Steve Fort

I'm a first time buyer, and at present i'm looking around at a few places.
I've also been looking into the various mortgages etc. Its all so confusing though!
Fixed, Variable, Capped, Flexible etc, all at different rates.......its a minefield for us first timers.

I wondered if any of you Knowledgable people could shed some light on this area for me please.
Basically i need to know that advantages and disadvantages, and which type of mortgage would suit me best. (i know that this is probably like me asking the length of a bit of string!)

If it helps, I'm 25, earn £25,000, and i'm looking for somewhere around £110-£120k (with a 10k deposit).
Whether this info makes a difference to the type of mortgage i don't know.

Any help is very much appreciated,

Cheers,

Steve

P1Fanatic

Im in the same boat and a fixed mortgage appears to be the best bet so you know exactly how much you are forking out per month for the next year or so. You should book a couple of meetings with your bank and various mortgage lenders to get an idea of what they offer and what each part means.

I know what you mean - after IT, house buying must be a close 2nd for the amount of jargon used.

Simon.

darlodge

My girlfriend and I bought our first house about 4 months ago and at the time, the Halifax were giving a very good rate.

We went for a 2-year fixed plan with the Halifax as the first 2 years are the toughest money wise (so we were told anyway). Its nice to know that the mortgage is exactly the same each month as apposed to a variable rate which obviously differs with 'the market'.

Buying our house was probably the most stressful thing that I have done. The effort required is immense, but it can't beat that feeling of having you own home

Have a look here and here for mortgage lenders.

All the best. I hope it all goes smoothly
Darren

MarkO

Be very aware of taking advice from people on here. I don't mean that in a bad way, it's just that there are lots of people on here who'll give you advice, and tell you what they did, but it probably won't be applicable to you. For example, I'm on a flexible variable self-certified mortgage, but unless you're a contractor with a large lump sum that certainly won't be right for you.

Since you clearly don't even have a vague idea (i.e., you're completely new to this, rather than having a fair idea of what you want and asking for advice to narrow it down) I would suggest you go talk to a few banks, building societies and even mortgage brokers (such as Charcol) to get a complete introduction into the subject. Also, read some of the money sites (such as www.thisismoney.com) which will give you a complete explanation on all your options, along with some hints and tips to get you started.

If you're earning 25k, most lenders will allow you to borrow 3.5 times that amount (so just shy of 90k). You might be able to borrow higher multiples, but it depends on whether you want to take the risk, and how much deposite you have. Bear in mind though that a good many people think that the housing market is either slowing down or actually about to fall a little, so this probably isn't the best time to be over-stretching yourself.

Good luck!

Jeremy'sMum

Ditto what MarkO says - be very wary of taking advice from here (although it's as good a place as any to begin). You'd be as well to walk into your nearest pub and ask the locals. When look at any mortgage you should make sure you consider 1)What it will cost you over the next couple of years 2)How certain you can be of these costs 3)How much you will owe after a couple of years and how easy will it be to move to another product/lender 4)How important is it to be protected against interest rate rises...... there are many other things to consider but these 4 are a good start.

Personally I wouldn't go near the Halifax - I don't rate their customer service or their interest rates. (Different strokes for different folks, I guess).

Pretty soon somebody's likely to reply, trying to sell you their services for this......

Taff

Straight repayment with a discounted variable rate every time.

Interest rates are *unlikely* to go up in the near future (next 5 years or so) and you get more flexibility (usually) than a fixed rate i.e. no penalties, allows overpayment of capital etc.

Oh, and try to control yourself on the multiple.

Don't go for any fancy mortgages with built in insurances, endowments etc. Even before these fell apart, it was blindingly obvious it was a bad deal. Banks etc will always try and push the fancy mortgages and ignore staright repayments - why? - 'cos they make oodles of cash from the fancy ones. And where does that cash come from? Your pocket - cash that you could use to borrow more or pay more against your borrowings.

