Basic Mortgage Question

The Mad Rapper · 14 Jul 2007 at 21:34

I'm starting to think about buying a house. I'll be buying it on my own. I have no clue whatsoever about mortgages so I need some general pointers.

Some basics about me might help I guess. I'm 33, earn £30K excluding overtime (of which I can have as much as I like). I'll be looking to buy in the North East.

How big a mortgage could I have, and how much will that cost me a month roughly?

What are the different types of mortgages available and which would be best for me?

TIA.

Glaucus · 14 Jul 2007 at 21:42

normal would be around 4.5X your salary although some will go up to 6X.

Goto www.moneysupermarket.com and type it in to see roughly what the price per month is.

scorza · 14 Jul 2007 at 23:45

I wasn't in a too dissimilar position as you earlier this year when I bought my first home (still got a couple of weeks to completion lol). From talking to my mortgage broker, my understanding of the mortgage situation atm is that your salary is less important to lenders than how much you can afford to pay back per month. So if you think you can pay back £1k a month then they'll base how much they'll lend you on that. A lot of lenders will also consider longer than 25 year loans now, enabling you to borrow more.

If you're serious about looking then its really worth getting a mortgage agreed in principle beforehand. Sellers take you more seriously then, and there's less chance of you having to pull out later.

Tunney · 14 Jul 2007 at 23:45

Abbey National will offer first time buyers six times their salary. Unless you've got some kind of additional income, don't even think about it though as it'll take 60%+ of your salary.

Speak to an independent advisor. If you're looking for someone who will give free advice try The Motley Fool. It's easier face-to-face though.

As a guide, a mortgage of £150,000 is currently costing me £890 per month over 25 years. With the recent increase in the Bank of England base rate, it'll probably cost you more.

The Mad Rapper · 15 Jul 2007 at 14:58

Tunney said:
As a guide, a mortgage of £150,000 is currently costing me £890 per month over 25 years. With the recent increase in the Bank of England base rate, it'll probably cost you more.

It'll cost you more as well won't it? You can't have a fixed rate for 25 years can you?

Thanks for the links, I read a huge thread on MSN Money last night which discussed the merits of renting over buying. What was clear to me was that a majority of people feel the market is due an imminent crash. Obviously the thought of that scares the life out of me. If there is going to be a crash I'd rather wait until it's happened and buy afterwards than buy now and get saddled with a ton of negative equity

Opinions?

Kitchster_uk · 15 Jul 2007 at 15:09

I'm a bank manager and certainly there is NO current speculation from within of a big crash. House prices are still rising and people still want to buy. A large amount of the country's wealth is held on secured lending against property and a crash would be catastrophic. The Bank of England won't let it happen - simple as that.

Start off small tbh, we bought a large 2 bed ground floor flat in hartlepool with private back garden and own drive for £57k in 2004 and sold it for £63k 2 years later, buying a massive 3 bed semi with potential up to 6 double bedrooms for £143k. Neither were new-build (avoid tbh - v.expensive and not as good build quality as 60's stuff) and the flat wasn't in the best area, however, the more that are sold, the better the area becomes as people like yourself start moving in. Don't stretch yourself too far either - you'll have to repair and maintain the place and that costs you.

Our website has a fairly useful mortgage calculator and HSBC is now very conservative on it's lending policies anyway - click here and the 2nd page gives you an idea of how much you could/should borrow up to.

scorza · 15 Jul 2007 at 15:19

The Mad Rapper said:
It'll cost you more as well won't it? You can't have a fixed rate for 25 years can you?

Thanks for the links, I read a huge thread on MSN Money last night which discussed the merits of renting over buying. What was clear to me was that a majority of people feel the market is due an imminent crash. Obviously the thought of that scares the life out of me. If there is going to be a crash I'd rather wait until it's happened and buy afterwards than buy now and get saddled with a ton of negative equity

Opinions?

The internet, even this forum, is full of doom-mongers who've been saying that a crash is imminent. I take the view that absolutely no-one can accurately predict the future so I think to say with any certainty that there will be a crash or not is extremely arrogant.

clv101 · 15 Jul 2007 at 15:21

Kitchster_uk said:
The Bank of England won't let it happen - simple as that.

Who "let" the previous price crashes happen? Who's letting the Spanish, Irish and US property markets lose value?

Serj · 15 Jul 2007 at 15:23

clv101 said:
Who "let" the previous price crashes happen?

Well not the Bank of England because they weren't in charge of interest rates then?

clv101 · 15 Jul 2007 at 15:28

Serj said:
Well not the Bank of England because they weren't in charge of interest rates then?

So who did "let" it happen? The Government? My point is that nobody "lets" house price crashes happen, just as nobody can prevent them, they are the outcome of a far larger set of influences which no one is in control of.

To say the BOE won’t let it happen is foolish – isn’t not their decision to make.

Slam62 · 15 Jul 2007 at 15:32

clv101 said:
Who "let" the previous price crashes happen? Who's letting the Spanish, Irish and US property markets lose value?

