Mortgages - how much to borrow

fendi said:
is it fair to expect house prices to fall if the rates increase?

people are finding it hard to borrow now so if rates go up i am guessing it will become a lot harder with the payments increasing.
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I doubt it.

And borrowing isn't hard, its responsible which is what it should be. You shouldn't be able to buy a house unless you can put a substantial deposit down. If you cant put that down you need to examine what's going on.

My brother (22) rented a flat for 9 months, loved it and decided to move back home with mum and dad to save up to buy somewhere of his own. That was a year ago. In a years time he'll be buying a 3 bed place in the south east somewhere and probably putting down 30-40k as a deposit with his GF.

The entire world got screwed up by giving loans to people who couldn't afford them. Finally there is a modicum of common sense being applied. Though as I said earlier, if you have that deposit, they'll still give you a small fortune regardless.
 
Pestilence said:
We borrowed 102,000 on a similar income (though this WAS a few years ago) and there were no problems whatsoever. I don't think you'll have many problems considering you have a nice hefty deposit.

The only advice I could give is REALLY make sure that this is somewhere you want to live. Investigate the HELL out of it.

We made the mistake of jumping in without checking every single aspect out. Now, after 4 years of constant harassment, vandalism and stress, we're jacking it in. Getting the place valued and, summer this year, selling it at a loss on the cash market to go rent somewhere decent. We just can't live this way anymore, and my (already fragile) mental and physical health just isn't worth worrying about the hit in the pocket.

We won't even be considering buying again until (and I know it sounds quite sickening and mercenary) either of us become benefactors of inheritance. We just won't be able to save enough for a deposit again any time soon. Hell, with all the money we've lost to this pit we find ourselves approaching our 30s and never had a single holiday outside of Europe, plans for children abandoned for now as we wouldn't even dream of trying to raise one around here and take the added stress.

Buying the wrong property can lead to an almost soul-destroying chain of events and consequences. Please make sure you know it's for you.
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Just out of interest, what area was this in?
 
A few helpful hints from someone who has recently purchased a house (July 2010).


1) Work with an amount you are comfortable paying a month rather than just looking at what you can borrow in total. When we looked at mortgages we spent ages on Tesco Compare and Moneysupermarket etc to gauge exactly what are repayments would be first and then looked at what the max we could borrow was.

2) Don't get pulled in by a a mortgage with an attractive rate but a high set up cost. This cost will be added to the mortgage and you will pay interest on it (unless you pay it upfront with money from your deposit which means borrowing more to make up the difference - the same result.

3) Speak to mortage experts (they often have these in most big estate agents). Even if you don't end up using them they can do a lot of the leg work for you.

4) Make sure you have a well though out budget. By this I mean monthly income less expenditure. Once you start adding Council tax, Rates, Electricity and Gas, TV licence, Food & Prov, Car expenses it can be quite an eye opener just how much you will end up spending a month before you take into account money spend on yourselves.

5) As an extention to the budget you could also look at a simply cashflow. This would allow you to take the absolute numbers entered into the budget above and split them out over a set period - three months is usually good (you can normally choose your mortgage payment dates or council tax yet things like Gas & Elec may be fixed). I find this more useful than just a budget as it allows me to see when the "peaks and troughs" in spend are and plan accordingly. (As an example I can see from looking at my cashflow that I have a large amount of spend falling in March this year (due to car tax, insurance, water rates and utilities all falling due at once. Hvaing the cashflow allows me to adjust my savings accordingly whereas the budget alone would not have highlighted this).

The last one above may seen a bit OTT but it doesn't take me very long to maintain and gives me a lot of information I would otherwise miss.
 
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fendi said:
is it fair to expect house prices to fall if the rates increase?

people are finding it hard to borrow now so if rates go up i am guessing it will become a lot harder with the payments increasing.
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Are people finding it hard to borrow?
 
i recently went to a mortgage advisor. she told me that if i borrow £50k i would repay £79k over the life of mortgage, 25 years. is that right? its crazy how much money they make!!
 
I find it easy enough to say I can afford £X amount each month, but not knowing what interest rates are going to do makes it very difficult to plan ahead.

OK fair enough base rates haven't gone above 6% in the period 2000-2011 but from May 1988 and May 1989 the base rate went from 7.38% to 13.75%, another 1% rise would have meant that the rise had doubled in just two years. Rates didn't come back down again until 1992.

I don't pretend to know anything about economics really but looking at those figures makes it very difficult to predict how much I could comfortably afford to borrow.


Edit: Source

http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp
 
That is a situation many are in at the moment. However, I do feel that we won't ever see rises like that again in interest rates, people would just declare themselves bankrupt.
 
