Need Advise: First Time Buyer - a total newbie, confused and wanting to buy a property

Bucki

Hello Everybody

I wan to apologies in advance, for my  English and maybe also silly questions etc.

I been thinking over this few times if I should post here and ask for advise but here we go.

Please do read the whole thread and try to understand the situation I am in.

Here we go...

I am 40, married and we are expecting our first baby. Until now, we lived at my parnts who helps us a lot especially to enable us to build up some savings. In little words, they took care of most expenses e.g. rent/bills etc. Now, it is time to look for a property and start a new journey ...

We have looked at a Property worth £240K which we really love and is nearby my parents too.

I am full time employed with a salary of £28K per year. My wife does not work atm. but will be in the future.

We have a saving of £40 and my parents are willing to gift £30k to us - in total £70 deposit.

They have the money in cash and never declared or put the money in the bank (they sold a property abroad)

Question: 

- Is there a problem if my parents like to gift £30 in cash to me?

- Would I have to justify this to estate agents or to my bank where the money is coming from?

- What else do I need to be aware of?

The Property

The property is round 17years old and the Energy Efficiancy Rating is C = 72.

There is a standard Boiler (ervised until march last year) is NOT a Combi Boiler but a standard one which has a tank to store water (does this make a difference).

Also, the water is on a metter instead of pay a fee and spend as much as wanted.

Does this type of boiler mean is less efficient, does the EER indicate is a less heat absorbant property?

Have you got any advise or comments or questions need to be asked about those?

Moving on to the Mortgage

First Time Buyer and the property is £240k with a Deposit £70k

This makes £170k which needs to be borrowed.

I am currently looking online to see how much it would cost, when borring £170k over 25years.

In all honestly, I am all new to this and been told that it's best to find a 'broker' who will find better deals than those online.

Questions:

Is this correct? Do I need to find those brokers myself? How do I find 'best' brokers or are they same and they all provide same offers?

Or shall I rely on the Finance Advisor provided by the Estatge Agents?

Standard Term or Fixed Rate

I understand that there is type which you can choose: Standard or Fixed. To me this means, I can decide whether I like to say "ok have it 5 years of interest rate which may flunctuate (rise or lower) at any time" or say "well I rather go for a fixed interest rate for 2 or 5 years, despite if the rate goes down or increases", is this correct of my understanding?

In this case, speaking from your experience: what is the best / recommended approach?

I have looked at the Mortgage Best Buy page and did search for a 5 year and 7 year Fixed Rate.

• 2 year standard = £911 p.m at 4.15%
• 3 year standard = 902 p.m at 3.95%
  
• 5 year fixed = £686 p.m at 1.53%
  
• 7 year fixed = £682 p.m at 1.49%
  

Looking at the figures above, I see that the 'best' deal would be the 7 year fixed.  Or am I deceiving myself and do not really understand the whole calculation / fees behind this all??
What are your thoughts/advise?

Questions:

What will happen after 5 year?
I assume, I will have to search for a better deal (remortgage) and go through search deals again?

I also assume in that case after 5 years: it be a remortgage for £129080 because 682 x 5 years = £40920?

My income and expected monthly expenses

I have calculated that my monthly outgoings would be round: £250 per month.

This includes, car insurance, road tax, Internet, car insurance, petrol, Gym, Mobile, content insurance.

Does not include expenses for food, clothes or holidays/leasure!

The Property Council is Band D = £155.00 per month currently.

I have estimated a £50 per month for each: water, electric and gas as a total of £150 per month.

From my calculatin so far, I have identified:

• Council Tax + Utility Bills = £305.00 per month
• Monthly outgoings = £250.00 per month
• Mortgage Montlhy Payment: £682 per month (if fixed for 7 years with the rate of 1.49%)
• Total monthly outgoing = £1,237.00 per month

A monthly left over of round £500.00 per month.

This would be for whatever other expenses such as: food / clothes and leasure.

I guess, we will have to forget about holidays as it won't be possible never ever, especially after having a child.

I will defenitaly have to seek a second job e.g. delivery driver on weekends / cash in hand round £400 a month (ext. petrol expense)

Questions:

Am I being very ambiguous here or am I not calculating things right as supposed to, or missing any other calculations?

Am I making a very big mistake in the calculations or even getting such a high mortgage with one salary income?

Most importantly, if I get a lump sum of e.g. £30K and want it to pay off the Mortgage.

Is this even possible? Can I pay as much lumpsum as I wanted or is there a cap?