We usually follow the US, buyer beware, its all about confidence, when they go it'll be a long way down.

mattx2 · 15 Jul 2007 at 15:33

Kitchster_uk said:
I'm a bank manager and certainly there is NO current speculation from within of a big crash. House prices are still rising and people still want to buy. A large amount of the country's wealth is held on secured lending against property and a crash would be catastrophic. The Bank of England won't let it happen - simple as that.

A crash may not be as catastrophic as you might think the US enconomy is still going strong despite a large drop in house values.

Also its not up to the bank of england the market will decided the price the uk has a free enonomy.

schnipps · 15 Jul 2007 at 17:06

Speak to an independant mortgage advisor as people have said, nobody on here can really say. It also depends what other finance you have (if any). Just bought a house with my gf which is costing £166,950, put a £9,000 deposit in, so whats left to mortgage over 25 years is about 950 quid a month, thats on a lower rate though as im on a fixed rate at the moment as i have a flat and am just porting my mortgage.

I did speak to an advisor in Oxford (buyng in the North East btw) and he was very very good. If you are on 30k + bonus and you dont have a big car loan or anything you should be ok to get a house although how much they will lend you i dont know.

Edinho · 15 Jul 2007 at 19:15

Kitchster_uk said:
I'm a bank manager and certainly there is NO current speculation from within of a big crash. House prices are still rising and people still want to buy. A large amount of the country's wealth is held on secured lending against property and a crash would be catastrophic. The Bank of England won't let it happen - simple as that.

Well to say your a bank manager im not so impressed with your knowledge of economics. No speculation? since when was a crash speculated? The BOE wont let it happen? Let what happen? If the economy is going arse end up do you really think they will be bothered about house prices?

Slam62 · 15 Jul 2007 at 19:23

Edinho said:
Well to say your a bank manager im not so impressed with your knowledge of economics. No speculation? since when was a crash speculated? The BOE wont let it happen? Let what happen? If the economy is going arse end up do you really think they will be bothered about house prices?

Just remember loan sharks (read banks) are not remotely interested in the wider economy just on making money and lowering the risk.

Hence at the first sign of a crash they pull their money back as fast as they can making the thing spiral out of control.

They love lending you money but they make sure they get it back

Basically anyone involved in the industry does not give you impartial advice because their livelihood depends on a rising market.

The Mad Rapper · 15 Jul 2007 at 21:57

Slam62 said:
Basically anyone involved in the industry does not give you impartial advice because their livelihood depends on a rising market.

That reads as being entirely sensible statement to me. Where, or to whom would I go for some impartial and sound advise then?

The Mad Rapper · 15 Jul 2007 at 21:58

Thanks to all for the great replies BTW, I am grateful. At the moment I must confess to feeling a little like one of those buffalo you see in the nature documentaries. I know I really want to cross the river but I can't see if there are any crocodiles in there and I'm scared!

Glaucus · 15 Jul 2007 at 22:03

IMO, if you can afford it you would be a fool not to, They've been talking about a crash for over a decade and the prices are still rising. Just get a fixed mortgage to protect yourself. It's what I want to do early next year.

Negative equity, isn't a problem as long as you can afford the monthly repayments. If you sale a house in a crash, you'll be buying another house that has also been affected by the crash. So as long as you can afford the monthly repayments negative equity doesn't matter.

mattx2 · 15 Jul 2007 at 22:33

AcidHell2 said:
IMO, if you can afford it you would be a fool not to, They've been talking about a crash for over a decade and the prices are still rising. Just get a fixed mortgage to protect yourself. It's what I want to do early next year.

Negative equity, isn't a problem as long as you can afford the monthly repayments. If you sale a house in a crash, you'll be buying another house that has also been affected by the crash. So as long as you can afford the monthly repayments negative equity doesn't matter.

Negative equity is a huge problem if you want to move during a crash say you take out 200k mortgage and prices drop say 15% thats 30k. your house is now worth 170 but you have 200k out standing you wouldn't have enough money to pay off the mortgage and if you can't pay off the current mortgage you can't take out a new one.

sunama · 15 Jul 2007 at 23:26

mattx2 said:
Negative equity is a huge problem if you want to move during a crash say you take out 200k mortgage and prices drop say 15% thats 30k. your house is now worth 170 but you have 200k out standing you wouldn't have enough money to pay off the mortgage and if you can't pay off the current mortgage you can't take out a new one.

...unless of course the mortgage is portable so that it can be moved over to the new property you are buying.

The way I see it, is that if you want to buy a property to live in and do not see it as an investment, but more as a roof over your head, then buy now and be happy. If however, you see the property as a major investment and want to make money out of it, then you have to attempt to time it correctly. The problem is that "the crash" has been imminent for many years now and property prices keep rising, pushing prices further out of reach from first time buyers. The last thing you want to do is to wait 2yrs hoping for a crash, only to find that after that time, the property you were interested in has moved further out of reach.

Buying a property in today's climate is a question of what the individual believes will happen to property prices. Each buyer must make the decision for themselves. If you believe in an imminent crash, then wait. If you believe that prices will increase further (as they have for the last 10yrs or so), then you may as well buy now.