

Make sure you can afford the SVR!!!!!!

What if in 2 years rates go up? The V stands for VARIABLE. Affordability criteria should account for a significant rate rise, and they wouldn't give you AIP for an amount without your theoretically being able to pay it back if the rates were (currently) about 6%.

A mortgage broker should explain all this to you. Speak to one, as suggested already.

You will usually, at least at the beginning of a mortgage with a higher LTV, always want to be on a deal of some sort. I'd personally suggest a 5 year fix at the moment, not 2, but I'm conservative about the rates. Others may disagree...

But if that rate ends, you need to be able to pay the SVR.... Perhaps you'd need to cut back other spending (sell a car? ) to do so: But you need to be able to pay it. Otherwise borrow less.