Mortgage broker - ask me anything

Tygerayn

Hi would love some advice on our very unique situation please 😊

We are a family in our mid 30's and purchased our house outright around 10 years ago. We have never paid a mortgage so don't have any history in paying one. Our house is worth approx 450k. We would like to upgrade and find our dream house. Maybe around 700-800k. We have around 250-300k cash as a lump sum to put down. We want to be in the strongest position in terms of being able to pounce on the right house should it come along. We wouldn't want the sale of our current house to hinder the purchase of our next house. Our current house isn't on the market nor do we wish it to be until we have found our dream house. We would ideally want to purchase our dream house and effectively have 2 houses until we have moved then sell the other. What would you recommend be the best way around this situation? Should we use the lump sum we have as deposit on the dream house and get a mortgage on the dream house? If so can you have a mortgage for say 6 months/1 year then pay it all off when the other house is sold? Are there cost implications for paying off the mortgage quickly? Or would it be better to get a mortgage on our current house to free up more cash? Also by purchasing a second home and effectively owning two houses until the original house is sold, are there any tax implications?

Thank you for your time 

K_S

@tygerayn Assuming a cash deposit of 250k for a 750k purchase, you're looking at <70% LTV, at which level there are a wide range of products available. Generally speaking, you may assume that banks will lend about 4.5x income, so if your income meets that threshold, you aren't carrying excessive debt and have a clean credit history, you're in a good position to proceed. In the affordability calcs, banks will take into account the running costs of the current house - council tax, utilities, etc. Since you don't have a mortgage on it, this shouldn't have a huge impact.

If you want a mortgage on a short term basis, you can look at getting a no-ERC (early repayment charge) product and pay it off when the current house is sold.

When you buy the new property, you will have to cough up an extra 3% (if in England) stamp duty surcharge, which you can reclaim once the current property is sold in the following year.

If you want to be able to move even faster than that (say your dream property is chain free and the vendor wants speed), you may consider a bridging loan which home-movers sometimes use to purchase a property before the current one is sold. Bridging loans are short term and at a higher interest rate than normal residential mortgages. The pros are that processing can be very quick (sometimes as quick as a week) and these are designed to be short term, from 0-12 months usually.

Tygerayn

@K_S That's so helpful, thank you very much.
I have a few further questions if you have the time 😊
Sorry I should've added the detail about our salaries, so jointly our salary is only around 50k, which would be a challenge in getting the mortgage amount we need, even though once our house has sold we would be able to buy the property out right. If that makes sense.
Would a lender take our house sale in to consideration? 

Would this force us to have to sell really first? As opposed to our orignal idea suggested.

Or would a bridging loan cover a 500k amount?

Thanks again 😊 

jules4485

Good morning. Me and my wife are now in our 90day period where our current 5year fixed rate is coming to an end. We know have 65k left to pay over the next 16 years. We are thinking of taking a 10year fixed morgate with our current mortgate provider. Even on the comparison sites I have been on they are coming out towards the top of the results for my needs. I am trying to avoid fees for mortgages and new provider fees. The morgate we are looking at has a fixed rate of 2.12% for 10years. We have for the last 7 years overpayed by £100 every month and will continue to do so when we choose a new rate or provider. I like to know what I am paying so what ever mortgate we take will be a fixed mortgate. Would you advise a 10year morgate at the moment or do you think that I would be better taking a fixed lower term mortgage. I personally cannot see the rates getting anybetter than they currently are. Thanks

MFWannabe

jules4485 said:

Good morning. Me and my wife are now in our 90day period where our current 5year fixed rate is coming to an end. We know have 65k left to pay over the next 16 years. We are thinking of taking a 10year fixed morgate with our current mortgate provider. Even on the comparison sites I have been on they are coming out towards the top of the results for my needs. I am trying to avoid fees for mortgages and new provider fees. The morgate we are looking at has a fixed rate of 2.12% for 10years. We have for the last 7 years overpayed by £100 every month and will continue to do so when we choose a new rate or provider. I like to know what I am paying so what ever mortgate we take will be a fixed mortgate. Would you advise a 10year morgate at the moment or do you think that I would be better taking a fixed lower term mortgage. I personally cannot see the rates getting anybetter than they currently are. Thanks

