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Mortgage Advice Req'd


Stu
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Hey guys,

basically me and mrs chippiestu are looking to buy a house together, and it'll be our first house, so getting on the ladder could be quite difficult, as we are both in our early 20's.

In a nut shell, i need to know roughly what sort of figure we could borrow to put into a house.

I am a complete idiot when it comes to mortgages, so i would appreciate some non-technical and incomplicated advice if possible!!

If someone can help, i would prefer to discuss the figures aspect via PM or email, as i don't fancy mine and mrs chippuestu's salaries being broadcast on the internet!

Stu

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I am sure there will be a website somewhere that you can put in your salaries and it'll come back with loads of offers. As a rule of thumb it used to be 2.5 times the sum of your basic salaries, sometimes you can negotiate in bonus. overtime etc.

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I am sure there will be a website somewhere that you can put in your salaries and it'll come back with loads of offers. As a rule of thumb it used to be 2.5 times the sum of your basic salaries, sometimes you can negotiate in bonus. overtime etc.

the crazy house prices have put an end to those sorts of sensible borrowing limits.

a big bank (forget the name) have just launched a mortgage where you can borrow 130% of the value of the house - putting you immediately into negative equity.

insanity

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i do have access to a deposit, the amount of the deposit is at the moment an undisclosed amount, but when my parents divorced and sold the house, me and my sister got some cash put away for us to use for our deposits on our first houses. When it went in in 1992 it was for something like £4000, and i have no idea how much it'll be now, my mum is checking that out for us. i don't want to borrow more than i have to, and i certainly don't want to end up in negative equity before i start!

Stu

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My only advice would be to hold tight and wait as i can only see house prices going one way and that is down ,think i would rent and watch the market for a while as i feel anything you buy now will not gain in price for a very long time

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Most lenders will give up to 2.5 to 3 times a joint salary (3.5 to 4 times a single salary) although some will go even higher.

To get good interest rates a lot of lenders will only go to 80% of the house price so you would need 20% + £3k (fees) savings.

Some will lend more, and as Matt said up to 120%, but rates will be higher.

If monthly payments are going to be too high look at a longer term, as you are both young, 30 or 35 years maybe.

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There are many different mortgages on offer these days. Many lenders still restrict themselves to 2.5 joint but there are others that will do 3x main salary plus 1x the second.

There are also self certification mortgages - companies will lend you any amount of money, with no proof of earnings as long as you have a minimum of 20% deposit. If you were to go down this route you would need to make sure you can afford the monthly repayments. Also, don't base affordability on interest rates now, make sure you can still afford it if the interest rates were to hike to 7%-8%.

Then you have longer term mortgages. You can repay over as much as 35 years, but the amount of interest paid over this period is rather steep.

I would reckon your 4,000 would probably be in the 6,300 - 7,000, depending on how it has been invested. Now I have no idea of the prices of properties in your area matey, nor what you’re earning but if you look at 6,500 as deposit you can:

Lay down a 10% deposit and get a mortgage for 58,500. With current interest rates you would be looking at 385 per month on a repayment mortgage over 25 years or 304 per month for an interest only mortgage over 25 years

or

Lay down a 5% deposit and get a mortgage for 123,500. Again with current interest rates you would be looking at 813 per month on a repayment mortgage over 25 years or 643 per month for an interest only mortgage over 25 years.

Other things to consider are stamp duty, currently 1% of the value of the house if the house is less than 250k. You would probably need 500 squid for solicitors’ fees and what ever furniture removal costs would add up to - anything between 300-700, depending on what you got.

There are plenty of websites out there for you to punch figures into. The best I have found in my last 3 moves has been www.charcol.co.uk - click on the charcol online bit to go through to mortgage calculators.

If you want matey I can put you in touch with some very good IFA's. Just give me a shout if you need any assistance.

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thanks for the advice guys, i'll pick this up later on and let you know then! Got to go on a long drive for a business meeting this morning, the only plus to it, is that i'm going in the lex, and i'm going on my own!! :D

Stu

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stu, stu, stu..

Forget morgage advice... heres some invaluable advice..

