Starting out

Cat695

Well hello to all and hope you can take the time out to help me

I'm hoping to buy a house this year!! as i reckon this could be the last time interest rates stay within my price range

I'm a first time buyer (at 35) single, in a pretty well paid job (i'm in the Army on 36K a year pay). I can get my hands on £50,000 (a mixture of borrowing off my dad and a interest free loan from the army which is paid off till i get out the army in 5 years) then i will be looking to borrow no more than £60,000 on buying a house worth between £80-£90k (i'm from the east midlands where houses are much cheaper!!!)

my credit history is all green (according to credit expert) apart from having to get myself on the electroll roll as this can cause me hassle in obtaining credit (apparently its one of the biggest problems for soldiers as we move alot) form has already been sent in the post back to the local council.

i do have a loan that i pay just over 300 pound for a month over the next 5 years plus CSA which is 400 a month , other than that the rest is phone, car insurance etc that i can easily get rid if needs be! I HAVE NO AND have NEVER HAD A CREDIT CARD!

the way i see it is as follows

house cost 90000 (max)

borrow 60000

deposit 30000

legal fees etc 10000

then i will have 10 or so grand left over for jobs etc pay off old loan

From what i've been reading etc i will only go for fixed rate for 5 years to ride out any problems in the future!!

I am due to finish in the army in 5 years(day before my 40th birthday) with a golden handshake of around 45000+ and an immediate pension of around 700 pound a month. depending in the market i would either sell and upgrade or stay where i am but am not really bothered

What i'm asking is can anyone forsee a problem with my calculations?

offer any advice that i haven't seen or read on

and most of all where do i start with going for a mortgage without having actually having a house to buy yet?

Many thanks
Paul

clutton_2

"" legal fees etc 10000" - did you really mean £10k ??

re getting a mortgage - you need to consult a "whole market" mortgage broker - or 2 or 3 - and talk to them about your salary and your plans - they will be able to advise on what size mortgage/deposit you can get/will need.

these days lenders are getting tighter and tighter in their criteria as to "where did the deposit come from" - and are not keen on borrowed deposits.

what do you plan to do with the house while you are overseas/in barracks where-ever ? r u planning to rent it out ?

if the answer is yes - then you will need a Buy To Let mortgage. if you are going to do that - i suggest you read https://www.singingpig.co.uk for a vast amount of excellent advice re buying investment property and https://www.landlordzone.co.uk on being a landlord

bw

Cat695

Clutton thank you for the advice...i'll just clarify those things

yes i meant 10k for legal fees etc

ref the deposit...8.5k will come from the army as it is well known by mortgage lenders that soldiers are given this interest free loan to help buy a new house due to us being away etc (don't get me started that this figure has not been updated to rise with the cost of houses)

the other 40k will be a one off "gift" from my parents NOT a loan or however there is a way to get around the tax man getting any (i know before you start on legalities but thats for another day)

well seeing as i'm coming to the end of my career i'll actually be looking to live in it when i'm not at work (parents will look after it when i'm away) though i may rent in the future if needs be (tho may rent a room out to a mate)

without going on to much....because i live in camp and will own a house the army will pay me a travel fee (milage allowance) to "maintain" the property and seeing as i live in salisbury but will buy in east midlands i will be looking at around an extra 300 pound a month being paid to me by the army.

This is mainly to set me up ready to come out of the army after 22 years and to be honest i would like as little hassle as possible (a stress free life after the army hehe) so renting out would only be a last resort!!

guppy

Cat695 wrote: »

I'm hoping to buy a house this year!! as i reckon this could be the last time interest rates stay within my price range

I still say wait. Its not like you will get a fixed rate mortgage that lasts for 25 years.

You're in a reasonable position, and with prices falling, you will have a much bigger deposit in the near future, making you even more desirable to mortgage companies.

Once the dust has settled they will surely start lending again, it is after all, their business.

Cat695

guppy my only concern is that interest rates will double and that will force me out of the market only to be living with my parents at bloody 40!!

clutton_2

my question was if you buy now - leaving it empty till you are 40 does not seem like a very good idea - not to mention the difficulties in getting insurance for a permanently empty property. you would be best advised to put it in the hands of a professional agent to let it out so that good tenants pay your mortgage until you leave the army

£10k for fees is waaaaay too much mate !

a solicitor will charge you round about £1k to buy a house (including all the disbursments, searches etc) in this price range;

you may get a mortgage arrangement fee of about £1500 - but you can add that onto your loan;

you may have to pay a broker, (some charge some dont) - £1k tops

Survey fee to lender - say £500 tops

nowhere near £10k

whenever you decide to buy - someone somewhere will tell you its the wrong time

drbeat

If you have a deposit of such then I'd use some of it to get shot of that loan! Your losing money with regards to the interest and the mortgage provider will take that loan into account when deciding what/if to lend to you!

With regards to interest rates, well I wouldn't use that as reason to saddle yourself with an overpriced house. Interest rates went to 15% in the early 90s and that was mainly down to the ERM debacle.

Also - in my opinion - interest rates have been too low for too long and have fuelled a debt ridden non-saving culture. That is just my opinion so please ignore if you don't agree.

Gather you deposit together
Pay off the loan
Bank what is left, earn some interest - which will be good if rates did go into double digits.
Sit and wait for the storm to pass.

You're in an excellent position!

Cat695

Drbeat i fully understand where your coming from and deep down i'm kinda thinking is it worth waiting and hoping houses crash to what they did all those years ago.....maybe i could buy a house out right with 50k next year!!!

i think i need to go chat to an finacial advisor again!

beingjdc

Cat695 wrote: »

guppy my only concern is that interest rates will double and that will force me out of the market only to be living with my parents at bloody 40!!

But if you get a 2-year fixed rate, and then they double, what happens at the end of the 2 years?

Also, if they do double, what will that do to house prices? They'll have to collapse as nobody else could afford their repayments.

£50,000 at 12% interest is easier to pay off than £100,000 at 6%.

guppy

Cat695 wrote: »

guppy my only concern is that interest rates will double and that will force me out of the market only to be living with my parents at bloody 40!!

If interest rates double you might be able to buy a flat for cash

Incisor

Cat695 wrote: »

guppy my only concern is that interest rates will double and that will force me out of the market only to be living with my parents at bloody 40!!

If they double, it will happen when you are off a fixed rate deal. There is very little you can do about it. Only worry about the need to buy if house price inflation starts up again, which seems unlikely for quite a while to come

Get the gift from your parents [or some of it] sooner rather than later and shove it in some sort of account. from a taxation point of view, there is a limit to the amount and the frequency which they can give you the money. Get them to shove the rest of the money into another account for you. Meanwhile, what you would have paid as a mortgage you can pay into your own account. It is far better to do this than borrow and pay interest if you don't need the house, unless house price inflation is going to devalue your savings.