Mortgage advice - first time buyer

[Delvis]

Hi all,

So, me and the wife need to start thinking about purchasing a house, which brings up mortgages.

I haven't the foggiest about them, so obviously ANY advice here or help is appreciated.

Naturally I know the basics, a high deposit helps matters, not to have too much debt, but beyond that, not a clue.

I've started reading money saving expert but it'd be nice to have some really world advice. A friend has given me some contact details for a mortgage advisor, so I'll be contacting them soon.

In short, no idea, don't have a big deposit atm, I changed jobs just before Xmas,wife is self employed and doesnt earn a lot atm.

TL;Dr: need mortgage advice for a n00b

P.S: have a H2B ISA setup

 

[Delvis]

If you don't have the deposit then its htb

Ah yes sorry, I have a help 2 buy ISA, slowly paying into it.

Once I get the cheque through from my new job ill know how much extra I can throw in it

 

[Delvis]

Kind of depends on lots of stuff TBH!

Are both you and your misses going to be on the mortgage? What are your salaries (ballpark) and where are you looking to buy? Will you be getting any help from family/parents? What do you have saved already?

Of course, loads of variables I guess I'm asking how people went about it, where to start etc

Hopefully both be on the mortgage, but we may need to do it just as me. I'm on 30k, she's below or not far above tax threshold. Buying in Buckinghamshire, near Milton Keynes/Buckingham/Bicester. Not sure on help, her parents will downsize and we may get something from the sale. Assume nothing is saved, think my H2B ISA only has 1k in it.

 

[Delvis]

You might need a bigger deposit!!!

Some developers offer a deposit contribution so that could help, though if you're waiting for some unspecified amount of money that may or may not be coming from a house sale then you're perhaps better off holding off taking to banks etc.. at the moment. Agreements in principle, mortgage offers etc.. are generally time limited to say 3 months or there about.

I know that

I have a new job, all extra money I earn from that is now going towards the deposit, so it should start shooting up a tad quicker now.

 

[Delvis]

There’s also the government help to buy. Give that a read!

Yep, as said earlier I have one of those

 

[Delvis]

I was able to find a better deal in ten minutes than a mortgage advisor could find.

Things to consider.

Clean your bank account up, get rid of daft direct debits and make sure you're out of overdraft.

Look at early redemption costs.

They will want evidence of everything

Thanks for the reply.

Bank is never overdrawn for me as I get charged, wife however still has her student account and is pretty much always overdrawn (but not charged), yes I know that's ****.

Daft direct debits?

Yeah I've read about them wanting everything, so I'll make sure we do before properly looking.

Ok, worth bearing in mind that most mortgages are around 4.5 to 5 times earnings of the aplicants - though differernt lenders have different rules though. So even if she only earns 10k then this will mean you can potentially borrow 45k more - which will make a big difference in the area you are looking to buy.

So if you pick a house that's 300k - and borrow the max (assuming you find a lender that can do 5 times earnings) you will need a deposit of:

300k - ((10k + 30k) * 5) = 100k

Obviously this is a gross simplification - but kind of gives a ballpark of the figures that matter the most

So basically, not getting a house a garage perhaps haha

 

[Delvis]

It's is tough - really tough, a deposit takes years to build, even if you live like a monk.

Shared ownership can be an option, but has its own risks...

Aye, something we've considered, she just hates new builds...but it may be something we have to do

Or keep your payments the same, take advantage of the better LTV and thus interest rate and shorten the term.

That’s the approach I took, payments went up by £50~ but my term is almost 10 years shorter now than when I bought the house 3 years ago.

Aye, if you can comfortably pay it off at the same rate, why not?

Also if you have any unused credit cards with zero balances then look at cancelling them and only keep 1 or 2. I'm looking to buy (first time) and had over £50k of available credit available. I was advised by my broker that lenders can be scared by this, so cancel the ones you don't need.

