Mortgages and unused credit cards

samps1973

I asked my advisors opinion on whether I'd be better off with htb or a standard mortgage. This is what he said.

This is a very tough one to call

 

As we discussed if you were to buy a Newbuild you could buy a more expensive property with cheaper monthly payments

 

You will have a further loan to pay off at some point in the future but with the £200+ saving per month, this shouldn’t be a problem.  You could overpay £200 per month on the mortgage (meaning the balance would have reduced considerably after the first 5 years and then at the point you would start paying the monthly interest instalment for the help to buy loan, we could look into raising money against your mortgage to redeem the help to buy loan.

 

That way you increase the mortgage but this will then be fully paid off by the end of the mortgage term and so you own the property outright

 

If you prefer a second hand property then we can also arrange this.  Based on the last 3 months payslips the mortgage is still likely to be £151000 so the maximum you could buy for would be £161000 which will limit your choice.

 

The other thing to bear in mind with all of this will be maintenance.  If you buy a Newbuild there should be very little you need to spend on the property as everything is brand new.  If you buy a second hand property, assuming there are installed white goods, these could be old and need replacing.  You may need to redecorate.  The boiler may be old etc.

 

Lastly and really important to consider is the service charge and ground rent.

On a second hand flat you will have to pay a monthly service charge and an annual ground rent.  You should check how much each of these is and how and when they can increase

On a Newbuild flat you will only have service charge (as they are no longer allowed to charge a ground rent when using help to buy), but again its worth finding out the cost of this

--------------------------

He also told me that you can pay at least 10% of the equity loan as an over payment but to avoid doing this unless I have a substantial amount to pay with as each time you pay theres fees for solicitor and valuation fees etc and that if he was in my shoes he would overpay as much as possible, remortgage and then continue repaying as much as possible

kingstreet

samps1973 said:

I asked my advisors opinion on whether I'd be better off with htb or a standard mortgage. This is what he said.

This is a very tough one to call

 

As we discussed if you were to buy a Newbuild you could buy a more expensive property with cheaper monthly payments

 

You will have a further loan to pay off at some point in the future but with the £200+ saving per month, this shouldn’t be a problem.  You could overpay £200 per month on the mortgage (meaning the balance would have reduced considerably after the first 5 years and then at the point you would start paying the monthly interest instalment for the help to buy loan, we could look into raising money against your mortgage to redeem the help to buy loan.

 

That way you increase the mortgage but this will then be fully paid off by the end of the mortgage term and so you own the property outright

 

If you prefer a second hand property then we can also arrange this.  Based on the last 3 months payslips the mortgage is still likely to be £151000 so the maximum you could buy for would be £161000 which will limit your choice.

 

The other thing to bear in mind with all of this will be maintenance.  If you buy a Newbuild there should be very little you need to spend on the property as everything is brand new.  If you buy a second hand property, assuming there are installed white goods, these could be old and need replacing.  You may need to redecorate.  The boiler may be old etc.

 

Lastly and really important to consider is the service charge and ground rent.

On a second hand flat you will have to pay a monthly service charge and an annual ground rent.  You should check how much each of these is and how and when they can increase

On a Newbuild flat you will only have service charge (as they are no longer allowed to charge a ground rent when using help to buy), but again its worth finding out the cost of this

--------------------------

He also told me that you can pay at least 10% of the equity loan as an over payment but to avoid doing this unless I have a substantial amount to pay with as each time you pay theres fees for solicitor and valuation fees etc and that if he was in my shoes he would overpay as much as possible, remortgage and then continue repaying as much as possible

10% of the property value (or 50% of the equity loan if you took 20%) not 10% of the equity loan.

samps1973

@kingstreet

Yeah I also thought it was 10% the value of the property at the time as I'm sure I read this somewhere. But he said its 10% of the equity loan. Maybe he's wrong or wrote it wrong or I misunderstood 🙂

samps1973

I thought I'd update incase someone else is worried about this.

I have now completed my mortgage on a help to buy new build property.
I explained to my adviser/broker that I had £50k available to me on credit cards. I also said that if I cancel them it would take over a month for the credit reference agencies to update and show the cards are closed.
He is a very good adviser and said that certain banks and building societies are ok with the credit card credit as long as as it's not being used.
He said he was certain I'd be ok but that didn't help my nerves much. 
We had zoom meeting and done the online application together and my mortgage was approved 1.73% 5 year fixed.
The lender is Santander.
I do have a good credit rating which helps. My adviser had my last 3 months payslip and 3 months bank statements to verify my pay days and also 3 months statements of my savings account where the deposit is kept.
My adviser said that Santander didn't need any of these as they were happy.

Hope this helps someone else.

Thanks for your help

MovingForwards

@samps1973 congratulations! 

Don't get buying anything on credit until the keys are in your hands. Ideally don't buy furniture on credit and get some previously loved for now. FB market place, gumtree, BHF and other charity furniture shops, IKEA are great for freebies / bargains, just while you're finding your feet. 

Do start as you mean to go on. The first year is kind of the hardest, as the urge to do your home how you want it is strong. However, after settling in you'll have a better idea as to what layout works best for you.

What you originally thought would work may not or the colours / style are wrong and it could be a costly mistake. After several months you'll have a routine, know the best furniture layout and you'll have some savings in the bank, then it's time to consider buying some key items.

Good luck, it's definitely working out well for you!

samps1973

Thanks @MovingForwards your help over the last month or so has been priceless. 

Yeah I dont want to get in debt at all really. I had £800 saved for a survey which I've found out I dont need. and the other fees have worked out cheaper than I thought so I'm going to treat myself to a nice bed and as I said in an earlier post a good quality sofa bed for my daughter. I'll just build everything else up slowly and over time. Luckily where it's a new build it comes with a built in fridge freezer, a cooker a dish washer and a tumble dryer so a massive head start.

The thing I like about it the most is not having to worry if the landlord will extend the contract or if they want to sell up etc so more security. And where I'm working it will feel more worth it doing a job as I'm getting something out of it. And another reason for wanting to buy is not worrying where I'll live when I'm older. And of course so my daughter can sleep in a separate room.

I cant believe I've done all this in just over a month. I think I'll need that long to recover from it all 😴

Thanks everyone for your help 👍

MovingForwards

@samps1973 depending on space in your current rental and what was supplied by your LL, it's worth keeping an eye out for smaller items eg lamps, kitchen equipment, rugs etc and pick those up while the conveyancing is being done.

With sofa beds, read as many reviews as you can. They can be awkward to get right. 

If the lounge is a reasonable size, look at getting a folding screen or two and put that in place when your daughter is having her sleepover. Provides the illusion of a bedroom and means you can still access the kitchen if DD is having a lie in.

The novelty of being a homeowner hasn't worn off, I still walk room to room knowing it's mine and retirement will be secure.