First Time Buyer - Mortgage Application

robgoode

Me and my partner are about to start a mortgage application for a new build house in Durham that we have had reserved for quite a while. Me and my partner earn minimum of £2,300 per month after tax combined.

Valued at £128,000, we had planned on doing a HTB mortgage with a 5% deposit however due to delays on site we have 9% deposit saved. We will be adding the extra to hit the 10% mark and are likely to apply for a 90% mortgage as I'm not fully comfortable going with HTB having read more into it.

Now in regards to the mortgage I'm torn between a few different options and looking for some advice.

- I was planning on doing a 5 year fix over 25 years to lock in a cheap monthly repayment and overpay mortgage with overtime pay, around £2k a year extra.

- Having spoken to a few people I've been advised to do a 2 year fix over 25 years due to LTV being lower by the end of that period and being able to get a better deal 3 years sooner.

- I've also been speaking to people I work with who have recently bought first properties. A few have taken out a 2 or 3 year fix over 35 years with the intention to remortgage after 2/3 years to a 22/23-25 year mortgage. Reason for this is to have lower payments to start off with to free up money for furnishings etc.

I'm unsure of what length of mortgage we should take out at the start. Do we go for the longer term in order to have lower payments at first to get other costs in hand or do we start of on a 25 year term and remortgage after the fix period? Does anyone have any experience in either situation that would be able to help with this matter.

Many thanks for any help provided .

YHM

What you are effectively asking for is specific advice about how to structure your mortgage. This forum is more for generic guidance, not about what rate / term is appropriate to your needs. You need to sit down with a qualified adviser / broker for that.

Invest your time in finding a good broker and they will guide you through the process from start to finish, including what rate and term will be appropriate for you and your specific needs.

robgoode

Thanks for the reply. We do have a broker set up but was hoping to get a bit of info before we started that process next month. So much to go over it seems.

FestiveJoy

robgoode wrote: »

Me and my partner are about to start a mortgage application for a new build house in Durham that we have had reserved for quite a while. ....

I really hope you haven't had it reserved for too long. :eek:

Most new builds require an exchange of contracts within 4 weeks of reservation (to avoid you pulling out after the property has been reserved and effectively off the market for a long period)... and most conveyancers need almost all of that 4 weeks to get to exchange for some odd reason.

If you don't exchange within 4 weeks, they usually put the property back on the open market. If someone else then reserves it, they'll go with them rather than you as long as the new buyer exchanges within 4 weeks of their reservation.

An early exchange also assists the developer's cash flow, as they will typically receive 10% of the sale price upon exchange, and that may mean without them having even laid a brick!
(If your downpayment is to be less, with finance in place to cover the remainder, the developer may agree to a lower amount at exchange, but not then less than your downpayment)

No conveyancer should be exchanging contracts unless they are confident you have the funds (e.g. a mortgage offer) available to complete when necessary.

Even with the best will in the world, a mortgage offer typically takes at least 2-3 weeks from application.

It would be most strange that all this was not explained by the developer before you reserved the property.

Enjoy the festive season.

:xmastree::xmastree::xmastree:

FestiveJoy

robgoode wrote: »

Thanks for the reply. We do have a broker set up but was hoping to get a bit of info before we started that process next month. So much to go over it seems.

It's best to start with the broker before you even start looking at potential proprerties you may be interested in.

The broker will discuss with you want you want, and what you can actually afford.

With that 'mortgage in principle', you can then shop around with confidence looking at properties you may be interested in purchasing ... and the seller will have confidence in you that you have already started looking at what is affordable, and how you are planning to finance it.

robgoode

I should have mentioned in the first post that we signed up for a pre-reservation scheme with Gleeson and moving to a full reservation in January. We have paid the fee and have all paperwork stating its a scheme designed to give us time to save for a deposit whilst the site was being worked on. Our plot got started in November and is at build stage 7.


Before any of this happened we were in touch with a broker who ran through all the finances and circumstances. Since that happened we both have had a jump in salaries, which the broker has been informed of. We are due to start the process of shopping for the mortgage 2nd week of January but was looking to see what other people have gone with in similar circumstances.

The_Palmist

Go with the minimum term you can safely afford. I don't get starting with longer term to afford furniture as you are effectively paying more interest. I would rather buy furniture which is more affordable or save for it a bit longer.