Thanks. Yes I only have the two, one I clear every month the other has less that 2k to clear - I'm aware this probably needs to shift first

Before buying make sure that you dont stretch your budget to the absolute limit, make sure you have some spare cash every month in case the house needs maintenance.
For 90-95% LTV HSBC seems to provide one of the best rates and their online process is very simple. You can try making an application online just to get an agreement in principle, hsbc doesnt carry out a hard check on your credit history for this (or nationwide, these are the two I tried less than 6 months ago).
The only advantage of going with a mortgage broker is if you are self employed and they sometimes offer a cashback with their lenders but definitely not worth paying them for, as you can pretty much apply to most banks directly. If you are buying through an estate agent they might try and persuade you to use their advisors.

Wife is self employed, so may be worth looking at a broker and normal advisor?

Also to claim on the H2B ISA, the house value has to be under 250k. One of my mates went just slightly over and hence couldnt use the ISA bonus.

Yes, I've noticed that. There are some ways 'around' it.

 

[Delvis]

Run some numbers through one of the online mortgage calculators to see if it's doable where you want to buy. Also, a few places will do an AIP online, but make sure they only do a 'soft search'

Thanks, I need to do a few more searches so thanks for reminding me. Recently read a out the AIP searches too.

Biggest piece of advice is to be realistic. Don't get carried away and stretch yourselves. In a case where there is very little deposit see your first home as a stepping stone to something bigger in the future. Mortgages are pretty straight forward to be honest but sounds sensible to see an advisor if your wife is self employed. Ensure theyre whole of market and how are they payed (commision etc). The mortgage itselfi can be sorted pretty quickly its the finding a house and building up your deposit that takes time. Also remember that interest rates are likely to rise from the historic lows of recent years so calculate what would happen if they doubled or tripled. Could you still afford the house and some quality of life? Budget for other major expenses also like holidays and cars, think about career prospects...are jobs stable, earnings likely to change and finally what are you contributing towards pensions?? Consider solicitors fees, stamp duty and how will you furnish the house?

A lot to think about but the mortgage itself is relatively straight forward.

All people and couples have different levels of repayment they are comfortable with. Sit down with the wife can see what that is for yourselves after take home pay.

This is kind of what I'm saying to the wife, wewont be able to move into our dream home, it'll have to be something smaller for a few years most definitely.

Best advice i can give is dont buy a new build if at all possible.

Also save as much money as you can before applying for the mortage, a loan from parents can help if you need it

Hah yeah, heard multiple horror stories.

Aye, a loan but a 'gift'

I've just recently purchased a flat through shared ownership. I didn't want to have to go down that route but was the only way to get me on the property ladder, particularly as it's just me and I was living in an expensive area. (I've had to move out of the county)

I used a mortgage broker (integrity mortgages) because I had no clue and they needed to do checks to prove I wasn't money laundering anyway. They were really helpful and friendly and also got me a great rate on my contents insurance too.

I want to avoid moving too far, having just landed a new job with less commute to help save more money, but I can see why it's needed sometimes.

Thank you though, will take a look at the recommendation

A 'gift' from parents would be better...

Yes, gift with a letter apparently.

That won't be happening from my side on all honesty

 

[Delvis]

Might be worth considering buying somehing that needs modernisation. This will knock quite a bit off the price, and as long as you can modernise it there's the opportunity to add a lot of value and save a few quid when you buy.

Just completed on our first house on the Friday just gone - it's habitable, but needs modernising. We saved over 100k by taking on a bit of project (verses prices of other houses on the street), and plan to get the place completely refurbished over the next few years.

Worth bearing in mind that you can't mortgage something that's not habitable, it needs to have a functional kitchen (ish) and other services etc to get a normal mortgage on.

It doesn't cost the earth to sort a house out either, you just need to be willing to get your hands dirty and get a decent survey to make sure there's no absolute horrors awaiting you!

Very true. Im always keen to DIY and know a lot of trades people personally

 

[Delvis]

Off topic, but seeing a post from you is a blast from the past. Good to see you posting

Indeed! Nice to see you @secretspy

Thanks for the link, assuming that's the PDF I need to read it

 

[Delvis]

We'll worth a look - we think that we will spend around 20k to add 100k of value to our house, it's just we need to live in something that's a bit compromised for a few years.

If we'd bought a new build in the area we wanted at our budget - it would have been a flat with no parking or garden with a max of 2 beds. We've ended up with 3 beds, 2 gardens, parking and a garage, in an actual house.