Have I got a AIP already

Yes, I have done one online via L&C but I guess a Broker would be able to look for better deals?

Also, in the application: I did not make a Joint Application and did not add my wife in the application at all.

Questions:

Is it better to include my wife in the application? Should I make a single or joiint application althought my wife does not work?

Does the single or joint application make any difference in the how much I can borrow and the interest rate?

Can I legaly apply for a single application & not report/declare my wife and then add her later once she starts working?

What if it goes wrong

I need to stop thinking negative and stress over this too much but I can't help it

Let's assume I get the mortgage for £170K and end up paying £682 per month for 7 year fixed rate (as detailed above).

... and all sudden, circumstances change and we have to get a smaller/cheaper property.

Can we then put the property for sale? Are we ligally to do that or will there be a cap for a period before you can sell the property?

Does it also mean, we simply pay a lump sum to the Mortgage Lender and then keep the rest to purchase a cheaper property?

What else

Indeed, it is not easy and defenitatly not as easy as I thought.

I certainly have this worrying / scary feeling inside of me ... all this [ but what if ] questions /voices in my head.... I am so worried.

Have we considered a 'cheaper' property?

Sure, we have looked around and we have not had this 'want this' feeling on any previous properties.

All of them we have looked at were starting from £135k (which required a lot of work) up to £190K which is not as spacious as this one.

Yes, the £190k is cheaper and would be round £480 p.m for 5 years fixed at 1.35%.

Indeed, a £200 p.m difference can make a difference but then we are loosing on the huge garden, huge kitchen, detached etc.

I guess, the decision is up to me, of course

As I said, I am NEW and all these questions in my head and worries... I came here to ask for advise / comments / suggestions / recommendations.

What do you think? I would deeply appreciate your feedback.

Please please please, also recommend any tips or tricks I need to ask or be aware of or whatever.

ps: the property had 4 offers for the asking price already, and I be making on offer on Monday (if I manage to kindly ask the vendor to wait for my offer too).

MaryNB

Your parents can gift you that money as long as they sign a letter saying it is a gift not a loan. However they will need to prove the source of the funds as part of anti money laundering checks by your solicitor. They'll have to show proof they got it from the sale of a house. Not sure how easy the process will be if it's in cash. Won't make it easier.

Unfortunately the £240k house is far more than you can afford. You'll probably be looking at a max mortgage of 4.5x your salary (although with a wife who is an adult dependent and a child on the way your bank may take this into consideration and lend you less).
With 4.5x £28k that's only £126k + £70k is £196k. What did your AIP say? I'm not sure how you would have got one that would imply a house worth £240k was within reach.

Get an independent mortgage advisor. Don't go with the estate agents person just because they may strongly imply it will affect your chances. 

Bucki

MaryNB said:

Your parents can gift you that money as long as they sign a letter saying it is a gift not a loan. However they will need to prove the source of the funds as part of anti money laundering checks by your solicitor. They'll have to show proof they got it from the sale of a house. Not sure how easy the process will be if it's in cash. Won't make it easier.

Unfortunately the £240k house is far more than you can afford. You'll probably be looking at a max mortgage of 4.5x your salary (although with a wife who is an adult dependent and a child on the way your bank may take this into consideration and lend you less).
With 4.5x £28k that's only £126k + £70k is £196k. What did your AIP say? I'm not sure how you would have got one that would imply a house worth £240k was within reach.

Get an independent mortgage advisor. Don't go with the estate agents person just because they may strongly imply it will affect your chances. 

Thanks for the kind feedback.

Indeed the cash gift, is tricky... I am thinking to put it into my bank, in smaller sums.

Would it be a criminal record if I do not include my wife in the application?

Would a SINGLE application be OK in this case? Is it mandatory to include my wife in this process?

The L&C Mortgage online, did not ask me about my wife at all and did not delcare it.

Where would I get an Independent mortgage advisor? Are they all same or do I need to look for a specific one?

Cheers

Capri84

I’m not sure if the UK is your native home, but we certainly don’t jail folk here for not putting their wife on a mortgage application!

Money laundering however is something different, so before you start going all Marty Burn (one for Ozark fans), you might want to just get documentation from your folks confirming the sale of a house. Quite how the money is sitting in cash however is probably going to be questioned along the lines. Anyone with that sort of money sitting outwith a bank, is going to look suss. 

Pepod

Whilst we may not routinely jail folk for not putting their wife on a mortgage application, to knowingly provide false information (such as not mentioned the adult dependant and soon to be child (congrats!)) would be an offence.