Cruiser said:
i recently went to a mortgage advisor. she told me that if i borrow £50k i would repay £79k over the life of mortgage, 25 years. is that right? its crazy how much money they make!!
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That doesn't sound right to me. I'm no broker/IFA/expert but that's paying over 50% in interest on the amount you originally borrowed.

Just seems wrong. I guess if you had no deposit, crap credit rating and it's the only mortgage deal you could get...then maybe. It certainly isn't the case for me and I've borrowed nearly 3 times that.
 
Knubje said:
That doesn't sound right to me. I'm no broker/IFA/expert but that's paying over 50% in interest on the amount you originally borrowed.

Just seems wrong. I guess if you had no deposit, crap credit rating and it's the only mortgage deal you could get...then maybe. It certainly isn't the case for me and I've borrowed nearly 3 times that.
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That sounds perfectly right. You are borrowing a lot of money over a long time. Our mortgage was 185k and I think if we pay back at the current rate we'll have paid back over £350,000.

Thats how mortgages work.

50k for 25 years at 5% works out to 295.63 a month every month for 25 years. Total repayable £88,689.


Crizzy said:
OK fair enough base rates haven't gone above 6% in the period 2000-2011 but from May 1988 and May 1989 the base rate went from 7.38% to 13.75%, another 1% rise would have meant that the rise had doubled in just two years. Rates didn't come back down again until 1992.
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Nobody does and thats part of the risk of getting a mortgage and is also why some people like me much prefer fixed rate deals. i'm probably over paying compared to someone on a variable deal but in 4 years time i'll almost certainly be underpaying. More importantly our mortgage outgoings are set in stone for another 4 years yet (5 year deal) so we can plan ahead. a little.
 
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Knubje said:
That doesn't sound right to me. I'm no broker/IFA/expert but that's paying over 50% in interest on the amount you originally borrowed.

Just seems wrong. I guess if you had no deposit, crap credit rating and it's the only mortgage deal you could get...then maybe. It certainly isn't the case for me and I've borrowed nearly 3 times that.
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Depends on the interest rate and length of mortgage. A repayment mortgage of £50,000 for 25 years at 6% will cost £46,645 on top of the original mortgage bringing the total paid to £96,645, it's obscene.

Edit:

A Very useful excel spreadsheet made by Locoblade at moneysavingexpert can be found in post 1 here: http://forums.moneysavingexpert.com/showthread.php?t=1157173 which shows a complete breakdown of mortgage repayments.
 
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The Deuce said:
£175k..get a nice 4 bedroomed detached with garage and drive for that here :)
surrounded by nice NORTHERN folk who'd make you feel welcome, unlike the snobs darn sarrrrf! ;)
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wow can;t believe that

pigs might fly where I live with that type money maybe you could get the cardboard from a kellogs box!
 
Crizzy said:
Depends on the interest rate and length of mortgage. A repayment mortgage of £50,000 for 25 years at 6% will cost £46,645 on top of the original mortgage bringing the total paid to £96,645, it's obscene.
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It's not really obscene, considering the amount of money you're borrowing and for how long...
 
Crizzy said:
Depends on the interest rate and length of mortgage. A repayment mortgage of £50,000 for 25 years at 6% will cost £46,645 on top of the original mortgage bringing the total paid to £96,645, it's obscene.

Edit:

A Very useful excel spreadsheet made by Locoblade at moneysavingexpert can be found in post 1 here: http://forums.moneysavingexpert.com/showthread.php?t=1157173 which shows a complete breakdown of mortgage repayments.
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Something that people often don't realise is how much overpayments affect things.
At the start you're paying off very little capital.
In the example you've given over the first year you'd pay off only £890 of the capital and nearly £3,000 in interest.

If you overpaid by £50 per month the total amount payable would go down by over £13,000. You'd pay off the mortgage after less than 19 years and that first year would chip away over £1,500 of the capital.
 
Haircut said:
Something that people often don't realise is how much overpayments affect things.
At the start you're paying off very little capital.
In the example you've given over the first year you'd pay off only £890 of the capital and nearly £3,000 in interest.

If you overpaid by £50 per month the total amount payable would go down by over £13,000. You'd pay off the mortgage after less than 19 years and that first year would chip away over £1,500 of the capital.
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Indeed. As I said before Us paying off £100 extra a month will save us nearly £50k and 5 years or something. It's worth doing if you can afford it. Why my parents never did I don't know.
 
Haircut said:
Something that people often don't realise is how much overpayments affect things.
At the start you're paying off very little capital.
In the example you've given over the first year you'd pay off only £890 of the capital and nearly £3,000 in interest.

If you overpaid by £50 per month the total amount payable would go down by over £13,000. You'd pay off the mortgage after less than 19 years and that first year would chip away over £1,500 of the capital.
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Yeah overpayments make a huge difference and even a small amount can add up to make big savings, I would definitely try and factor this in to any budgeting plans I have when looking for a mortgage.
 
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