I've done 10+ years in quite poor quality rented accommodation, so a few years in something that is less than perfect is a no brainer for us.

Indeed, I'm fine with it, hopefully the wife is

 

[Delvis]

I'd be interested to know what ways around it you think there are because as far as I'm concerned it's cut and dry.

Sometimes you can negotiate to pay for the white goods/furnishings seperately.

So you'd do the 250k mortgage, then pay a lump some of 7k for example if the house was sold for 257k, that way you'd still get the gov bonus. This obviously depends on who you have the mortgage with...also probably not always likely to happen .

 

[Delvis]

As a first time buyer you're unlikely to be buying a house with enough contents that it makes a significant difference to the price by doing that. Plus it would mean needing a larger deposit as you'd be paying for the contents from your own cash. So pretty much irrelevant in the circumstances.

Well I know someone who's done it, so k know it can happen

 

[Delvis]

If you have debts pay off in this priority order ASAP

Credit Cards
Loans
Student Loans

Obviously getting a mortgage while you have debt is harder but some debts are riskier then others especially when the application gets put through stress testing.

For your wife, 2-3 years books or self assessment tax returns. Its daunting when one or both of you is self employed but don't let it be, as along as your have your paperwork in order it makes things easier.

Using a mortgage broker can smooth out the process.

Look in to the help to buy schemes, lots of new builds around, some stock being hard to shift, you might benefit from Brexit and a slowdown in the market with New Build Developers struggling to shift stock.

Happy to chat any time.

Hiya

Cool, I was intending on clearing the credit card asap, it's not massive (sub 2k), just I've not been in a position to clear it yet.

Wife has her books, so that should be sufficient if hope.

As said, have a H2B ISA, was a virgin one setup through MSE.com, just again not been in a position to plow money into it

And thank you for the reply and offer

Just some thoughts from reading all the replies. You've mentioned your combined earnings are about 42k (30/12), sticking these into a mortgage calculator gives you a figure of around 200k.

Minimum deposit is 5%, and as you seem to already be aware, the bigger your deposit the lower the LTV and the lesser the monthly payments are.

On a 200k property with a 10k deposit (5%) would require a mortgage of 190k and give you monthly payments of around £800-880/mth (based on a 30 yr term)
On a 200k property with a 20k deposit (10%) would require a mortgage of 180k and give you monthly payments of around £720-760/mth (based on a 30 yr term)
On a 200k property with a 40k deposit (20%) would require a mortgage of 160k and give you monthly payments of around £580-600/mth (based on a 30 yr term)

The above gives you an example of monthly payments based on the different LTV rates.

Have you had a look around the areas you wish to buy to see what you can afford? This will at least give you an idea of how much of a deposit you need to save.

As for saving for the deposit, you mentioned a HTB ISA, but with 1k in it? is this actually the HTB ISA, or a HTB LISA? It sounds more like the latter? The HTB ISA which was available 2 and a bit years ago allowed you to open the account with a 1k deposit to gain a £250 bonus.

Anyway from what i've read, you mentioned your current deposit savings are practically zero. You mentioned you and your wife also have some debt - Credit card for you, and overdraft for your wife? (When does your wifes free overdraft end? iirc from graduate accounts you normally get a year or 2 before they start applying interest). Either way a mortgage advisor/broker would tell you to clear those debts, as they will eat away at the total a lender will give you - there's a section called monthly commitments and this will include anything like student loan repayments, and any credit commitments, and this can reduce things quite drastically.

I had the mishap last year of running into this, i purchased my missus engagement ring on credit (i had the money in my account to pay instantly, but wanted the credit card protection). Anyway shortly after we found a house we liked and went through the process of putting in a bid, went to get an AIP, and the total amount they'd lend us came out something ridiculous like 30k under what it was with 0 debt. (the ring wasn't 30k! ). Thankfully they hadn't yet taken payment of the ring, so i was able to change the payment and clear the debt from my account.

