Mortgage help.

PH4NT0MBL4DE

PH4NT0MBL4DE

PH4NT0MBL4DE

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25 Jan 2013
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197
Me and my wife would like to buy a home. We are 22 and 23 and have 2 kids. I earn about £27000 a year I think but she only earns about £5000 - £7000 a year as she only does part time as we have kids.

We tried to calculate a loan through our bank (hsbc) and could only borrow £79000 but the house we wanted was £139000. We said we would pay %10 of the property and wanted to spread it over 30 years and have capital repayment. Did we do something wrong here lol.

So we would like some advice please. How much deposit should we out down, like what is the average people pay.
Is it best to go capital repayment or interest?
What is the best combination of payment methods that will make my repayments as low as possible. I don't want to pay a ridiculous amount on the deposit.
Any other advice in regards to mortgage is very welcome as we are complete novices when in comes to a mortgage lol.

Thanks.
 
HSBC offer higher loan to value loans. I assume your above information comes from the online calculator - you should call them to discuss your requirements.

You will find mortgage rates will be lower if the mortgage is less than ~85% of the what the bank value the house.
 
You could look at the Government help to buy scheme

On a £140k house you pay a 5% deposit (£7k), borrow 20% from the Government (£28k) and take a Mortgage of 75% (£105k)

You won’t be charged loan fees for the first 5 years of owning your home.
In the 6th year, you’ll be charged a fee of 1.75% of the loan’s value. After this, the fee will increase every year - RPI plus 1%.


^^ Macca beat me by seconds
 
Thanks for your help so far guys. How do I know what the bank values the house at? And when you say I won't have to pay back the help to buy scheme until after 5 years of owning the house. Do you mean 5 years after I have fully paid off the mortgage?
Thanks
 
PH4NT0MBL4DE said:
Thanks for your help so far guys. How do I know what the bank values the house at? And when you say I won't have to pay back the help to buy scheme until after 5 years of owning the house. Do you mean 5 years after I have fully paid off the mortgage?
Thanks
Click to expand...

No, the 5 years starts from when you get the mortgage.
 
PH4NT0MBL4DE said:
Thanks for your help so far guys. How do I know what the bank values the house at? And when you say I won't have to pay back the help to buy scheme until after 5 years of owning the house. Do you mean 5 years after I have fully paid off the mortgage?
Thanks
Click to expand...
You don't have to pay the HelptoBuy loan back ever until you sell your house, but, from 5 years you will start to pay the fee on the amount you borrowed.

Also note : If you leave repayment of the HelptoBuy loan until your house sale you will repay the percentage borrowed, not the value borrowed. So if you borrow 20% you will payback 20% of the total market value when sold.
 
You are a little ambiguous with your income. When you say 'about', what do you mean? Are you both empoyed and do you earn commission / bonuses?

You can't really get away with borrowing the deposit either (unless it is a gift from a famiyl member).

Try the loan calculator at Virgin Money as they take into account incomes and expenditures, rather than just going against you as you have two kids.
 
Regardless of how long you want to pay it back over, the mortgage co. will only lend you X*income, so the most you will be able to afford for a house is X*income + deposit.

If you want a more expensive house, then really the only way you can do it is either increase your income, or increase your deposit.

PH4NT0MBL4DE said:
How do I know what the bank values the house at?
Click to expand...

Initially they'll look at the sale price, but once you've placed an offer, you'll need to get a valuation done by an surveyor appointed by the bank to confirm the value.
 
I'm surprised they will only loan you 80k - Most mortgages lending in principle is around the 3 - 3.5 - 4 times earnings range, which gets you to about 100k.

It might be worth talking to a mortgage broker who will get you an idea of what other lenders will loan you, and then go through the process of applying for a mortgage for you. They will be charging you for the service once you put the real application through, and this can range anywhere from 200-600 quid for their fee. On the flipside you might be able to borrow more by using their services than you are finding already.

Personally, I think you are too young, earn too little between you, and want a house costing too much, unless you are able to raise a hefty deposit (14-20k which will get you a decent rate) to bring the mortgage amount down. Your mortgage payments are going to end up being over a third of your own take home pay ... not good.

A better strategy might be to get something cheap that you can build up some equity (assuming house prices don't go down at least) in over the next 5 or so years, by which time you should both be earning more and will be able to then put down a larger deposit, and make the payments comfortably.

Don't dive into home ownership - It took me till i was 34 and willing to do it. The last 10 years should be a warning from history about what happens when people dive into owning homes at ANY cost.
 
I bought my first house in June, there's only three major aspects to stress over in my opinion.

1) Mortgage Deposit: Larger the deposit = the better loan-to-value ratio = lower APR (Focus on percentages, 90%, 80% or 75% Mortgage - round up/down your deposit to match one of these - DO NOT GET A 5% DEPO)
2) Mortgage Term: Go for the lowest term you can afford per month (short time, you'll have to pay more off your mortgage per month, long term you could save thousands of pounds in interest rates)
3) Continuity: Always have an emergency fund and don't waste money on short term loans, its very easier to get into debt from buying furniture for the house etc - be frugal!

I personally went for a 20 year mortgage (with an option to pay 20% extra per month fee free) with a 10% deposit, I had enough for 15% but the rates weren't any different and I couldn't stretch my budget to 20% at the time.
 
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Without meaning to cause offence (but acknowledging that I probably will...) you don't even know how much your wife earns.

It seems to me that you need a better grasp of both your current financial position as well as how mortgages work before taking on this level of financial commitment.

Perhaps you should consider renting for the time being. House ownership isn't an entitlement.
 
seems hsbc are offering you 2.5x your combined gross salaries, sounds about right, you wouldn't want to be the next repossession statistic :O
 
maccapacca said:
25% deposit will get you the best rates.
Click to expand...

Used to be the case but following the credit crunch sometimes you need as much as 40% to get the best deals.

Anyway it looks as though you have a joint income of £32-34k and want to borrow approx £125k. That is over 4x joint earnings and over 4.5x earnings of main bread-winner, which is pushing it a bit in terms of what most lenders will offer these days.

It sounds to me as though to get the sort of property you are looking for you may need to consider H2B scheme or similar which effectively means you won't need to borrow as much from the banks.

I also second the posts about needing to be more precise about your household income as a few grand here and there could make all the difference in your budget
 
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