total newbie - needto educate myself

solventblackbird

Hi everyone

I've been lurking here for quite a while and have found this site to be really useful - some of you are already familiar to me so I thought I'd dive in with a couple of questions and a short introduction.

OH and I both graduated from Uni two years ago with overdrafts and credit card debts etc - both worked full time and lived on nothing for eighteen months in order to pay it all off. Currently the only debts we owe are to the student loans company. As I am not working (we have a baby) our income at the moment is very imited but we are saving what we can in order to get the deposit needed to buy a house - we're aware that in our current position this may take a long time, but are determined to keep the savings going and stay out of debt until it is possible.

Having read many of the posts here I am shocked at how little I know about financial matters - we are both young (early twenties - been married since we were 19) and feel very out of our depth with the terminology etc. So, some questions.

1. when we do apply for a mortgage will the banks take off the amount we owe to the student loans company from the amount they are willing to lend to us? Would it be better to put our spare money into paying off these loans early rather than into our ISAs? The loans are very cheap - around 2.3% (off the top of my head) although between us we owe about 25K and obviously this, if taken off a mortgage loan, would significantly decrease our options. At the moment my husband is paying off his very gradually but I am not because I am not earning.

2. is there a idiot's-guide website to mortages and house financing I can look at? We're not in a position at the moment to be researching the products of different banks but we would like to educate ourselves on the terms used as most of the things we read, we don't understand.

3. I currently have two credit cards - both of which are paid of and saved for emergencies but neither of which I use... would it be better to get rid of the credit cards to improve my credit rating for the future, or, as I have read, use one of them regularly but pay off the balance in full each month?

4. Are the things I keep hearing about first-time buyers ever likley to change? Is a house for myself and my family that we own and not chucking money down the drain each month just a pipe dream for us? I realise even in the best of circumstances it's going to take us a while to get a deposit together but most of the houses where I live, even the very modest terraced ones seem completley out of our reach (our rent is 380 a month, we aren't in a position to pay much more, although my husband is to be promoted and so the budget will be a bit more generous when it comes to shopping for a mortage.

Hopefully,

SB

Doozergirl

Hi SB,

I'll try to answer some of your questions!

1. When you apply for a mortgage, you must declare any outstanding loans and whether you have any credit cards and how much you owe on them. However, they do not 'knock off' any money that you owe so paying your loans off will not affect your ability to get a mortgage. Whether you save more by paying off your loans than paying into an ISA is a question probably better suited to another board on here (not sure which one!)

2. https://www.themovechannel.com has some 'how to' guides and gives some explanations of the processes involved in buying,selling and applying for mortgages. Others may have better suggestions. When it comes to the time though, speak to a good independant mortgage advisor and go through your different options again and again if necesssary until you understand - they will be able to advise you on the best type of mortgage to suit your plans and circumstances though.

3. Getting rid of credit cards will not improve your credit card rating. There's loads of stuff on this website on credit cards, but the general consensus is that using it and paying it off is good.

4. Hang on to the dream! There are ways of getting on to the property ladder, even if it's buying a house in a cheaper area and either living in it or renting it out for a decent profit to help you keep saving or simply buying a shed of a house and turning it into your dream home over time. Keep saving and watching the market. Reading your local property paper each week will help you build up a good idea of what houses sell for and help you to spot a bargain (they do exist!). There are many more cynical people here who no doubt will throw in their opinion though!

Good luck! I hope I've helped a little!

solventblackbird

Thanks for that - I think it's better to save than to pay the student loads off more quickly, because the interest I earn on the savings is more than what I pay on the student loan - that makes sense, right?

It seems that the general feeling at the moment is that the housing market will crash and it's better to wait anyway - sounds good to me as I have absolutley no idea how the average young family saves up enough money for a deposit and fees anyway - not complaining here as the fact that my daughter is healthy, my husband is earning and we are not in major debt makes me better off than most, but it's a dream of ours to have our own place that seems impossible at the moment...

thanks again - I'm off to look at the site you recommended now. Why they didn't teach me this at school I'll never know...

Doozergirl

I think the general feeling amongst buyers (first timers esp.) is that the housing market will crash. Sellers are a little more optimistic!

Good point about why they don't teach this stuff at school. Most of us have to go through it - why we are told nothing I don't know!