100%+5 times salary=crazy?

paddycr

I know, I know...even entertaining the thought of a 100% mortgage as well as 5 times salary is absolutely mad and I can guess the reaction I will get to this.

Although I earn approx £30k per year, the average house price where I live as well as surrounding areas are around £174,000...way out of my price range and always will be.

I currently pay £600 pcm rent on my flat now..however, I have seen a house valued at 5 times my salary exactly..a bargain!Going on most repayment calculators, monthly payments would be around £800 pm..I would have a tight leash around my neck with a certain banks name on it for a few years.

However, considering for an extra £200 pm I would have my own place instead of paying dead money for renting, are these types of mortgages really that bad.

Please help, I know nothing about mortgages (obviously!) and am considering msking an offer.

nadnad

Would you think of asking someone to go in with you on the purchase it would make it a lot easier? Have you gone to see a mortgage advisor/bank or checked on the internet to see if you will get accepted for a mortgage? Have you thought about stamp duty, solicitors fees etc? Don't forget about rates/ council tax and the fact that this will be your house so all repairs etc stop with you! Its a big thing to take on - now me myself am not 100% against this sort of thing but I will bet that every other reply you get will say NO NO NO!! Also you could take in a lodger to help with the mortgage and bills etc. But what I would do first is make a list of all your outgoings, then really think hard about the big leap to buying your first home - me and my OH bought our house 2 years ago and we kinda jumped in head first mortgage rates hve risen ever since (until this month) and there just seems to be one thing after the other - bills, rates, things broken, need new front door, new back door, stuff for garden etc etc etc, the list goes on so its not just the extra £200 on the mortgage (which could rise) its all the other crap as well!!

homersimpson_3

it's not only the mortgage you need to consider- you have to ensure you can pay all utility bills and household repairs let anone legal and costs with moving. all these costs mount up. i understand you want a house but are there any flats you could buy (often cheaper)? another option to consider. if you could find a bank/building society to lend you the money you have to prove you can afford to meet payments - devise a list of incomings, outgoings and savings and take this and usual documentation with you (bills, p60, bank statements etc).

meanmachine_2

Hold on a second, I make your monthly repayments over 900 quid a month.

If you're borrowing 5 times your salary you're unlikely to get the cheapest deal going, so you're likely looking at around 5.5% int.

Do you have a partner?

Normally people buy average properties when they're wanting to settle down. Otherwise you buy a one/two bed flat.

An average property is a 3 bed semi, I'd say.

But I think you've vastly underestimated the costs of buying a home. Legal fees, stamp duty (£1500), repair costs, etc

That's around £3000, plus you have to furnish the place.

At the end of the day though, it's up to you. Just do your sums

bunking_off

Agree with the others; 'fraid I think you'd be insane to take on that level of debt...accident waiting to happen.

Always confuses me when pundits refer to average house prices and FTBers in the same breath - unless they've come into some money, no FTBer should be looking to buy an "average" house. As MM says, a flat or starter home is the first rung on the ladder.

meanmachine_2

Actually, to be consistent, I think someone earning an average wage should be able to afford an average home.

It's assumed that a FTBer isn't earning average wage, unlike the OP. That's why the market's ground to a halt. If people on above average wages can't even afford an average property, who's going to buy the above average properties?

My advice to the OP is to wait for a correction in the market. Meantime save save save.

It's suicide to borrow so much when a) house prices are flat or falling and b) there isn't high inflation to diminsh your debt.

Spendless

bunking_off wrote:

Agree with the others; 'fraid I think you'd be insane to take on that level of debt...accident waiting to happen.

Always confuses me when pundits refer to average house prices and FTBers in the same breath - unless they've come into some money, no FTBer should be looking to buy an "average" house. As MM says, a flat or starter home is the first rung on the ladder.

TBH there were times when I wished that I'd had a mortgage for my maximum when I bought my 1st place, cos I could have bought an 'average' property a large 2 bed MTH or small 3 bed semi. Instead I bought a small 2bed MTH well within reach and then within a year it went into neg equity. Whilst it didn't initially bother me it became a problem when I met hubby and had eldest, the place was too small, and we couldn't sell as people were 'leapfrogging' this sort of property to buy bigger places. If I'd bought bigger in 1st place we could have stopped. Everything worked out for me in the end though cos we bought our current bigger place cheap due to needing work on it and rented my old place out -a year before the prices went sky high and when tenants moved out sold mine at a profit.

It wouldn't have cost me 5x salary to buy a bigger place though.

Anyway question for you all- considering many people seem to think that prices will fall, if you are buying wouldn't it be better to buy an 'average place' rather than a bottom of rung place, due to the potential leapfrog situation I've described above.

Ian_W

Spendless wrote: Anyway question for you all- considering many people seem to think that prices will fall, if you are buying wouldn't it be better to buy an 'average place' rather than a bottom of rung place, due to the potential leapfrog situation I've described above.

