Apply for two mortgages: First Direct & TSB

greencode

This has all happened a bit quick. I'm looking for a £50k mortgage on a £150k property as a first time buyer. I was looking at the First Direct 10 year fixed rate fee free offer but when I called them they said, as I'm a company director (of my own company with just me working in it and the sole director) that they do not take into account dividends paid to me. Which is most of my wage.

TSB seemingly do take this into account.

First Direct is the better deal (by around £400 over 10 years) but what I don't want to do is get turned down for First Direct, go to TSB and they then see that I've jus been turned down on my credit history.

TBH, I doubt if I would get turned down as I have 100% perfect credit rating and am only looking to borrow £50k over 10 years (around £471 a month) but just want to see what I should do next.

TSB do have a Mortgage Promise Application which takes 10 minutes and gives you an indication as to whether they'll accept me, but if I do this will it then affect the First Direct one!

Any ideas, or help would be much appreciated.

Pixie5740

Can you meet First Direct's affordability based on your income excluding the dividends? I assume that like many contractors you pay yourself a salary based on the minimum wage.

kingstreet

Do not go near TSB at the moment.

They have serious IT issues.

greencode

Pixie5740 wrote: »

Can you meet First Direct's affordability based on your income excluding the dividends? I assume that like many contractors you pay yourself a salary based on the minimum wage.

Hi. Exactly that. I pay myself minimum wage and the remainder in dividends.

Ah, that's very interesting. I've only been looking at the various mortgages they offer and not the "How much can you borrow?" calculator. That actually comes out at £54,620 so I should be okay.

spillage74

If I can I my 2p worth. Why not go for a longer mortgage repayment time. I found myself in your position and took out the longest possible mortgage time 29 years on a 2 year fixed.
I then over paid as much as I could over the 2 years and put any extra into savings. At the end of the 2 years I paid off a large lump sum and took another 2 year deal. I have one year left and should be mortgage free in the next year or 2.
Doing this also meant that if I needed some cash I could just pay the minimum mortgage payment which was only about £200 a month.

greencode

spillage74 wrote: »

If I can I my 2p worth. Why not go for a longer mortgage repayment time. I found myself in your position and took out the longest possible mortgage time 29 years on a 2 year fixed.
I then over paid as much as I could over the 2 years and put any extra into savings. At the end of the 2 years I paid off a large lump sum and took another 2 year deal. I have one year left and should be mortgage free in the next year or 2.
Doing this also meant that if I needed some cash I could just pay the minimum mortgage payment which was only about £200 a month.

Ah, that's interesting. I hadn't thought of that. I'm 42 so didn't want a long mortgage but that's not really what you're suggesting anyway. My original plan was to put £50k away in a 5 year fixed rate account for that to gain interest whilst paying back the mortgage. The interest gained on a 5 year fixed rate would be the same as the interest I pay on the 10 year mortgage therefore making it all equal, although I'd probably put the £50k back in another 5 year fixed rate to gain even more interest.

spillage74

Hi Greencode,

I was the same age as you when I took out my mortgage. I am just cautious and wanted to make sure I could repay the mortgage even if the worst happened. I managed to half my payments last year and I am now paying the minimum for a bit and using the extra savings by towards a loft conversion. Once complete I will just overpay the mortgage again.

greencode

spillage74 wrote: »

Hi Greencode,

I was the same age as you when I took out my mortgage. I am just cautious and wanted to make sure I could repay the mortgage even if the worst happened. I managed to half my payments last year and I am now paying the minimum for a bit and using the extra savings by towards a loft conversion. Once complete I will just overpay the mortgage again.

Thanks for your thoughts on this. I can afford the mortgage and actually might overpay for a few years anyway but what I'm now thinking is the 10 year fixed at 2.49% with FD (me being lazy and not having to apply for another mortgage in 2 years time) and get a 3 year fixed rate bond with NS&I which will pay £2,980 in interest. It then has a 3 month interest penalty if I needed to withdraw for any reason. I don't think I would but good to know that I could easily pay back the mortgage if something disastrous happened.

TBH, there's so many permutations and things you could spend your life trying to get it perfect.