Mortgage duration

Be really careful and ensure you don't spend all your wages on a mortgage you can barely afford.
Back in the 80's (i think) interest rates were 17.5%, most houses were less than 40k, but a lot of people lost their homes.

Always plan for worst case scenario, ensure you can pay a mortage at interest rates 8-10%.

It's foolish to say "they will never go that high" but look at the state of the economy and our national debt.
 
what showboat is saying is what you need to address; only mortgage yourself to what you can afford each month. you need to budget for bills and the unforseen. it's all very well getting a mortgage on a relatively short term so you can be mortgage free within 20 years but if you buckle under the mortgage repayments or have to have a poor standard of living because of this, it totally defies the point.
 
OP, with 20% you should be able to find some respectable mortgage deals out there as I am sure you have probably seen.

Bare in mind that if you are getting to near 25% you will need to factor in other costs such as solicitor fees, moving costs, new furniture, having some savings spare for when you have moved in, possible stamp duty if it lowers soon it's being suggested, etc.

My house was just under stamp duty and we had a 85% LTV. We had more saved and could have probably stretched to 20% but considering EVERYTHING else we would have sold ourselves short and realistically needed another 3-6 months worth of savings to be comfortable.

Having said that, the process of finding/buying takes a long time and we offered around August and are completing a week Friday. We took our time and just let the process run it's course because we were saving the whole time :D

What is your credit rating like? Are you in any debt (bar student loan) with credit cards etc? Did you achieve the 15-20% you have now on your own or was it a gift from family? Do you pay into a pension scheme?

Questions like the above will inevitably determine if banks are interested. Generally if you aren't in debt and have a nice chunk of deposit and good credit rating they will have no problems in lending you the money. Although as first time buyers the deals are never really that sweet unless you are putting down huge amounts of money on a deposit.

To add to what CM1179 and Showboat said above, they recommend that roughly 1/3 of your total monthly income should cover a mortgage payment. Leaving the rest for " enjoying life" (I.E - Bills, Food, Saving, Etc). This should also leave you in good stead for planning for things like interest rate rises.

It then depends if you want to mortgage over say 35 years, if you want a fixed 2-3-4-5 year deal. Protection from interest rates rising until you come out of that term but slightly more on the monthly payments. If you think you'll be earning more in 4/5 years then it might tie in nicely.

It's all a lot of ifs/buts and whats suited best to your position at the end of it all. No one knows what is going to happen, the benefit of hindsight, if only we could have it now.

The main thing is if you are moving with the intent on buying a home or an investment to make money from, if it's the first then that is a better term to be considering buying at the moment, imo :)
 
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Not really a lot to add to what's been said already, other than another recommendation for a longer mortgage, with the option of overpayments.

We've gone for a 30 year mortgage, but can pay up to 10% of the total value off, whilst the monthly repayments are also shrinking the total capital in the mortgage (its a repayment mortgate, interest-only ones are daft IMO)

When the first 5 years is up, we'll look at our savings, maybe pay a bit more off the mortgage cost and then take out a 15 year mortgage or something, probably paying back similar levels to what we currently are.

Of course, if circumstances change, we have the options of making no overpayments, or even payment holidays if times got really bad.

In short, play it so you have the maximum amount of flexibility possible, it may sound dreadful taking out a 40 year mortgage when you're young, but none of us know where we'll be in 40 years, so keep your options open. Hope that helps :)
 
In answer to your questions Knubje:
I have thought about going with a slightly lower deposit and keeping that extra 5% or so aside for the fees/moving in costs you've mentioned. That very much depends on the time it takes us to find a place though as we might have time to earn a bit more.

Credit rating should be fine for both of us. No loans or any debt of any kind apart from student loans. I got my first credit card approved recently with no problems. Saying that though we've never done anything that would give us a 'good' rating, i.e. paying off cards regularly, so I'd imagine our credit score would be fairly average.

1/3 on mortgage sounds about right for what we have been calculating. If we can get a long mortgage it may move down to nearer 1/4 which would be great. We don't want to risk going any higher than though because we're not going to know our exact outgoings until we have a house in which case it'll be too late!

I think we'd be looking at a 3ish year fixed rate. Don't think I want anything other than a fixed rate as that will make it a lot easier to budget and hopefully it's the safest option.

And the house will be bought as a house rather than an investment!

Anyone know of any mortgage providers that are particularly flexible with regards to over-payments then or are they quite hard to come by these days?

Thanks again.
 
Personally I've always liked to keep the mortgage term as short as possible, as the interest rate is (normally) more than you can get from savings. Our first mortgage was over 20 years (approx 35-40% of net income) and our second over 7 years (helped by an inheritance). Ideally I'd like to have the mortgage paid off before starting a family, as that is a great unknown in terms of cost, but my wife has other ideas :)

That said, the problem with going with a shorter term is that you can leave yourself in an awkward situation if you have a sudden drop in income. A better option may be a longer term mortgage with flexible overpayments, as that would let you overpay constantly but with the safety net of being able to drop back to the normal rate if your income gets a hit.
 
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