First time buyer

username__5

I know you guys must get loads of these sorts of posts but I am interested in buying a house/flat.

I recently graduated and have been working for over a year in the NHS. In this time have have made my way up the ranks a bit and have a half decent salary for a 22 year old. Currently my basic pay is just over £20k but usually I get more money for mileage per month probably about £100 profit. I have a graduate £5k loan.

There is a house I am interested in worth £89,999 would it be viable to look for a mortgage for this house? I am paying rent of £320 a month and I would very much like this to go into a property I own rather than someone elses.

I have not got much in the way of deposit however I may be able to get some money from the bank of Mum and Dad.

What would you suggest my options are? Thanks in advance

Dave

herbiesjp

Looking at a 100% mortgage, and an avergae fixed rate deal of 6.45% over 25 years on a repayment mortgage basis would mean £604.87 pm

To get a 100% mortgage though, you would really need to have an excellent credit history

jonewer

Its also worth noting that 100% mortgages have become fewer and further between and harder to get approval for.

You may frequently be stung with a higher lending charge for between 90-95% LTV mortgages.

Bear in mid that by borrowing over 4x your income with additional debt and no savings, you may leave yourself vulnerable to financial distress if your cicumstances or the ambient financial circumstances change for the worse.

My advice is either to hang fire until you increase your salary, pay off your debt and build up a deposit and/or go cap in hand to your parents.

But whatver you do please please please do not go sub-prime. These mortgages are cynically predatory. They are the financial equivalent of giving a thirsty man whiskey..... and they may very well leave you penyless, bankrupt and homeless in a few years time.

Lavendyr

Assuming you do not have a deposit, you would need at least a 100% mortgage, and possibly more in order to afford solicitors fees, survey, furnishings, etc.

But let's assume you need to borrow the £90k and forget about the rest for a moment. On a 25 year mortgage at 6.5%, you would be paying £487.50 per month on an interest-only mortgage. That would mean you would be paying more in *interest alone* than you are currently spending on rent (and remember interest can be just as "dead money" as paying rent). A repayment mortgage would be £614.86 - nearly double your current rent. And all that's if you can even get a 100% mortgage - currently you would need to have a spotless credit history with evidence of borrowing (e.g. credit cards with no missed payments). Not to mention the current turbulence of the market - you could easily find yourself in negative equity. If you needed to move for whatever reason, negative equity could make it very difficult.

What if, instead of buying now, you were to wait for 5 years and save up a deposit in that time? You say you are earning around £20k, meaning your takehome (I'm not including your petrol profit) is roughly £1,280 per month (I'm assuming no student loan other than the graduate loan you name). Take rent, living costs and whatever you need to pay off your loan each month, and you're still left with a decent sum to save (I'd guess at least £500, more including your petrol profit). Stick that in a mini ISA and then in a high-interest savings account each month and in 5 years you could have £30,000 plus interest sitting there (more if your salary goes up but you can keep your costs down) - a fantastic chunk towards a house. Over 5 years you'd have spent around £20000 in rent - but I would bet that you would have spent far more than that in additional interest had you bought without that deposit and paid the bank for 5 years.

Even if you only saved for a year, that's still £6000 towards a house which is much better than nothing at all and will open you up to better mortgage deals which will in turn cost you less over the life of the mortgage.

herbiesjp

jonewer wrote: »

Its also worth noting that 100% mortgages have become fewer and further between and harder to get approval for.

You may frequently be stung with a higher lending charge for between 90-95% LTV mortgages.

Bear in mid that by borrowing over 4x your income with additional debt and no savings, you may leave yourself vulnerable to financial distress if your cicumstances or the ambient financial circumstances change for the worse.

My advice is either to hang fire until you increase your salary, pay off your debt and build up a deposit and/or go cap in hand to your parents.

But whatver you do please please please do not go sub-prime. These mortgages are cynically predatory. They are the financial equivalent of giving a thirsty man whiskey..... and they may very well leave you penyless, bankrupt and homeless in a few years time.

Still plenty of 100% mortgage deals around

You are right on Higher Lending Charges, howver there are still plenty options that do not charge this HLC

Also, there is currently little chance of getting a sub prime 100% mortgage - although there is no indication that the OP would have to look at this option

poppy10_2

Definitely try to save up for at least a 5% deposit - it will increase the range of options available to you, and will work out cheaper in the long run.

username__5

Thank you all for your advice. Good point about the interest on a mortgage being dead money. I hadn't thought about that. I would love to have a house but I guess my situation isn't ideal by any means. I need to get rid of my debt and start saving.

Thanks again
Any other views?

sarkin

As herbies jp said there are some 100% mortgage about and he has found you a quote. I would recommend that you contact a mortgage broker and get then to do an AIP for a mortgage then you know where you stand ingetting a mortgage