What Would You Do? (Advice/Opinions?) First Time Buyer

Strebor123

Hi all,

Looking to buy a house with my partner some time really soon.

We have roughly a £30-35k deposit (Depends how long it takes to buy) and we are looking at houses in the 200-230K range. Joint income is £42K

Basically looking for advice/opinions on what you would do.

The first problem is who to choose as a provider. Do I go with purely whoever is cheapest? Or do you think we should go with somebody a bit more expensive but who you know provides good customer service etc.

Second is what initial period should I go for on a fixed rate. 2 years is the cheapest, but if we go for that and the rates jump up over the next 2 years we'll be paying a lot more later on. If we go for a 5 year (or even 10) we'll be paying a fair bit more initially but if the rates go up we'll be better off down the line and you also get the added security for X amount of time of knowing how much you'll be paying.

I'm fairly sure that the rates WILL go up at some point in the nearish future, obviously nobody knows when or exactly by how much and that's why I am looking for some other people's opinions to consider.

Thanks all.

AnotherJoe

I'm fairly sure that the rates WILL go up at some point in the nearish future

---

Well then you should start trading currencies and in a few months time, you can buy in cash

If you want certainty on payments over a period, then by all means fix a rate but don't kid yourself that anyone knows what's going to happen to interest rates. No one knows.

OnTheRun

Strebor123 wrote: »

Hi all,

Looking to buy a house with my partner some time really soon.

We have roughly a £30-35k deposit (Depends how long it takes to buy) and we are looking at houses in the 200-230K range. Joint income is £42K

Basically looking for advice/opinions on what you would do.

The first problem is who to choose as a provider. Do I go with purely whoever is cheapest? Or do you think we should go with somebody a bit more expensive but who you know provides good customer service etc.

Second is what initial period should I go for on a fixed rate. 2 years is the cheapest, but if we go for that and the rates jump up over the next 2 years we'll be paying a lot more later on. If we go for a 5 year (or even 10) we'll be paying a fair bit more initially but if the rates go up we'll be better off down the line and you also get the added security for X amount of time of knowing how much you'll be paying.

I'm fairly sure that the rates WILL go up at some point in the nearish future, obviously nobody knows when or exactly by how much and that's why I am looking for some other people's opinions to consider.

Thanks all.

I think first off you need to consider what you can realistically afford.

Times have changed and income multiples are not the be-all and end-all they once were, with mortgage providers looking nowdays more at affordability.

The without going into all your finance details, the old rules are still often a good rule of thumb.

On a joint income of £42k and say £35k deposit, you'll struggle to buy anywhere costing more than about £180k

So go and see a broker (an IFA, not a kid in a suit in a bank) and see how much they say you could borrow in principle. They will also advise on the other questions you ask such as who to go with, how long to fix for, etc, etc

Strebor123

We already have an agreement in principal. 200K. Add our deposit on top and that's the 230K.

We can afford roughly £1800 a month in repayments each month (based on what we've been saving) but with a mortgage this size repayments come out around £900 a month for a 25 year term.

I am not looking for advice on what we can and can't afford. Just an opinion on what people would do based on the options available. Do people think it's better to maximise the savings now and go with a 2 year with the cheapest provider? Or is it worth paying a bit more for a better customer experience. Do people prefer the security of a longer fixed term at a higher price? Or do people tend to think that going with the best deal available right now is a better choice.

There is no correct answer but I do want to see people's opinions on this.

dimbo61

Better customer experience ! New one on me
Follow on rate is important in case you cannot remortgage to another lender because one of you has lost there job.
How long do you want to stay in the property ? What kind of property are you looking at ?

AnotherJoe

I agree with dimbo61, your decision should be influenced by factors personal to your circumstances rather than a collective opinion on interest rates. So things like,how long you plan to stay there, might you conceivably drop to one salary, (see what I did there ), other factors about the mortgage such as follow on rates, and so on,

RavingMad

Strebor123 wrote: »

We can afford roughly £1800 a month in repayments each month

On a joint income of £42k? I don't know anything about your situation but have you factored in all the bills etc?

Putting down 15% deposit is a great achievement and you'll have access to better rates than most first time buyers.

Ask yourselves what you plan on doing in 2, 3, 5 and even 10 years time. Rates will more than likely go up but no one knows when and we're told by the rate setters that they'll say below pre-crisis levels for a good number of years (take that with a pinch of salt)

Personally, I would choose 2 year fix for the lower rate and overpay if you're able. End result should be less outstanding and a house that's gone up in value meaning better LTV and better rates but the *hassle* of having to make the same decisions again 2 years later.

elsien

For me customer service didn't come into it.
I wanted a good rate, ability to overpay without any penalties, not an extortionate follow on rate, low initial set up fees. Then I looked for provides who would offer this. Never fixed for more than 3 years but have overpaid continuously.

Strebor123

We worked it out simply by taking our rent and then how much each month we were saving and adding them together (Since there'd be no need to save anywhere near as much after we get the house)

All bills are factored into it since we pay them all now. We are fairly money savvy. Thanks for your opinion. I was thinking about just gong with 2 years as cheaply as possible and hammering the overpayments as much as possible to get a better deal after the 2 years are up.

As for what we'll be doing in the future. No clue haha. We are both fairly young (24 and 22) so no kids or anything planned yet. Would like to get a job that pays a bit more but where I live that's probably not going to happen.

With regards to customer service I was just worried about going with a lender who was really crap and took ages to get anything sorted. Might be worth paying a few extra quid each month to go with somebody you know is reliable.

On that note. Does anybody have experience with First Direct? They seem to have the cheapest rates at the moment.

MortgageMamma

Remember when you own your home you need to do all the repairs etc yourself. So make sure you factor in savings for having the roof fixed after a storm, repairing broken windows, and any other building work you may need done. An offset mortgage would be a good way to do this. I'm not saying its right for you but its worth exploring.

I know you say you don't need to save as much as you are doing now, and I don't disagree with you but how good would it be to drastically reduce your mortgage term whilst having a safety net of savings?

If you can reduce your mortgage term by overpaying and you decide later on to have a family or buy another property/change jobs you'll be sitting pretty. If this home is going to be your permanent home for a long time considering fixing for longer, as each time you move to another lender it will cost you time and money in fee's. Just make sure you can overpay/or offset if that suits you, and that you consider early repayment charges i.e. if you have a change of circumstances and need to sell up, or need to switch to another lender there are fee's for doing so whilst you are "tied in" to a fixed rate.

It may also be sensible to check the mortgage is fully portable to another property should you choose to move, this is especially important with the longer fixed rates.

Exciting times good luck!

MM

GoldenShadow

I think your calculations are flawed. Using that we could afford 2k a month, there is no way in heck I would be willing to pay that and no bank on earth would have lent us that much.

I had a DIP for purchase of 260K on a 53K salary, still no way in hell I would have borrowed that much. We are not big spenders, our vices are the dogs, don't smoke or drink etc and we borrowed 190K. your house value might go down, you might need to do expensive work eg. New windows and the like.

Re fixing, we went for five years. Ten would lock into a rate that was too high for me to want to pay. Within the next decade we will pay off a fair bit and our LTV should come down meaning we are eligible for better rates. I don't foresee rates going up enough in five years for that to offset personally.

Just because they will lend you as much as X doesn't mean you have to borrow that.