When looking for a mortgage advisor, 'unbiased' and 'vouchedfor' are two websites which can be used to find advisors. Ideally you want to find one which is 'whole of market' which will mean they have access to the most options for you.

If your parents transfer the money into your bank in smaller sums, it will still show up on the bank statements so will still be subject to the regulatory checks. Different lenders asking for different amounts of bank statements, so whilst in theory you could transfer the money and then wait for a long enough time before applying, it would be hard to say how long you would need to wait for and the lender can always ask for additional information.

As has already been said, find a mortgage advisor and disclose all the details truthfully to them (they are working for you, to help you) and see what is available, but realistically you are most likely going to have to lower your expected budget.

Justonemorecupoftea

Lots of questions here -

Deposit - you're parents will likely need to prove where they got it from. You'll have to spend a long time paying it into your account in smaller amounts for it not to look dodgy.

Have you factored in the costs of purchasing the house - these are not to be underestimated - you'll need to pay solicitors fees, for a survey and possibly a fee to your lender.

EPC - a C rating is fine - if you get the certificate number you can look it up on the government website and it gives you a breakdown of the reasons for the score and recommendations.

Mortgage - as others have said borrowing that much won't be seen as affordable by many/any lenders. I'm surprised you have an AIP. You didn't include your wife on there, did you add a dependent (e.g. your future child?) that will be factored in to affordability assessments.

Will your wife receive child benefits/maternity pay - that can sometimes be added in to the mix. It's your choice about whether your wife is on the mortgage or not, but I'd discuss the implications of that with a solicitor should you pass away. She would need to be listed as an adult dependent. I would also advise your wife to make sure she is named on the property to provide some protection in the case of death or divorce.

Also you'll generally only be able to get mortgage that runs until retirement age - the longer you leave this decision the shorter the mortgage term.

Fixed rate - exactly that, fixed. Rates are very low at the moment. At the end of the term you would automatically be put on to a standard rate for the bank (depending on what they are at the time) or you could remortgage to get a better rate.

Expenses - these seem low to me, you'll need buildings insurance and life insurance as part of having a mortgage. There's also no allowance for child related expenses!

If it goes wrong - that's why banks have affordability assessments etc to asses the risk of that happening. You can indeed sell the house. I think there might be a 6 month cooling off period between applying for mortgages.

Broker - I'd advise getting one as they will explain everything to you much more clearly than I have and understand the implications of different scenarios - including around the deposit. I would not advise using anything linked to your estate agent.

MaryNB

Bucki said:

MaryNB said:

Your parents can gift you that money as long as they sign a letter saying it is a gift not a loan. However they will need to prove the source of the funds as part of anti money laundering checks by your solicitor. They'll have to show proof they got it from the sale of a house. Not sure how easy the process will be if it's in cash. Won't make it easier.

Unfortunately the £240k house is far more than you can afford. You'll probably be looking at a max mortgage of 4.5x your salary (although with a wife who is an adult dependent and a child on the way your bank may take this into consideration and lend you less).
With 4.5x £28k that's only £126k + £70k is £196k. What did your AIP say? I'm not sure how you would have got one that would imply a house worth £240k was within reach.

Get an independent mortgage advisor. Don't go with the estate agents person just because they may strongly imply it will affect your chances. 

Thanks for the kind feedback.

Indeed the cash gift, is tricky... I am thinking to put it into my bank, in smaller sums.

Would it be a criminal record if I do not include my wife in the application?

Would a SINGLE application be OK in this case? Is it mandatory to include my wife in this process?

The L&C Mortgage online, did not ask me about my wife at all and did not delcare it.

Where would I get an Independent mortgage advisor? Are they all same or do I need to look for a specific one?

Cheers

With a salary of £28k I think it would be very difficult to put £30k into your account without needing to explain it. It's not a sum you would be able to save over anything less than several years. Your conveyancer will be acting for your lender as well (you should make sure your chosen conveyancer is on your bank's panel). If they're not happy to sign off on the source of funds I doubt you will able to use it as part of your deposit. Your mortgage offer is based on a set deposit and if the bank isn't happy the money is coming from a legitimate source they may refuse to release the funds. I haven't seen a situation where someone has had their deposit money refused (a few on here had issues but I don't know the outcome) but I would presume something like that would happen.

