First Time Buyer Advice

Firsttimebuyer2021

Hi, my partner and I are looking at buying our first house together next year.

 

Bit of background;

Currently live in Scotland. Partner is full time employed within the public sector earning just over £26k, no CC balances as they get paid off in full and has a car PCP of £236 a month.

I currently work 2 jobs – one full time employed and another as a free-lancer. My full time employment is currently £14k. I have only been free-lancing a year so my free-lance accounts are around £2k with next years expected to be around £4.4k. I also have no CC balance as they get paid off in full and I have a HP Car of £166 a month.

Just a few questions that we need help on if people wouldn’t mind advising us it would be greatly appreciated!

Using Bank of Scotland mortgage calculator, they advise we could borrow around £200k. Is this an accurate amount? We are currently looking at properties between £130k-£185k.

Next question is we are aiming for a 15% deposit, when do we actually need to pay this deposit? We found a new build house today for £165k that isn’t ready until November 2021 but we didn’t know when the deposit would be payable if it was in November at completion or before as we have saved about £16.5k so far.

Next question is I am looking potentially getting a new car soon as mine is starting to get problems, If I swap to a PCP/HP for around £165-£200 a month will this have the same impact of my HP or worse as the outstanding balance will be greater. I have done both sums in the BOS mortgage calculator and the figure doesn’t change but don’t know if it will change when an actual application will be made.

As I am currently within 2 jobs will mortgage providers accept both incomes?

Another question is when is the right time to get an AIP and is one needed?

 

Thank you for reading this and for any answers you may give!

K_S

@Firsttimebuyer2021

I can try answer some of your questions -

- with a joint app of 26k and 14k basic income, and car payments as stated, the max borrowing from HBOS should be around 160k not 200k for a 25 year term.

- I don't know how old you are but with a longer term (say 40 years which is the maximum), HBOS may potentially allow a borrowing of 190k.

- a second income stream of self-employed nature with only 1 years track record is very unlikely to be taken into consideration for affordability purposes

The good news is that your budget is 130-185k, you already have 16.5k saved and the 90% LTV market is coming back to life so you should hopefully have options to afford a property in the 150-170k range with a 90% LTV mortgage. If you can save up to a 15% deposit, you'll bring down the borrowing costs a lot. And your affordability should improve further if your age permits a longer term.

Hope that helps and good luck!

Firsttimebuyer2021

@K_S

Thank you for your response and clearing some questions up its greatly appreciated, If we had to go for that house at £165k do you think a 15% deposit and our salaries would be fine? We have no defaults and everything paid on time and up to date?

Would you suggest we speak to a mortgage broker when we are ready to buy to get a better idea of exact figures we can borrow and get an AIP in place? 

One last question sorry if i had to pay off my car and just deal with the problems till after the house purchase, Would the £166 a month increase the house budget by much or should i just leave it as is?

Again, Thank you so much for taking your time to answer my questions! 

K_S

@Firsttimebuyer2021 Apologies, for some reason I was thinking that you'd asked specifically about a 25 year term hence the lower borrowing figure. I've redone my post above so please have a look.

To answer your questions -

- based on the limited information in your posts yes I would imagine you should be able to borrow enough to buy a 165k with a 15% deposit (85% LTV)

- yes, when you are ready to start viewing, get in touch with a broker to get an answer to the "how much can we borrow" question so you have a clear budget in mind. Don't worry about the AIP itself, leave it to the broker.

- depends on how long a term you can get. If long enough, then the current car payment will not make much of a difference.

I hope that helps.

Firsttimebuyer2021

@K_S Thank you for updating your post it is really appreciated, Were 24 year old so it would be a 35 year mortgage term for lower payments with a view to pay it off much quicker with maximising 10% yearly overpayments. 

With the 15% deposit needed for the mortgage when does this become payable? Having saved £16.5k the now and needing another £8k roughly to get us up to the 15% amount we aren't wanting to reserve the next month and then being told the 15% needs paid ASAP when looking at projections we won't have that amount until Summer time 2021. We also looked last night at the Scottish first home fund as we might only need a 5% deposit but didn't know if that would complicate things anymore.

Thank you again for all your help! 

K_S

@firsttimebuyer2021 Generally speaking, mainstream lenders will let you go up to 70 years at end of term, so for example if you're mid-20s you may be able to go all the way up to a 40 year term if needed.
With regard to when you actually need the deposit, it's usually only prior to completion.