The housing market is cooling, and 75% of analysts are predicting prices will fall, of course none actually agree on when and how much, but if you buy right now, your buying at the peak..

Now you wouldnt buy shares when they had peaked would you?

So why would you do the same with your biggest investment..?

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Now you wouldnt buy shares when they had peaked would you?

So why would you do the same with your biggest investment..?

Depends what term of investment you are looking for. If you may move within 5 years then there could be a problem but a longer term shouldn't be.

The analysts I have heard are predicting no growth for a few years rather than falling prices.

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well Colin, the one group on analysts I dont listen to are the ones linked with Estate Agents, because, shock horror - these are claiming the market will still rise (except the Halifax, who has predicted 'flat')..

I dont listen to the people that are going to provide info to keep the market moving..

And even if its a long term investment Colin, most analysts agree the market will dip and return to this level in the next 6-10 years, so in my mind, why not wait a year for the dip??

just my 2 cents..

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And even if its a long term investment Colin, most analysts agree the market will dip and return to this level in the next 6-10 years, so in my mind, why not wait a year for the dip??

just my 2 cents..

They have been saying it for over a year now. Someone I know has waited and now cannot get a morgage for the amount needed to buy a place because prices continued to rise.

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tell me about it, i'm in a similar position...

but its the estate agents doing all they can to keep the market up, after all, the more a house costs, the more they make...

At the end of the day, its a gamble, but here i have started to see the lower end start to drop (1 bed flats) and thats a good indication of where the market is going to go, obviously the 3-bed house will be last to move due to being the mass market..

Im going to wait it out in my rental...

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I agree with Colin. Everone told me last December not to move as prices were heading downwards. Well, just over a year on my house has increased by 38k. If I wanted to move into the same house today, I wouldn't have been able to.

Not only that, people are predicting the market to flatten and not fall, as Colin has also mentioned. Even if prices do fall you have to look at:

1/ How much by? - Most analysts are saying around 2-3%

2/ Where are you looking to buy? The locations seen to be flattening off or falling slightly tend to be the already over priced areas anyway.

3/ Is there an actual fall in price or are we seeing more realistic prices being advertised? We all know that a house is only worth what a) someone is prepared to pay for it and B) what the surveyour values it at on inspection. In many instances just because a house is advertised at 250,000 doesn't mean that is what it sells for.

I think that we can all agree that as long as you are sensible with working out your monthly repayments based on future interest rate predictions, even if your property does take a bit of a hit, it has always and will always recover. Supply and demand thing. In Berkshire alone 400,000 new houses have to be built by 2010 in order to keep up with demand.

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I work in the city in London and work quite closely with all sorts of analysts. The one thing I've learnt is everyone talks bollocks. The market can move only 2 ways (up or down) and all analysts predict one of the 2 directions. So atleast 50% are always right. Given that I have a fairly deep understanding of financial markets, banking, interest rates etc., I make financial decisions without any advise.

Personally, if you get an affordable mortgage and think long term (5 years plus), in the worst case you wont have made any money, but you will have paid to own atleast a part of your house. If you are the types thats going to get onto an estate agents website every month to check the value of your house, I'd suggest you want a few months and see where the market goes. If you aren't going to lose sleep over a 10 - 15% dip in your property price, I'd say, start looking and try and spot a house that's been on the market for a while. As a first time buyer with your mortgage offer sorted, you might be able to bag a good deal.

I am thinking of moving myself and the house goes on the market in a week or two. I went to see the bank last week and they offered me 4.5 times my salary + 3 times the missus' salary (I have about 25% deposit). Of course I wont be borrowing all that. So be wary of what you are offered.

Banks are there to make money and any misery that over-borrowing might cause you is not their business. Apart from being liable to pay back what you borrowed, giving them a mortgage to your property, banks have their leding risks hedged, so they never lose. Its a case of caveat emptor.

Generally speaking I dont trust any IFA's or mortgage advisors. Mortgages are very simple business and it helps to select the mortgage you want yourself and then getting an advisor to do the form filling for you.

PM me if you need more info.

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