I'm not familiar with L&C but there are other mortgage calculators online that do ask about dependents. When you go to apply for your mortgage your lender will check affordability and will almost certainly ask about dependents. I had a quick look at Halifax's mortgage calculator using your salary. One dependent doesn't make a difference but two (your wife and future child) reduced the mortgage offered by £8.5k

pinkshoes

1. The £30k gift will need proof of its origins for money laundering purposes.

2. The biggest problem is your salary. Realistically you can borrow 4x your salary,  maybe 4.5x so this puts your budget of £180k to £190k. Don't forget you will need cash to pay for solicitors fees, building surveys etc...

AdrianC

Bucki said:

We have looked at a Property worth £240K which we really love and is nearby my parents too.

I am full time employed with a salary of £28K per year. My wife does not work atm. but will be in the future.

We have a saving of £40 and my parents are willing to gift £30k to us - in total £70 deposit.

As others have said, you can't afford it. But let's move on from that.

They have the money in cash and never declared or put the money in the bank (they sold a property abroad)

Question: 

- Is there a problem if my parents like to gift £30 in cash to me?

Not in itself... but...

- Would I have to justify this to estate agents or to my bank where the money is coming from?

Yes, absolutely!

It is a legal requirement for them to satisfy themselves of the source of those funds, to prove that it's not money being laundered from the proceeds of crime.

Just saying "my parents have £30k cash kicking about that's come from abroad, no paperwork" will make your solicitor's hair stand on end.

I am all new to this and been told that it's best to find a 'broker' who will find better deals than those online.

Questions:

Is this correct? Do I need to find those brokers myself?

Yes.

How do I find 'best' brokers or are they same and they all provide same offers?

Find one locally who you get on with and think you can work with.

Or shall I rely on the Finance Advisor provided by the Estatge Agents?

That's one option. They may indeed find you a good deal.

Standard Term or Fixed Rate

I understand that there is type which you can choose: Standard or Fixed. To me this means, I can decide whether I like to say "ok have it 5 years of interest rate which may flunctuate (rise or lower) at any time" or say "well I rather go for a fixed interest rate for 2 or 5 years, despite if the rate goes down or increases", is this correct of my understanding?

Yes.

In this case, speaking from your experience: what is the best / recommended approach?

What's going to happen to rates over the next few years? No, nor me.

I also assume in that case after 5 years: it be a remortgage for £129080 because 682 x 5 years = £40920?

Umm, you're forgetting about the interest.

Yes, you're repaying £682/mo, but most of that is interest.
https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/
£170k at 1.53% for 25yrs does indeed give £682/mo repayments.
After 5yrs, you will still owe £141k, because the £12k difference to what you've paid is interest on the outstanding balance.
In total, you'll repay £205k over the term.

I will defenitaly have to seek a second job e.g. delivery driver on weekends / cash in hand round £400 a month (ext. petrol expense)

Don't forget that you need to declare that income on your tax return and pay tax on it...

Yes, the £190k is cheaper and would be round £480 p.m for 5 years fixed at 1.35%.

£70k equity plus £120k mortgage - call it £125k because you'll need money for the legals, survey, etc...
You should be able to borrow that on a single £28k salary.

First thing to do is get a decision in principle - this is a lender looking at your finances and saying "Yep, we can lend you that, if we like the property." Without that, no EA will take your offer seriously, because you can't show you have the money to buy the place.

ps: the property had 4 offers for the asking price already, and I be making on offer on Monday (if I manage to kindly ask the vendor to wait for my offer too).

Why on earth would the vendor prioritise your offer over the other four?

You haven't even got a decision in principle on the finance yet. Get that, find out how much you can borrow, THEN start looking at what you can afford.

Redwino222

Affordability is a huge issue.  I am around the same age as you, with a similar mortgage but I earn over double what you do.

I am not rich by any means and still need to be careful. 

Your living costs will increase with the baby.

Can you start looking at Cheaper houses?

Scotbot

MaryNB said:

Your parents can gift you that money as long as they sign a letter saying it is a gift not a loan. However they will need to prove the source of the funds as part of anti money laundering checks by your solicitor. They'll have to show proof they got it from the sale of a house. Not sure how easy the process will be if it's in cash. Won't make it easier.

The proof of funds does not have to come from a house sale. It can be from savings or investments . As long as there is documentation it doesn't matter where the money cones from

 The OP says it is cash from an overseas property sale documentation on this can be used for proof of funds.

 If it really is cash under a mattress then that will be a challenge not least because no solicitor will accept a bundle of notes as a deposit. It will need to be transferred via a bank account.