What would you save?

[NotAGolf]

The girlfriend and I are looking to buy a house soon, we've been on a few viewings and got a good idea of what we can borrow and how much the repayments etc are. We like one of the properties but I think it's a little out of our price range, however my dad and my gf don't. Just wondering what you guys would be prepared to pay if you were in a similar situation.

Quick background on us. Both 24, been in our first job out of uni for about a year. Joint salary is a smidge over 33k, so take home is 2150p/m. We've done some calculations and believe our outgoings will be no more than £900 for everything, including about £150 for either repairs or unexpected bills, if there's any left this can be used for 'luxury' things like the odd meal out etc. We're looking to get a 5 year fixed mortgage so will be stable for a while. No kids and not likely to have them within the 5 year term. Salary is not likely to go up much, and certainly not massively in that time frame either.

So if you take 900 from 2150 that gives us 1250p/m for the mortgage and any kind of savings we would have. This would be future savings for things like weddings, kids, pensions, as well as more luxury things such as holidays cars etc.

So, what would be your max limit of that 1250 you'd want to spend on the mortgage itself?

 

[Casdawer]

800-900.

Would give you 350-450 that you could save per month.

 

[ntg]

800-900.

Would give you 350-450 that you could save per month.

+1, or use that money to overpay when you feel like it OR add it to a holiday abroad - no reason why not enjoy life a bit more when you can.

 

[meghatronic]

I would not want to spend more than 40-50% of the income on a mortgage. So £800-1000. You could always get £750 and overpay the months you have spare cash (if you get such a penalty free mortgage).

 

[Abraham]

unless you're looking at a really short term I'm not sure how you'd get to that level of monthly repayments on the salary you're on unless you have 40%+ deposit

 

[NotAGolf]

Thanks for the input so far.

unless you're looking at a really short term I'm not sure how you'd get to that level of monthly repayments on the salary you're on unless you have 40%+ deposit

We've got a deposit of ~30% on a 200k house. We've seen a 5 year fixed deal at 4.09% which gives payments of £752 a month over 25 years. I think that should be quite easily attainable.

However, the house we've seen is 225k. We can get a few grand together to keep us at ~30% deposit, but that increases the rate and therefore the repayments which enters the 850-900 range. And like you said, that's IF they will lend us that much, which I have a feeling will be tricky. 215 maybe, but 225 is really pushing it.

My view was that 800 was a sensible max, but others seem to think 850-900 is manageable.

Maybe I need to snap out of the idea that I'll have to wait more than a month before being able to buy a new bike/tv etc! Especially as our savings is between 2 of us, ~£200 each doesn't seem like very much.

 

[Building Candy]

If your combined sallary before tax is 33k I think the most a bank will lend you is £150k

 

[TMP]

Damn son buying a house with your GF at 24, not sure I could do that. Not that I speak from experience or anything, but what happens if the relationship goes all Pete Tong on you?

 

[[TW]Fox]

You need to think about what happens in Year 5. It's unlilely you'll get another fixed deal at 5%, and if you dont think your salary is going much higher in that time period you need to have a plan for what happens when your interest rate is potentially much higher.

 

[Scrutinize]

You need to think about what happens in Year 5. It's unlilely you'll get another fixed deal at 5%, and if you dont think your salary is going much higher in that time period you need to have a plan for what happens when your interest rate is potentially much higher.

This...

Plus you need to consider how good your relationship is as well and how you would deal with splitting the assets under a breakup. Especially in context of buying the other out, selling and ensuring no negative equity and who owns what % of the house / mortgage.

Say your GF leaves, she may get defaulted if she doesn't pay but so do you if it is a joint arrangement. Would she be happy to walk away not caring about her credit history and leave you in the mire?

If you are left in the house and want to stay there could you pick up the tab and buy her out? Especially if interest rates go up and your salary won't cover a decent replacement mortgage deal.

As for mortgage value per month £800-£900 tops.

 

[aardvark]

You need to think about what happens in Year 5. It's unlilely you'll get another fixed deal at 5%, and if you dont think your salary is going much higher in that time period you need to have a plan for what happens when your interest rate is potentially much higher.

+1

i don't know what interest rates will be in 5 years but i would bet everything i have on them being higher than now, most likely a lot higher.

 

[ntg]

Thanks for the input so far.


However, the house we've seen is 225k.

Obviously you need to haggle the price. You should never buy at RRP! Even a measly 5% off the price should get you into the price range you are comfortable with.

 

[Pestilence]

Obviously you need to haggle the price. You should never buy at RRP! Even a measly 5% off the price should get you into the price range you are comfortable with.

This. Always come in with what seems to be a retardedly lowball offer.

For 225k asking, you'd be wanting to settle between 200 - 210k IMO, so offer, to begin with 180k. Of course, they'll say no. Give them a few days and their agent will be ringing you, bugging you to make another offer. Bid 192k.