What’s the interest rate on a 5 year fix? Normally they’re lower 

Personally I wouldn’t fix for ten as normally the rates higher and you will have early repayment charges for much longer which could be expensive should you manage to be able to pay it off earlier 

K_S

Tygerayn said:

@K_S That's so helpful, thank you very much.
I have a few further questions if you have the time 😊
Sorry I should've added the detail about our salaries, so jointly our salary is only around 50k, which would be a challenge in getting the mortgage amount we need, even though once our house has sold we would be able to buy the property out right. If that makes sense.
Would a lender take our house sale in to consideration? 
Would this force us to have to sell really first? As opposed to our orignal idea suggested.
Or would a bridging loan cover a 500k amount?
Thanks again 😊 

@tygerayn Given the income vs borrowing required, a normal residential mortgage is likely not possible. Mainstream residential lenders will not take into account future proceeds from sale of current property.

In the above scenario, people often use bridging loans. A bridge can be secured against the property you are buying (so 500k on a 750k property which is around 67% LTV which is doable, generally speaking). To bring the risk down further for the lender (and the cost for you), it may also be possible to secure the bridge against both 2 properties. The term is usually for up to 12 months but can be paid off anytime without a penalty. I hope that explanation makes sense.

The other option is as you said, to sell the current property and get into a chain, or go into rented and then buy.

K_S

jules4485 said:

Good morning. Me and my wife are now in our 90day period where our current 5year fixed rate is coming to an end. We know have 65k left to pay over the next 16 years. We are thinking of taking a 10year fixed morgate with our current mortgate provider. Even on the comparison sites I have been on they are coming out towards the top of the results for my needs. I am trying to avoid fees for mortgages and new provider fees. The morgate we are looking at has a fixed rate of 2.12% for 10years. We have for the last 7 years overpayed by £100 every month and will continue to do so when we choose a new rate or provider. I like to know what I am paying so what ever mortgate we take will be a fixed mortgate. Would you advise a 10year morgate at the moment or do you think that I would be better taking a fixed lower term mortgage. I personally cannot see the rates getting anybetter than they currently are. Thanks

@jules4485 I wish I could say! It mostly boils down to your individual plans, how much you value a fixed payment and your view of interest rate movements in the future.

For my personal mortgage, I always go for the shortest fix as that suits our personal plans, I don't like being tied into long term contracts and I'm happy as long as I can get the best / most appropriate deal for me at the time. But that's just me.

NatalieanneDFW

I just wondered if anyone has successfully been able to buy shared ownership solely on disability benefits and been able to obtain a mortgage for the share. I'm looking for a few hours of therapeutic work but that's all I can manage at the moment however I would love to have a more secure home than private renting. My 11 year old son also receives disability allowance and we receive universal credit. 
I have access to a deposit for the share.
All is affordable but the sticking point is that I'm not employed and there is a lot of discrimination around this. 
Please no judgements or advice in the risks of SO or recommending Council housing as I'm aware. I would just like to stick to the aspect of getting a mortgage with two people in the family having long term health issues. 

K_S

@NatalieanneDFW I've never worked for a client in a similar situation so unfortunately can't comment based on experience. Generally speaking, there are lenders who will lend on 100% benefits income but it's all case specific, based on sustainability of that income, etc. 

The complication is likely the SO bit as lenders often have different/additional criteria requirements based on the requirements of the scheme and or their own SO mortgage specific requirements.

It's a case of ringing around to a few lenders (if there are any) who do SO mortgages + accept 100% benefits income and check if they will consider doing both together. I hope that makes sense.

Tygerayn

@K_S thank you so much we really appreciate your advice. We shall take a look into the bridging loans. Happy New year and thanks muchly