First time buyer, higher earner and large deposit £180k

Bolt1234

Looking into this for my 28 year old son who is looking to buy with his long term partner early next year.

Bulett Pointed for ease!

They are NOT married.  Deposit will be approx £180k on potentially a £750-£800k house in the Home Counties.  With Stamp Duty and such like to pay everytime they move they are looking for a 10 years plus house.  No flats! 

They are in stable jobs (one is senior NHS Nurse) and need to be based in a certain area (Bucks) and house prices arent cheap around there.   They are currently renting and paying £2000 for a small 2 bed in said area.  Very affordable  rental for them  They really like the area and want to avoid the Slough, Burnham area.   

Combined Salary is £130k.

I am mortgage free and only had repayment mortgages.  Husband had a endownment mortgage many many years ago just when house prices dropped and he was stuck in a 1 bed!  All OK now!

What about considering a Interest Only mortgage?  They will be able to pay off chunks of the mortgage over the coming years due an inheritance from my husband who has a life limiting illness.

Any advice from anyone please  They want to get this right!  

Many thanks



   

DullGreyGuy

Bolt1234 said:

Looking into this for my 28 year old son who is looking to buy with his long term partner early next year.

Bulett Pointed for ease!

They are NOT married.  Deposit will be approx £180k on potentially a £750-£800k house in the Home Counties.  With Stamp Duty and such like to pay everytime they move they are looking for a 10 years plus house.  No flats! 

They are in stable jobs (one is senior NHS Nurse) and need to be based in a certain area (Bucks) and house prices arent cheap around there.   They are currently renting and paying £2000 for a small 2 bed in said area.  Very affordable  rental for them  They really like the area and want to avoid the Slough, Burnham area.   

Combined Salary is £130k.

I am mortgage free and only had repayment mortgages.  Husband had a endownment mortgage many many years ago just when house prices dropped and he was stuck in a 1 bed!  All OK now!

What about considering a Interest Only mortgage?  They will be able to pay off chunks of the mortgage over the coming years due an inheritance from my husband who has a life limiting illness.

Any advice from anyone please  They want to get this right!  

£620k mortgage is very big for a couple only earning £130k 

For interest only mortgages you must have a credible plan to pay off the whole debt within the timescales of the mortgage, it doesnt sound like the inheritance will do that? If it will then why wait until the passing? A plan to sell the house isnt an acceptable solution to most.

Most lenders will only give 75% LTV so their deposit wouldnt be big enough for many lenders for the top of their budget. 

Hoenir

What's the source of the deposit? 

Bolt1234

Source of deposit is me.  I received significant inheirtance from parent and am planning to transfer the deposit within 2 years of parents death.  I dont need the money.  Our house is worth in excess of £1.4 m should I ever need care.  

Realistically over the next 5 years they will be able to pay off approx £200k of mortgage due to their father passing.  Son in particular is already earning nearly £80k and that is very likely to continue upwards. He is also planning to review critical illness insurance, life insurance for both of them to cover the mortgage.  His partner has a very portable skill both in the UK and worldwide should they ever decide to move (dont think they will but you never know!)

silvercar

My son and wife did similar on similar figures last year. Got their mortgage through a broker, part interest only part repayment. 

Gifted deposit, though you could do a deed of variation to give the inheritance directly to them. Interest only keeps the monthly repayments lower and they can pay of chunks if they want to.

Bolt1234

Silver - thank you.  I know its a stretch but son in particular has really found his stride and I am no worries about him and his career.  Yes - will do a Deed of Variation within 2 years of my parents death so it goes directly through to them avoiding any inheirtance tax should I pass within next 7 years (I have no intention of doing so and am still working).  State pension for me kicks in next year too.  Might well defer it if I am still working 

Bolt1234

Will ring fence his deposit too

amnblog

The level of borrowing v deposit does not lend itself easily to interest only borrowing. Nor does interest only appear to be of value to them if the objective is later paying off lump sums.

They may want to consider an offset mortgage which they should talk to a Broker about.

Their budget should get them some sensible options in Bourne End or Flackwell Heath area.  If they need the train in to town they may have to look toward Maidenhead/Taplow.

ACG

I wrote a reply yesterday but it does not seem to have come up.

In response to DullGreyGuys comment - the affordability seems fine at the lower end, 4.5x income is £585k, plus the deposit gets you to £765k, so the lower end of the budget seems possible. 

I agree with amn though the interest only part will make things more difficult. There will be extra hurdles to jump through and it will likely also mean higher rates (although maybe not depending on the finer details). You might find it better to just do a longer term (35 or even 40 years with some lenders). 

Speak to a broker, they can get all of the information and put some options to you/your son. Its not our job to help get you the cheapest product, its our job (in part) to help you navigate the options and find you the most suitable product. 

DullGreyGuy

Bolt1234 said:

He is also planning to review critical illness insurance, life insurance for both of them to cover the mortgage. His partner has a very portable skill both in the UK and worldwide should they ever decide to move (dont think they will but you never know!)

Critical illness is ok, but only covers you for the conditions listed. There are plenty of other things that can take you out of being able to work that CI won't respond on. 

Permanent Health Insurance for him may be a more sensible consideration, or additional, given it covers income almost irrespective of the illness/injury. They need to consider their sick pay under the NHS but also what happens if they cease working for the NHS given you talk about potential moves. 

ACG said:

In response to DullGreyGuys comment - the affordability seems fine at the lower end, 4.5x income is £585k, plus the deposit gets you to £765k, so the lower end of the budget seems possible. 

You have vastly more experience than I do in this field but my experience is that when people have a budget range they tend to end up much nearer the top end of their budget, or over, than the bottom end. 

ACG

DullGreyGuy said:

ACG said:

In response to DullGreyGuys comment - the affordability seems fine at the lower end, 4.5x income is £585k, plus the deposit gets you to £765k, so the lower end of the budget seems possible. 

You have vastly more experience than I do in this field but my experience is that when people have a budget range they tend to end up much nearer the top end of their budget, or over, than the bottom end. 

In this case I doubt that will be an option though.