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    • MortgageSeeker2018
    • By MortgageSeeker2018 8th Jul 18, 6:03 PM
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    MortgageSeeker2018
    Is a mortgage a good idea or should I forget it
    • #1
    • 8th Jul 18, 6:03 PM
    Is a mortgage a good idea or should I forget it 8th Jul 18 at 6:03 PM
    Hello,

    I have 20k in savings, and my partner and I earn 35k combined. We are looking at buying a property for approximately 175-180k. For this price, we could only afford a very small 2 bed terrace at best. We have been to speak to an independent broker, who showed us a few possible mortgages. We looked mostly at 5yr fixes, which would mean our repayments would be something around 650pm for the first 5 years, then around 811 thereafter. The lenders we looked at would offer around 4.5x our salaries, meaning 4.5 x 35000 = 157500 (let's say 160,000 for arguments' sake. So on a property of value 180,000 we could put down 18k, meaning an LTV of 90%. I have considered the bulding, contents and life insurance, which I estimate to add another 10pm onto the repayments. With the solicitors' fees, the broker fee (350) and the survey, we could JUST afford to do it, but with nothing left at all.

    I have been thinking about what is best to do for a while and it's not easy to find the answer, because I don't want to have a mortgage around my neck which in 5 years strangles my partner and I.

    The alternative would be to use my LISA (forget to mention I have this, sorry!) as a pension pot and just keep renting for life, but with spare cash in my back pocket for use at any time.

    Can anyone set me on the right road with this?

    i feel that some people are so desperate to escape renting that they shoot themselves in the foot by taking on a mortgage that strangles their finances.
Page 1
    • ACG
    • By ACG 8th Jul 18, 6:34 PM
    • 17,502 Posts
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    ACG
    • #2
    • 8th Jul 18, 6:34 PM
    • #2
    • 8th Jul 18, 6:34 PM
    Despite my signature, I try to answer these types of threads in a non biased way.

    From a personal perspective, I bought my first house 5 years ago. It was a doer upper. I spent 10k doing it up and made 60k profit give or take. Part of that profit was because of house price increases, part of it was because of the work I did to it.

    It gave me 60k plus my original deposit to put down on the "family home" - somewhere we will be forever.

    When my mortgage is cleared, I will own the house. The mortgage currently costs around half what it would cost me to rent a similar house in the same area.

    Providing I make my Mortgage payments, I will not be evicted. I can decorate until my hearts content without asking permission, if something goes wrong, I choose who comes down to fix and when. Being a bit of a control freak, I HATE having to rely on other people.

    So by owning, I have benefit from house price rises, cheaper Mortgage than rental payments and freedom to do what I want in the property.

    You say the Mortgage will increase after 5 years, that is pretty likely but it does not necessarily have to go to 800 a month, you can renegotiate the deal with the same lender or a new lender based on the (hopefully) lower loan to value.

    For me, owning a home is an absolute no brainer. Even if my current home loses 10% of its value, in fact even 20% of its value, I am still quids in.

    Different people, different areas may not be as fortunate as I have been. But it is not just the financial benefits, it is the security it gives me that I appreciate the most.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Nebulous2
    • By Nebulous2 8th Jul 18, 6:39 PM
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    Nebulous2
    • #3
    • 8th Jul 18, 6:39 PM
    • #3
    • 8th Jul 18, 6:39 PM
    Surely there is a middle route?



    Try to improve your earnings, add to your deposit and buy when you are in a better position to afford it?



    You cannot say what your mortgage rate will be in 5 years. It is likely that you could fix again after the 5 years finishes. Equally you can't tell what your rent will be in 5 years, rents tend to increase as well.