If they refuse again, state that you have similar properties lined up for a similar bidding amount, and want to see how they fare -- but the sellers really need to get realistic about what they're expecting in today's financial climate.

Give them a week, they'll come back grovelling for that little bit more. Drop an offer of 205k - FINAL.

Deal done, and your mortgage becomes much more realistic.

 

[NotAGolf]

Thanks again all. Three points seem to be coming up here:

1. Our relationship. Obviously I would be stupid to think we're defintely going to live happy ever after, but we're both sensible, been together 5 years, lived together for 2.5 of those (own place at uni, and her living at my parents for last 5 months). She's got more of the deposit than I have so will be sorting this out with the solicitor if something did go wrong that it gets split fairly as we'd almost certainly leave the house and buy our own.

2. Interest rates. Again we have thought about that, and obviously they will be going up, but like everyone else we don't know by how much. I know I said in the OP I don't expect to get a pay rise, but at the end of 5 years, if I was still on my current wage I'd definitely be looking for a new job, which should cover good few percentage points increase. If our wages stayed the same then we still have ~£3-400 buffer p/m as well as savings to tide us over until we found something smaller if the rates really do go mental and we're on the same wage.

3. Asking price. Again we've considered this but I have a feeling that it wont drop by a significant amount. It's been on the market for 4 months and hasn't dropped a penny for that period. According to the estate agents the seller is moving into rented accomodation and obviously doesn't seem to be in much of a rush. She's had a few offers that haven't been high enough for her. I know this is all what the agent has told us though so obviously he wants as much £££ as possible and could be spouting a load of bs...

Thanks again.

 

[BennyC]

What type of mortgage are you after? Obviously an interest only would give you a much lower monthly repayment though this might not be ideal.

I'm not really too clued up on mortgages but say for instance if you did choose an interest only could you not save/invest all the money you're saving and when it comes to remortgaging, pay off a lump sum of however much you've managed to save? And essentialy 'buy back' your property this way in small chunks by borrowing less and less each time?

 

[Django x2]

You'll always not budget for something, and it will be something stupid:

Outgoings:
Mortgage
Home Insurance
Buildings Insurance
Life Insurance
TV Licence
Utility Bills (Phone, Gas, Water, Sewage, Broadband)
Council Tax
Car insurance
Car maintenance
etc
etc

Furthemore, on that joint salary, with a £10k deposit, a responsible lender is likely to lend you £50k tops, but you do have that on your side with a £60k deposit.

Mortgages are all about the deposit these days. The bigger the deposit, the more you'll be leant (and often at better rates)

 

[mike66uk]

I'm not sure if I'm the first one to point this out, but you say you have a 30% deposit on a £200k house, so that's £60k deposit, leaving £140k left needed to be borrowed. You state your joint income in £33k, meaning that you need to borrow about 4.2 times your joint income.

As far as I was aware, I thought that it was pretty standard for banks to lend around 2.5-3 times joint salary. Have you considered this?

They also consider all your expenses and see if you have enough cash left every month after the mortgage repayments and run you through their affordability calculators based on how much disposable cash they think that you would need to live comfortably, which in my experience has been more than I would have allowed myself.

 

[Django x2]

I'm not sure if I'm the first one to point this out, but you say you have a 30% deposit on a £200k house, so that's £60k deposit, leaving £140k left needed to be borrowed. You state your joint income in £33k, meaning that you need to borrow about 4.2 times your joint income.

As far as I was aware, I thought that it was pretty standard for banks to lend around 2.5-3 times joint salary. Have you considered this?

They also consider all your expenses and see if you have enough cash left every month after the mortgage repayments and run you through their affordability calculators based on how much disposable cash they think that you would need to live comfortably, which in my experience has been more than I would have allowed myself.

This is true, HSBC would however, lend them 145k if they had absolutely no other commitments (car loans, credit cards, etc), and they are notoriously strict lenders. As I said, it's all about the deposit these days rather than the salary

 

[NotAGolf]

You'll always not budget for something, and it will be something stupid..

I've got all the things covered you've listed and by including £150 'miscellaneous' outgoings in that £900 so that will hopefully cover anything that I've missed or underestimated, as well as any months where we overspend on anything.

As far as I was aware, I thought that it was pretty standard for banks to lend around 2.5-3 times joint salary. Have you considered this?

Their affordability calculators are a bit more complex from what I've seen. The whole x times salary doesn't really apply any more. After speaking to a broker as well as doing our own research, we've got a range of loans from about 100k-165k. So that's from 3x-5x. Obviously that's subject to credit checks etc but I think 4x is fairly easy to achieve, and 4.5 will hopefully be attainable. As said though, this depends a lot on your deposit.

Lucero, where did you get 145k from? I just tried their calculator and it came out at only 111k.

Thanks again.

 

[Django x2]

I did mortgage in joint names, borrower one earns 17.5k no outgoings, borrower 2 the same with a £60k deposit for a first time buyer in the north (believe it or not, living area is part of lending critieria). Came out at £144k