Without rambling on too much, based on the details you've given so far, unless you've got a family member gifting you a substantial deposit (10k+), then i suspect you'll be spending at least the next 12 months clearing your existing debts, and putting savings aside for a deposit. Personally i think you'd be better switching to a HTB LISA (1k bonus for every 4k saved), so have a read up on those and see if it makes more sense switching. Someone earlier mentioned about the Governments HTB schemes, i think this works by you providing some money as a deposit, and then the government also providing some money as a deposit (as a loan) - say 10k/10k each. The loan value increases/decreases depending on whether the value of the house increases/decreases. So if it increases 10% then you'd now owe 11k on the deposit loan. From memory these are typically 5 year loans as well, so you'd need to ensure you can not only pay your monthly payments, but also save up enough to pay off the governments loan at the end. There was a thread on here a couple of months back with someone in this sort of situation where he'd been paying back the monthly mortgage amount, but wasn't putting enough aside to pay back the loan at the end. I think these schemes can be a little irresponsible as it can open doors to houses (no pun intended) for people that wouldn't necessarily be able to afford it under normal circumstances.

Final point, i think someone's already linked you to the mortgage guide that Martin Lewis has published, that covers pretty much everything you need to know about mortgages.

Thanks haha, nice long reply

Yep, it's a help to buy ISA, I've only been able to put the minimum in over the last year, hence why it's not gone up a lot

Going by what you're saying, we can't get much unless we get a significant fund from somewhere, pretty much everyone we knoe only managed to get their houses and deposits due to a grandparent t passing away basically....

As for prices, they'll be around 240k more than likely, we may need to move further out into let nice areas annoyingly, or do shared ownership :/

what is wrong with new builds? they usually come with the latest and greatest of everything. the only issue i can see is if you can't afford a decent one so you end up with a crap one. or the relatively small gardens and driveways but that isn't a huge deal tbh.

wiring will be up to the latest standard. insulation up to the latest standard. boiler and everything else will be latest and energy efficient, etc. same with a lot of the appliances (dishwasher, oven, etc).

my advice to OP is nationwide are a really good lender that also offers cashback, etc at times.

also you need to find out your LTV and if it's close to a band then increase it to meet the next band. e.g. on a 200K house lets say you have a 19K deposit. which is 1K less than 10% so you fall into the 5% LTV bracket which isn't that good. by having that extra £1K you would fall into the 10% bracket and have a much better interest rate as a result. so you need to do your own figures and see what works for you. it's always best to have a multiple of 5% as your deposit. so 5%, 10%, 15% 20%, 25%, etc. if you have 13% then try and get that extra 2% if you can if you have 11% then obviously that extra 4% will be hard to get/save at short notice.

have you found a place or area you are interested in? make sure you view as many homes as you can including ones you don't like that much to cross off things you definitely don't want. view homes in the price bracket lower and higher so you can see the difference in what you get for your money.

i initially was looking at spending as little as possible on my first home. i then upgraded to next bracket and then the bracket after that after i saw them. so i went from a 2-3 bed flat to looking at small 3 bed detached to large 3 bed detached with large driveway and attached garage, etc.

i was looking for around 2 years before i bought. i'm glad i spent all that time researching and i ended up making the best choice. the home i have now could do me for life or the next 10 years. whereas before they would have been stop gaps.

pictures can be deceiving and i even looked at semi-detached to rule them out. the bedrooms were far too small. i looked at old houses and ones less than 20 years old. i wouldn't cross off a new build but generally speaking IMO it depends on the area. I know in my area new builds are overpriced. in an area 5 mins away they are a good price and will 100% go up in value with time. in my area they won't due to them being overpriced in the first place.

Cheers

Yeah we want to stay local to where we are now, mainly because our works are here.

Appreciate the advice, I need to view all this on my computer as replying properly is a pain on my phone!

Did it all online via nationwide. Had to drop in proofs at a branch but doing it all online by myself was a breeze. Intact Buying my flat was very easy and stress free. I’ve rcerntly remortgaged and that was super easy well.

I was a FTB, with no chain which made it easy I suppose. However, don’t assume it’ll be a headache/difficult!

Good to know and appreciate the response

I would also recomend first direct, we got AIP online (was easy) and did the rest over the phone. We got a great deal and five year fixed term and can make unlimited over payments with no penalty. They beat almost every other provider on the rate by a bit as well which was handy

Cool,shall look into them as well

Getting on the electoral role is good for your credit score.