    It sounds as though you have worried yourself about making such a big commitment, which is understandable. There is no need to give up altogether though - you have plenty of time.
    • xxjennyxx
    • By xxjennyxx 8th Jul 18, 6:45 PM
    • 63 Posts
    • 2,607 Thanks
    xxjennyxx
    • #4
    • 8th Jul 18, 6:45 PM
    • #4
    • 8th Jul 18, 6:45 PM
    I'd run some quotes for the buildings, contents and life insurance so you know for sure what you would be paying, I doubt you would get all three for anywhere near 10pm unfortunately
    2013 Wins: 50 Amazon, 100 Littlewoods, Deskfest kit & 150 vouchers, Case of wine, Stella(6), 500 Dune voucher, FCUK Handbag, Birthday party for 20, 32inch TV
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    • MortgageSeeker2018
    • By MortgageSeeker2018 8th Jul 18, 6:51 PM
    • 20 Posts
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    MortgageSeeker2018
    • #5
    • 8th Jul 18, 6:51 PM
    • #5
    • 8th Jul 18, 6:51 PM
    Well I am 34 and my partner is 36, so we feel that getting onto the property ladder sooner rather than later would be the best idea, if we decide to go down the mortgage route.

    I have experience with building work, having completed a 3 year joinery apprenticeship, albeit 13 years ago, but would likely be able to complete many improvements myself, as ACG did.

    When I've looked at mortgage comparison tables, the cheapest offers seem to be around 650pm,and then in smaller font it states rising to 811 after the 5yr fix. That said, as mentioned above, we could potentially sell at 5 years or remortgage.

    Thanks for for the ideas and advice, any more of the same would be very appreciated. I need as much information as possible...
    • MortgageSeeker2018
    • By MortgageSeeker2018 8th Jul 18, 6:56 PM
    • 20 Posts
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    MortgageSeeker2018
    • #6
    • 8th Jul 18, 6:56 PM
    • #6
    • 8th Jul 18, 6:56 PM
    The earning more income thing is something I've looked into for what seems an age, with no success. I still have a bog standard job and have never had any promotion wherever I've worked. Just completed a Psychology degree with the OU last year, got a 2:1, still unable to get a higher paying job. Also not had a pay rise at work in the 2.5 years I've worked there, not for want of asking! The response was a flat no...
    • ACG
    • By ACG 8th Jul 18, 7:11 PM
    • 17,502 Posts
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    ACG
    • #7
    • 8th Jul 18, 7:11 PM
    • #7
    • 8th Jul 18, 7:11 PM
    The initial 5 year fixed will be on a rate of maybe 1.5-2% I am guessing.
    After that, it will go to the SVR rate which with most lenders is around 4%.

    At the end of the deal, assuming the base rate has not jumped 2% in that period (which could happen) then 800 will not be what is out there. If the base rate has jumped by 2% then chances are wages will have gone up also.

    Could you extend the term? You are a similar age to me, I put my term to 35 years knowing I would make overpayments. Although I did that as I am self employed and like most self employed people, I have good months where I can overpay and bad months (typically the christmas lull) where I want my repayments as low as possible.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Thrugelmir
    • By Thrugelmir 8th Jul 18, 7:21 PM
    • 59,808 Posts
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    Thrugelmir
    • #8
    • 8th Jul 18, 7:21 PM
    • #8
    • 8th Jul 18, 7:21 PM
    The alternative would be to use my LISA (forget to mention I have this, sorry!) as a pension pot and just keep renting for life, but with spare cash in my back pocket for use at any time.
    Originally posted by MortgageSeeker2018
    Once the property is paid for. Then the payback is no rent. Security for the rest of your lives. If both of you have LISA's then diligent saving would provide a significant boost towards the funding for the purchase.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • MortgageSeeker2018
    • By MortgageSeeker2018 9th Jul 18, 7:28 AM
    • 20 Posts
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    MortgageSeeker2018
    • #9
    • 9th Jul 18, 7:28 AM
    • #9
    • 9th Jul 18, 7:28 AM
    How much should I expect to pay for the insurances I'll need to take out, per month?
    • getmore4less
    • By getmore4less 9th Jul 18, 8:13 AM
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    getmore4less
    Where are you living now what is that costing.

    with the buy be a better or worse place than you currently rent?
    • MortgageSeeker2018
    • By MortgageSeeker2018 9th Jul 18, 9:12 AM
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    MortgageSeeker2018
    We pay 550pm currently in a 1 bed flat. It is quite a spacious flat and buying a terrace house would mean much smaller rooms, not necessarily a bad thing from a heating perspective...
    • getmore4less
    • By getmore4less 9th Jul 18, 10:27 AM
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    getmore4less
    How much would a spacious 1 bed flat similar to what you are living in cost?

    you might want to look at what you could get with HTB as well.

