Thinking about buying our first home... general advice appreciated

jde-tv

Me and my partner were talking about this last night and have no idea what’s realistic… So I just thought I would see what the general opinion is on here.

Deposit: 7k

Combined wage: 46k

Maximum monthly mortgage repayments we could afford: £800

I have a loan for £6400, of which £6000 is still to pay over 4 years.

My partner needs a new car, would they be better to get a loan to cover the cost of one, or get a car on finance, I don’t know which (if either) will look better on a mortgage application.

After all of this do you think we would be likely to be accepted for a 95% mortgage? The properties in our area are around £130k

Any advice would be great  Thank you

foxy-stoat

The only advice I can give you is save for a bigger deposit, clear down your current debt, try and not get into any more debt so buy a car for a couple of thousand. You will also need another £1000-£1200 for legal fees.

Loan or finance secured on a car will make no difference, the total amount will still be added to your current debt which will effect your affordability.

My first time mortgage was £110,000 and I paid around £650 a month for the first two years. Think the rate was around 4% so if you can afford to pay upto £800 a month then you will be on or near the limit when the lender stress tests your finances.

If the house prices in your area are rising now then get on it as soon as you can afford to, if they have been stagnant for a few years then I would wait as long as you can to reduce your debt and build on the deposit.

Mortgage_Moog

I was in a similar position not long ago and here's what I was told by a few brokers.

1) Pay off all debt before applying for a mortgage. The way most banks work it out is that they multiply the amount of debt you have by 5 and take that amount off what they'll lend you. In your case that means about 30k less on the mortgage offer. The 5x debt thing isn't 100% accurate but try some online calculators and it always works out roughly that way. I know it's a pain but I spent 5 years living back home paying of all debt before I applied and now I'm reaping the rewards.

2) Getting a car loan or finance will again knock down the amount they'll lend. Could you wait until after you get the mortgage then get the car? Or just get a cheaper car? Homes are more important than cars.

3) I'd say you need more than a 5% deposit. Although you can get 95% mortgages you'd be very limited in choice and along with your debt it could be hard.

Sorry to sound negative but that's what I was told and the best thing to do is pay off your debt with the deposit you've saved and start saving the deposit again. I know it's annoying and can take months but I've been there and when you get to the end it's a great feeling!

jde-tv

Thanks for the replies I agree about saving longer, that was our original plan until someone else suggested the 95% mortgage. I just worry that the money we save over the next four years (when my loan ends) will be eclipsed by the house prices going up and I guess that's just life though!

Thrugelmir

Have you both opened Help to Buy ISA's?

Clear the debt.

If you are both determined to buy a home. A few months of seriously hard saving can make the task far easier. That's personal choice though as to how much you are prepared to sacrifice/give up.

jde-tv

Thrugelmir wrote: »

Have you both opened Help to Buy ISA's?

Clear the debt.

If you are both determined to buy a home. A few months of seriously hard saving can make the task far easier. That's personal choice though as to how much you are prepared to sacrifice/give up.

I think that's the issue, I don't want to give too much up! I've worked out that in four years time we can have a deposit of at least £17k and zero debt... I think that might be a better option that way even with a 90% mortgage we can still afford more than we can at present. We will both also be just under 30, so we can hopefully get a 30 year one?