Mortgage Calculators - How accurate?
Discussion
Me and the better half are going to be looking at applying for a mortgage next year, First time buyers. I have used a few calculators online and the monthly repayments they come back with are staggeringly high.
E.G. 25k deposit, borrowing 150k over 35 years comes back at circa 8-900 a month. Is this roughly what we will be having to fork out? I know I need to go and talk with a mortgage advisor but I am just trying to get some figures into my head first.
E.G. 25k deposit, borrowing 150k over 35 years comes back at circa 8-900 a month. Is this roughly what we will be having to fork out? I know I need to go and talk with a mortgage advisor but I am just trying to get some figures into my head first.
Easty-5 said:
Me and the better half are going to be looking at applying for a mortgage next year, First time buyers. I have used a few calculators online and the monthly repayments they come back with are staggeringly high.
E.G. 25k deposit, borrowing 150k over 35 years comes back at circa 8-900 a month. Is this roughly what we will be having to fork out? I know I need to go and talk with a mortgage advisor but I am just trying to get some figures into my head first.
The problem that you have is that even though you have a healthy deposit of £25k, when purchasing a £175k property your deposit equates to a 14.3% deposit meaning that you are looking to borrow 85.7% of the properties value (LTV).E.G. 25k deposit, borrowing 150k over 35 years comes back at circa 8-900 a month. Is this roughly what we will be having to fork out? I know I need to go and talk with a mortgage advisor but I am just trying to get some figures into my head first.
The 85-90% category represents the highest risk category commonly available and therefore is reflected in the rates offered.
I've ran the figures and the figures you've quoted seem fairly high. I've got access to a FTB only product at 4.79% Three year fixed rate which would make your payments £737 per month.
If you can get the borrowing below 85% then the rates get better, with a two year rate at 3.85% available which would make your payments £645 per month.
Hope that helps?
Sarnie said:
The problem that you have is that even though you have a healthy deposit of £25k, when purchasing a £175k property your deposit equates to a 14.3% deposit meaning that you are looking to borrow 85.7% of the properties value (LTV).
The 85-90% category represents the highest risk category commonly available and therefore is reflected in the rates offered.
I've ran the figures and the figures you've quoted seem fairly high. I've got access to a FTB only product at 4.79% Three year fixed rate which would make your payments £737 per month.
If you can get the borrowing below 85% then the rates get better, with a two year rate at 3.85% available which would make your payments £645 per month.
Hope that helps?
That helps greatly, thanks very much. We would be able to save 30k, it just means having to live at home for a while longer. The problem is, we are buying property in Aberdeen, so prices are sky high for what you get. Ideally I'd like to spend circa 150k on a property but looking at the market it appears that 150k won't get us into anywhere we would both be happy with long-term. The 85-90% category represents the highest risk category commonly available and therefore is reflected in the rates offered.
I've ran the figures and the figures you've quoted seem fairly high. I've got access to a FTB only product at 4.79% Three year fixed rate which would make your payments £737 per month.
If you can get the borrowing below 85% then the rates get better, with a two year rate at 3.85% available which would make your payments £645 per month.
Hope that helps?
Off topic, you may be able to help me with another query if you'd be so kind? How do lenders work out how much they are willing to lend somebody like me? I work offshore so I have a base salary and then I get an extra day rate for days worked offshore. Days worked offshore can obviously fluctuate so my earnings each year differ.
Easty-5 said:
That helps greatly, thanks very much. We would be able to save 30k, it just means having to live at home for a while longer. The problem is, we are buying property in Aberdeen, so prices are sky high for what you get. Ideally I'd like to spend circa 150k on a property but looking at the market it appears that 150k won't get us into anywhere we would both be happy with long-term.
Off topic, you may be able to help me with another query if you'd be so kind? How do lenders work out how much they are willing to lend somebody like me? I work offshore so I have a base salary and then I get an extra day rate for days worked offshore. Days worked offshore can obviously fluctuate so my earnings each year differ.
You don't need to get to £30k, you just need to get to 15% if you want to get to the lower rates.Off topic, you may be able to help me with another query if you'd be so kind? How do lenders work out how much they are willing to lend somebody like me? I work offshore so I have a base salary and then I get an extra day rate for days worked offshore. Days worked offshore can obviously fluctuate so my earnings each year differ.
With regards to your employment, are you salaried PAYE or contracting/self employed (and have to fill out tax returns and self assesments etc) ?
With a £150k mortgage over 35 years, even at nil interest you would be paying back £357 per month in capital.
Between £800 and £900 per month suggests an interest rate of between 6% and 7%. That does seem high and I would have thought 4%-5% would be achievable (on a 90% LTV) which would mean repayments more around the £700 pm mark. There is often a fee on top of that, though - say around £1,000 up front although it can vary quite a lot.
It is worth thinking about what it would mean if interest rates really did go up. Personally, I can't see it happening in the next couple of years (although I could be surprised) but current rates really are very low. If the mortgage rate went up to 10%, £150k over 35 years would cost over £1,200 pm.
Between £800 and £900 per month suggests an interest rate of between 6% and 7%. That does seem high and I would have thought 4%-5% would be achievable (on a 90% LTV) which would mean repayments more around the £700 pm mark. There is often a fee on top of that, though - say around £1,000 up front although it can vary quite a lot.