    What rate/term was the broker using for your examples of 650/810

    160k paying 650pm/810pm over 25 and 30 years the rates and interest pm(at the start).
    1.7%/3.6% 25 years 230pm
    2.7%/4.5% 30 years 360pm

    Renting the money to buy somewhere is cheaper than your 550 to rent somewhere.

    remember the capital component of the mortgage is more like saving than rent so even though the total is more than the rent you are saving(creating equity) reducing the interest(rent) component.
    • ACG
    • By ACG 9th Jul 18, 10:28 AM
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    ACG
    Insurance can be as little as 15 a month for buildings insurance (possible even less). That is the only requirement.

    You can then take out any of the following:
    Contents insurance,
    Life insurance,
    Critical illness,
    PHI/Income Protection
    Unemplyment

    Of the above, I have Buildings and contents insurance and PHI. My PHI insurance pays out enough to cover my bills. I could have taken more cover out if I wanted to as PHI is based on your income, but I am happy with the amount of cover I have.

    I should really do life insurance but I never get round to it. I also have a cracking pension from when I worked for a bank that will pay out something to my Mrs, although it is not ideal.

    The cost of all of those will vary, there is a saying that some cover is better than none. So if you only want to spend say 30 a month, then you might be able to get say 500 a month income protection insurance say 50k life insurance. Not ideal, but better than nothing if you ever find yourself in a position to need to claim. Not many people can afford to fully insure themselves.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • MortgageSeeker2018
    • By MortgageSeeker2018 9th Jul 18, 11:05 AM
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    MortgageSeeker2018
    Getmore4less - that's a brilliant way to think about a mortgage, thank you! I think a mortgage is the way forward. We have a viewing this evening on a 3 bed terrace at 181000, will see how that goes...

    By the way, is a survey essential?

    How much reduction on the asking price should I attempt when we find a good place?

    Thanks ACG, 30 a month doesn't seem too bad.
    • zx81
    • By zx81 9th Jul 18, 11:11 AM
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    zx81
    How much reduction on the asking price should I attempt when we find a good place?
    Originally posted by MortgageSeeker2018
    That depends on how overpriced you think it is and on the seller's circumstances.
    • MortgageSeeker2018
    • By MortgageSeeker2018 9th Jul 18, 11:29 AM
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    MortgageSeeker2018
    It was recently reduced, so if it seems OK then I may put in an offer for slightly less than asking price, depending on condition etc. as you say. If it has been reduced, it could be that the seller is eager to sell and may accept a lower offer?

    There is someone else going to see it this afternoon as well, according to the agent.
    • ACG
    • By ACG 9th Jul 18, 12:01 PM
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    ACG
    Im not saying you can get everything for 30, it was just an example figure. But if that is your budget, that is your budget and it is down to the broker to work to that.

    Personally, I would rather the customer take a 30 a month policy they can afford and will keep than a 100 policy that will get cancelled a month later. Also some brokers will ask you to sign a document that says if you cancel the policy within 2-4 years, you will have to pay them any commission which they have to re-pay to the insurer. So always best to be open and honest with the broker and check what you are signing.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • getmore4less
    • By getmore4less 9th Jul 18, 12:09 PM
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    getmore4less
    ON right move do the "more like this test".

    add in those marked as sold and then do paper comparisons to see what looks like good value against the once people are offering on.

    Think about what you are looking for from a property.
    what things are good/bad about where you live.

    If brave move over the renting/buying/selling board and post a link to some of the options in the area you are buying to get some feedback.
    • MortgageSeeker2018
    • By MortgageSeeker2018 9th Jul 18, 4:36 PM
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    MortgageSeeker2018
    In terms of the timeline to moving in, is this the right order: view a property, make an offer, offer accepted, go to broker, get mortgage, go to solicitor, get survey, exchange contracts?
    • ACG
    • By ACG 9th Jul 18, 6:38 PM
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    • 9,314 Thanks
    ACG
    Get your broker on board and solicitors first.
    Neither need to do any work until you have found a property and had yoru offer accepted, but I would always rather speak to a customer and have a factfind in place so it is all a little more relaxed rather than have to do a factfind after your offer has been accepted and then do the research.

    Estate Agents are quite pushy, so any delays and they are a nightmare.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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