For all sorts of reasons buying average or even above average would be best - if it's affordable.
I agree with all other posters [unusually inc MM ] that 5x salary is too much, add in the other costs mentioned in purchasing & running property, the fact that it's 100% mortgage, uncertainty about interest rates and it adds up to a huge risk in this particular case. Then add in the fact that there is concern about prices falling in the short term and you go even beyond that.

Many of the doomsters want to prices to fall so that property is affordable to them - I've no problem with them wanting that - so they can buy. Why do they do they want to buy? Because even they believe that in the long term property prices rise, otherwise there is no logic [many other reasons but not logic] in buying - ever!! So you're right that you should get on the ladder at the highest point - so long as the short term risk doesn't outweigh the potential longer term reward.

With regard to MM's point about someone on an average salary as a FTB being unable to afford the average house - I'm afraid it was, unless my addled mind is playing tricks again, ever thus. But you answered yourself in your 1st post. When I first bought in the 70's as a single person I was on about the average wage but could only afford a flat due to very restrictive lending criteria and high interest rates* - the opposite of now. We had a custom in those days called "marriage" - if you don't remember it your parents might - and when we had 2 reasonably decent wages we then could afford the "average" house.

So some say "it's never a good time to buy" - I say "it's almost always a good time to buy" provided you don't overstretch yourself in the short term.

*BTW came across some papers from 11 yrs ago when we had one of the 1st Fixed mortgages introduced - 9.9% for 3 yrs from Bristol & West - think the SVR's then were around 12%!! Now that IS a frightener on Interest Rates!!

meanmachine_2

Ian_W wrote:

*BTW came across some papers from 11 yrs ago when we had one of the 1st Fixed mortgages introduced - 9.9% for 3 yrs from Bristol & West - think the SVR's then were around 12%!! Now that IS a frightener on Interest Rates!!

SOme fair points.

But did you also come across some old property instructions detailing how you could buy a 3 bed semi for 30K?!!!

My problem is that my habits are at odds with the present thinking. I save before I buy and have never had debts. I'm cash rich, at a time when, in property terms, your cash has never been so worthless.

I wish I could go back 11 years, as I'd be able to put down a much larger deposit, thereby off-setting the higher interest rates.

Also, isn't it better to buy when rates are high, and therefore likely to fall, rather than the other way round? The OPs borrowing costs, from this point on, can only get more expensive (if you're of the opinion that int rates are going back up soon).

Oh, and if for any reasons, int rates do have to go back to 12%, what do you think will happen to house prices then? It's unlikely to happen, but then life is full of unknowns.

Spendless

Ian_W wrote:

Many of the doomsters want to prices to fall so that property is affordable to them - I've no problem with them wanting that - so they can buy. Why do they do they want to buy? Because even they believe that in the long term property prices rise, otherwise there is no logic [many other reasons but not logic] in buying - ever!! So you're right that you should get on the ladder at the highest point - so long as the short term risk doesn't outweigh the potential longer term reward.

With regard to MM's point about someone on an average salary as a FTB being unable to afford the average house - I'm afraid it was, unless my addled mind is playing tricks again, ever thus. But you answered yourself in your 1st post. When I first bought in the 70's as a single person I was on about the average wage but could only afford a flat due to very restrictive lending criteria and high interest rates* - the opposite of now. We had a custom in those days called "marriage" - if you don't remember it your parents might - and when we had 2 reasonably decent wages we then could afford the "average" house.

So some say "it's never a good time to buy" - I say "it's almost always a good time to buy" provided you don't overstretch yourself in the short term.

*BTW came across some papers from 11 yrs ago when we had one of the 1st Fixed mortgages introduced - 9.9% for 3 yrs from Bristol & West - think the SVR's then were around 12%!! Now that IS a frightener on Interest Rates!!

Never thought about that re the doomsters! The reason why I've always wanted to buy is cos in approx 22 years time I want to be living here with no mortgage and not paying rent till my dying day either. If I'd had a partner to buy with I'd have certainly bought bigger, but as it was I was late 20s still with parents and a couple of failed relationships behind me, so I decided to buy on my own rather than wait for Mr right to come along. Was it really 12% back then. I bought end of 94 but had a discounted rate of 2% off for 1st 3 years-I wonder if I've got any old paperwork that will tell me.

Incidentally Mr Spendless bought a 2 bedroomed flat in different county at same time as me, when we married and couldn't sell mine we sold his at a profit-not much I admit but a few £1000 more than he paid, so just cos one area and type of house went down in price doesn't ness mean they all will.

meanmachine_2

How odd that Ian W knows what all doomsters think all the time.

I agree with Spendless, I would like to buy at some point because, over the longer term, it works out cheaper than renting, provided you buy at the trough of a market, not the peak.

And I'll have a roof over my head when I retire.

After that I couldn't give a monkeys whether my house goes up down or sideways and it baffles me why homeowners on here should care either.