First time buyer - HELP!!!

nareik88

Hello, I am currently renting spending £700 a month and really want to get a mortgage.

Its me and my wife, we only have a 5% deposit and we are looking at a flat.

THE DILEMMA.

My wife has 2 defaults, one will be 6 years old in 2020 and other is only 2 years old, so wont be disappearing for a while. I was in a debt management plan a year ago, so this is counting against me. All debts now paid off.

I really want to get out of renting as soon as possible but what is our best approach to this. Due to our circumstances the lenders that will touch us come with a 5% interest rate. We would roughly be paying the same amount on a mortgage as were are currently paying in rent.

Should we wait until 2020 for 1 default to disappear from credit rating and save for a bigger deposit, but continue to waste £700 a month in rent. Then hopefully have better options with other lenders.

Or go with the 5% interest rate now, pay roughly £700 to my mortgage and be on the ladder a lot sooner.

My thoughts on this are get on the ladder as soon as possible. The interest rate might be higher but I'm already wasting £700 a month in rent and might as well give it to the bank, at least i'd have my own property. I am can then re-mortgage in two years to a better deal is my thinking.

Any advise would be much appreciated.

Grezz24

Depends on what you can afford, if you can afford 5% interest, and you see renting as wasted money (not wasted in my opinion as it provides a roof over your head) then may be worth it.

Try work out the difference between paying an extra £700 a month to rent for 2 years, vs the costs of a 5% mortgage, it may be cheaper in the long run for a 5% mortgage to start putting your money into your home, and then look to remortgage in 2 years time when the default has dropped off?

wantonnoodle

One thing to bear in mind, while a mortgage may be the same as the rent (or slightly less if you're lucky), you need to make sure you have funds spare to cover maintenance and repair costs.

If the boiler packed up, or a storm caused roof damage, would you be able to pay for repairs that could stretch into hundreds of pounds? These are being covered by your landlord at the moment, but you would be liable if you owned your own house. We bought last year and in the first year have had to replace the roof, replace the central heating timer unit on the boiler (though we were able to get the boiler serviced at the same time, so that saved 2 call outs), and replace the track and gearbox on 2 multipoint locking doors. The only part of this we had any idea about was the roof, as we knew it needed some repairs (though it turned out the repairs wouldn't have been much less than a full re-roof - £5600 for a re-roof, vs £3600 for the repairs - £1500 being for the scaffolding alone on both quotes). The rest came out of the blue, but it all mounts up. £200 for the timer repair, £80 a pop for the door repairs.

On top of maintenance costs, you will also need to budget for buildings insurance. Your landlord will be paying this for the place you rent. Its a requirement for any mortgage lender.

Bearing all this in mind, I would wait until the defaults drop off and keep saving. Then you will have a bigger deposit, and also a maintenance fund ready to use should anything need fixing (you may find a lot of little things will need doing when you buy your own place - decorating at the very least).

GoingOn30

How long would it take you to save up to a 10% deposit? Are there any outgoings you could cut down on to help you save up quicker?
Your mortgage options would really open up if you could get up to 10%.

MortgageMamma

Its not just the default of your partners thats holding you back, its the fact that you are only just out of a debt management plan and only have a 5% deposit. I think the best course of action right now for you is to see a broker, have them check the viability of your proposal right now and if its not workable then the broker can tell you what you need to do to succeed, e.g consider saving a larger deposit and waiting for the first default to drop off the file. Also if your partners defaults are unsatisfied then its going to make it a bit harder for you to achieve a mortgage.