And as someone said above - take my advice with a pinch of salt and do whatever floats your boat. What's good for the goose may not be good for the gander. Six of one, half a dozen of the other. etc etc etc

Taff ACA (fyi)

Andy McCord

the trouble with discounted variable rates is that they dont always pass on the B of E cuts in interest rates to you, IMHO the best deals at the moment are a trackers, but always avoid being tied in just in case rates start rising, at which point you can dive onto a fixed rate for x years, you only have to look at lenders deals at the moment to see that interest rates are likely to continue to fall, hence why they want to get you onto a fixed rate B4 it falls again

V5

Just going through the process of buying our first house and was told about this rule of thumb used by lenders:

the sum total of your monthly mortgage repayment plus any other loan/debt commitments shouldn't be more that 1/3 of your gross monthly salary.

That's not to say you wouldn't get a mortgage if it was greater than a third.

I know everyone is say interest rates aren't going to rise, but I think it's worthwile making sure you could make the repayments if they do. I know that if we had to, we could still make the repayments if they went up to 10%. It gives a level of peace of mind.

In the end we went for a two year fixed rate one because it does make budgeting easier in the early days.

Good luck!

[Edited by V5 - 6/27/2003 9:46:03 AM]

corradoboy

Like some of the above, it's your money, your mortgage, it has to suit you & your financial situation and banks will give better advise than Scooby drivers, even if they are selling you their products.

On £25k you probably have around £1800 a month after tax, and your mortgage will be around £600, leaving £1200 or so for all other expenses. You should have a reasonable amount of disposable income left so it might be worth looking at a "Flexible Current Account Mortgage".

That's what I've got from Yorkshire Bank, and I'll do my best to explain it, briefly. Think of it not so much as a mortgage, as an overdraft to the amount of your loan, with interest charged at about 1% above base. You pay all you salary in, and this comes off your loan, thus not accruing interest. Each month the amount you would owe if it was a normal mortgage is shown on a statement, along with what you actually owe having overpayed. The difference between the two is effectively your savings, and you can spend it if you wish. The less you're tempted to spend, the more you save in interest payments, the faster you get the monkey off your back, or, the faster you can move up the ladder as savings effectively become equity.

Example based on my circumstances.

£50k borrowed over 25yrs @ £300pcm
Joint earnings approx £2700pcm leaving £2400 for living expenses.
Estimated time to final payment 4yrs. Saving 19yrs worth of interest and nuff cash!
I'm hoping in about 1yr to have enough equity to pay cash for a new Scoob.

Bonus on top, interest free credit card. Do all your spending on the card, leaving as much money as possible in the mortgage account for as long as possible, but clear the card balance each month.

P1Fanatic

I think your looking at more like £1,550 - £1,600 net per month on a £25k salary.

Simon.

3times

Steve,
As you know I am very local to you and just so happen to be an IFA.

I can probably give you all the information you need.

e-mail me as per profile and I will give you my number.

Tony

robski

Just a couple of things to think about if you havent got enough already.

Fixed deals - you can get some long term ones. We have a 15 year fixed so our mortgage feels more like a rent except we are buying our own house. We thought of it this way, we were more than happy paying 750+ a month to live in that house, so now we dont really care what interest rates do. Its a nice feeling. We may start to worry about them in 11-12 years if they are 10% plus. But bu then even with low inflation, approx 50% or more wage increases should have been seen.

Very carefully check the get out clauses, generally the better the deal, the more get out cost. If it seems too good to be true but you can get out for nothing the chances are it isnt so good.

If it still exists there used to be a Which? Mortgage magazine, good start as no one is sitting there talking at you, and you can re-read bits to make sure you are 100% happy you understand.

Are you really really sure its going to work out with your girly? Tricky question I know, but if your not 100% sure, and I know its easy to say yeah of course we will, dont go for something thats gonna cost a lot to get out of IMHO (been there done that).

robski