Other than standard advice paying off your credit cards etc (make sure all minimum payments are met even if it's 0%).

Looks like you have a long way to go if youve got very little in savings (a couple years for deposit?) , but good luck!

Sadly I don't think we have a couple of years, so will no doubt have to rent.

Great eh? Yet some people are able to get houses given to them because they're jobless and up the duff

Also Lloyds bank today launched a 100% £0 deposit mortgage, fixed for 3 years at 2.99%.

It requires family to put up a 10% deposit that is locked in a savings account for the same period, but it does pay 2.5% interest.

Actually a very attractive offering if you have family who can help. It is also low risk to them.

Aye sounds good, just no one is available to give that kind of money sadly

 

[Delvis]

Is there any scope for your wife to earn more? Is it a new business that's starting up? If she was on a minimum wage FT job, assuming you're over 25, she'd have 17k income, which might boost your available amount to maybe 210/215.

Unless more business comes in, no.

New business, well, been going for a couple of years but she's been self employed doing other work for about 4/5 now I believe.

I have suggest trying to find at least a three day a week job, to get some extra, but most of those dont pay much sadly

 

[Delvis]

Are you currently at parents/in laws and rent free? Just try save as much as possible/earn as much as possible.

I don't think others living in naff council housing is something either to aspire to or relevant
. Bit of a daily mail comment

Yeah, just the rage kicking in

At the in-laws, not rent free but cheaper than renting properly

 

[Delvis]

Any family member willing / able to take out a loan and put the funds in said savings account? You could have an agreement where you cover the interest portion of any loan they get so that they benefit and you guys still get a big boost to getting on the property ladder?

No, in-laws have their own money woes and my mother's poor, so

 

[Delvis]

Make sure you check out the LISA, you've not got a great deal in the HTB ISA for the bonus to be worthwhile. If you're going to be saving for the next 12+ months, then you can get a 2k bonus from depositing 8k. Depending on how much you can both save each month, you can open one each and double the bonus - again assuming neither of you have owned a property before.



Yeah i don't want to put a downer on it , but first thing is being realistic about what's affordable to you both - have a read of some of the horror stories in this sub-forum, or even over on MSE where people find they have unaffordable mortgages.

If you're looking at 240k, then that's quite a bit of a deposit you'll both need to save.

Yeah, thank you for the insite

Indeed though, realistically speaking we probably can't afford that any time soon

regardless of how much they pay - more money is more money.

when i was saving for a deposit. i worked a second job where they pay ranged from minimum wage to £15 an hour depending on the role assigned. also shifts could be as little as 3 hours to as much as 12 hours.

with it being a second job it was all taxed with no deductions as my main job got all those. so sometimes you were walking away with peanuts.

your combined income is around the 45K mark i believe so that means you can get a mortgage for around 180K which means you need a deposit of around 80K if you are looking to buy a place worth 240K. because 20K of that deposit will be eaten up by solicitors fees, stamp duty, furniture, other costs, etc. remember you will have to fully furnish the place which means beds, dining tables, tv's, couches, coffee tables, washing machines, etc. all of this stuff costs money then add in stuff like cooking appliances, kettles, irons, carpets and anything which needs doing.

also how are you planning on splitting the bills with you earning more than double your partner? what happens if it doesn't work out? have you looked at how expensive council tax is on a £240K property?

the reality is you are going to be paying more to enjoy the same stuff so she is essentially getting a lot more for her money. this isn't an issue for high earners but at the lower end it can cause friction. especially since her wage is below minimum wage full time employment.

It was more to replace existing work with a permanent role that's more of a guaranteed income.

Bills are bills, if I earn more than i put more in, simply really. Welcome to marriage

As for furnishings we live in a flat essentially now, so I have our own furnishings, sofa, TV, bed, side table, wardrobe etc etc

 

[Delvis]

still you would need a 70K deposit then to be on the safe side of things. also with your wife being self employed how does things like her pension and maternity leave work?

she won't be entitled to pretty much anything so she either needs to up her income considerably or get a job which provides benefits and security like the above. i take it she gets zero holiday pay too as well as any holidays then? so if you decide to go away for 2 weeks potentially that is 2 weeks lost earnings for her?

i wouldn't be taking any of her income into account tbh until she got a job and she could do her self employed stuff around that. lots of places offer part time shifts.