It is worth thinking about what it would mean if interest rates really did go up. Personally, I can't see it happening in the next couple of years (although I could be surprised) but current rates really are very low. If the mortgage rate went up to 10%, £150k over 35 years would cost over £1,200 pm.
Is it really feasible that it could increase to 10%?
Would that not cause more problems than it solves? Ive no idea how this works by the way...but it would cause huge amounts of people major issues and having to downsize, house prices to drop because the majority could not repay large sums of borrowing, then negative equity?
After 12 years of owning and three properties, im now back to renting until I can find the next house...I really dont know whether to borrorow a little In case it all goes tits up, or the maximum I can, seeing as money is so cheap!
Sorry for the thread hijack.
Would that not cause more problems than it solves? Ive no idea how this works by the way...but it would cause huge amounts of people major issues and having to downsize, house prices to drop because the majority could not repay large sums of borrowing, then negative equity?
After 12 years of owning and three properties, im now back to renting until I can find the next house...I really dont know whether to borrorow a little In case it all goes tits up, or the maximum I can, seeing as money is so cheap!
Sorry for the thread hijack.
Burnham said:
Is it really feasible that it could increase to 10%?
Would that not cause more problems than it solves? Ive no idea how this works by the way...but it would cause huge amounts of people major issues and having to downsize, house prices to drop because the majority could not repay large sums of borrowing, then negative equity?
After 12 years of owning and three properties, im now back to renting until I can find the next house...I really dont know whether to borrorow a little In case it all goes tits up, or the maximum I can, seeing as money is so cheap!
Sorry for the thread hijack.
Base rates have been pretty high over the last few decades - we're at an historic low at the moment. I know mortgage rates don't exactly track base rates (they tend to be higher as you can see from current base rates of 0.5% pa and typical mortgage rates of, say, 4%*) but it's a reasonable guide to historic mortgage rates and it's easier to find data of historic base rates.Would that not cause more problems than it solves? Ive no idea how this works by the way...but it would cause huge amounts of people major issues and having to downsize, house prices to drop because the majority could not repay large sums of borrowing, then negative equity?
After 12 years of owning and three properties, im now back to renting until I can find the next house...I really dont know whether to borrorow a little In case it all goes tits up, or the maximum I can, seeing as money is so cheap!
Sorry for the thread hijack.
It's very definitely feasible that mortgage rates could go up to 10% or higher. Base rates went up to 15% in the late '80s. It was only in 2008 that rates started dropping from the more typical 5%-6% range to the current very low level. In my view, it's very dangerous to stretch yourself with a mortgage based on current rates - you definitely need to consider whether you could still afford the mortgage if the interest rate went up.
And is it likely to go back to historic rates? Who was it that said, "The four most dangerous words in investing are 'This time it's different'"? (Sir John Templeton, based on a quick google.)
- My mortgage rate is much lower but I have a low LTV and was lucky/clever enough [delete as appropriate] to get a base rate tracker a few years ago which means I'm currently paying just over 1%. But I'm looking at that as a bonus and am prepared for the hit if/when rates go back up.
Zigster, tonker, thanks for taking the time to reply.
I'm pretty strict in terms of overpayments (as opposed to spunking any excess funds on whitegoods!) and I've no debts or loans at the moment thankfully. However, in the past I've always borrowed the maximum offered to me. As rates are so low I'm inclined to do the same this time round.
The range of properties I'm looking at are from 52% LTV (£1,700 per month, which makes my eyes water) down to 33% LTV (a much more manageable £800 per month). These are at 4%/25yrs for easy maths.
The bonus of the lower end is that I'll save £12k in stamp duty straight off, and have all borrowing paid off in circa 6 or 7 years if I put my mind to it. Less stress and worry, especially if times get hard, or children come along for example. So I'm beginning to think borrowing less is more sensible this time round (especially with the concern that rates may rise)...
On the other hand, if I max out, I'll probably not have to move 'up' again, I can downsize in many years to come and hopefully benefit from it (and have the nice feeling of living in a bigger home for the duration). I still have this niggle at the back of my mind that says 'borrow lots while its cheap'.
(+1 for BBC Mortgage Calculator)
I'm pretty strict in terms of overpayments (as opposed to spunking any excess funds on whitegoods!) and I've no debts or loans at the moment thankfully. However, in the past I've always borrowed the maximum offered to me. As rates are so low I'm inclined to do the same this time round.
The range of properties I'm looking at are from 52% LTV (£1,700 per month, which makes my eyes water) down to 33% LTV (a much more manageable £800 per month). These are at 4%/25yrs for easy maths.
The bonus of the lower end is that I'll save £12k in stamp duty straight off, and have all borrowing paid off in circa 6 or 7 years if I put my mind to it. Less stress and worry, especially if times get hard, or children come along for example. So I'm beginning to think borrowing less is more sensible this time round (especially with the concern that rates may rise)...
On the other hand, if I max out, I'll probably not have to move 'up' again, I can downsize in many years to come and hopefully benefit from it (and have the nice feeling of living in a bigger home for the duration). I still have this niggle at the back of my mind that says 'borrow lots while its cheap'.
(+1 for BBC Mortgage Calculator)
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