Correct.

Self employed, so anytime not working is no income because all the work is based on visits to clients.

This is one of those rare occasions where Psycho Sonny is speaking sense.

What hours does your Mrs work? If she's bringing in less than a min wage income then surely there is scope for a second job unless her own business is basically paying slave labour?

Does 240k get you the house you need or the house you want? When I was with my ex she wanted a 180k+ house yet we'd have been perfectly comfortable space and location wise in the one I ended up buying myself (sub 110k). As a result I'll be able to overpay significantly. And because I bought something that needed work, it's probably worth approx £125k now so when I remortgage in October i'll be able to bring the LTV down again.

240k is just a house that popped up down here, 2 bed.

Can I ask roughly what your wage was and what deposit you had?

There's still a bit of waffle there

Based on the fact OP is renting, and doesn't have much of a deposit etc would be safe to assume he's a FTB, so therefore he's stamp duty exempt which will save a few k. Solicitor fees should only be around 1-1.5k and ~500 for HB report. Even if he has no stuff you'd just buy only what you need, even if it meant second hand from gumtree.

Halifax suggests he'd get a mortgage of upto 200k, so i'd put his deposit at 45/50k.

Yes we'd be first time buyers.

Rent isn't a lot atm but I've been unable to save much untill now, really I should have changed jobs two years, live and learn.

no way he gets £200K especially with her being self employed. on his income alone you are talking £150K max. more realistically £120K. with hers lucky to get up to £180K max and realistically £150K.

ideally IMO as a first time buyer he should be looking to buy something around £170K max IMO with the sort of income he's stating. it puts him in a stronger more comfortable position in terms of overpayments, accounting for maternity leave/pay, etc. what if his partner becomes ill? if he's going to go for a £240K property he needs to then be spending £200 a month on various insurance policies (health and life, etc).

Going by what everyone is saying we'll defodefini need to lower what we can get, as I'm not going to be saving 50k any time soon....so we'll probably end up renting annoyingly, which is money down the drain

I don't control the calculators. OP said he's on 30k, and his wife is on about the tax threshold, which is what, 12k. Stick that into Halifax's mortgage calculator and it'll give you 199.5k. Which is perfectly within typical bounds 42*(4.5 - 5)=189-210k, infact (although irrelevant to the OP) there are some lenders that will go upto 6 times salary, although highest earner must be above 50k.

Not for me then

those calculators are to suck people in. when they sit you down they will be more firmer. especially when they see she is self employed.

i reckon he could get £180K max. if interest rates go up after brexit like people are predicting he will be lucky to get £160K if he walks in after an interest rate hike or two.

Yep, Brexit is going to do something no doubt, can't wait :/

That does sound like it doesn't factor in any monthly outgoings though. Factor in standard house hold bills of at least £500 pm and you are going to see that drop.

Yarp

 

[Delvis]

240k you're going to want a minimum 10% deposit (24k). As an example my house was circa 250k, 10% and we were then earning circa 60k (roughly half and half ). Admittedly it needed a lot of work (&money) and as a result, is now worth a lot more (hopefully!).

You can also get the help to buy schemes with 5% deposit, but you will get a worse rate, and need to work out how to pay off the government owned percentage after 5 years.

Does your wife stay at home/look after kids? Otherwise I'd agree with other responses in that it would help you accumulate some more cash if she had another job.

Tbh I'd always look to max out mortgage as I have low outgoings elsewhere, next place I'll probably be doing the same

Yeah we have a help to buy ISA, but you don't have to take their money but looking at prices we'll be in that bracket anyway.

No we don't have kids. She's been looking for alternative work, she's a vet physio and one day is dedicated to that, the other work is dog walking and all of a sudden some clients have dropped out (because they're working from home for instance)...So she's looking for work between Tuesday-Friday now, as the vet physio work is what she wants to be doing full time just it's taking a while for vets to take them on board.