First time home ownership

[BulletToothTony]

Hi fellas,

I'm hoping to buy my first house/apartment within the next few months. I'm single, live in the North West, 30 years old with a secure job making £28-32k a year.

I'm just looking for a little guidance as this is the first time I've explored ownership seriously, but I'm at a stage where I don't want to piss money away renting any longer. I want the security of a home and asset of ownership/investing in myself. But in truth I'm fairly clueless and could do with a little help.

How is the housing market looking more broadly at the moment, would it be wrong to get the impression it's inflated relative to the state of the wider economy? Would the next few months be a wise time to buy or a risky one.. is there the potential for a correction over the horizon in the housing market which could really come back to bite you buying soon?

As far as a mortgage application goes, any tips or advice you could give me to get the best possible rate? I've heard all sorts of stuff about mortgage applications being rejected for the most spurious of stuff, even a friend of a friend having their application rejected because they spent money in Gregg's every morning before work apparently ha!

My job also has an attractive share save scheme and I'm thinking of contributing £300 a month to it, I have to decide for the year this week, but I'm concerned about how that would effect my eligibility and chances with a mortgage application. My annual wage would be unchanged but my take home pay would take a bit, is that something I should be worried about if I apply?

I should have a minimum deposit of £20k, could be as high as £50k potentially, but I'd have to liquidate some investments and I'm not wholly convinced that would be a wise move either. Thoughts? I have £8k debt currently also however, divided over two zero interest credit cards and a 3% fixed interest loan over the next 18 months. Monthly payments for these total £800 currently, could pay them off early if it'd help.

If you were me how would you play it? Am I doing the right thing given my personal circumstances currently? I'm aware it's tougher doing it single too, so a lot to mull over. Would be interested to hear all perspectives.

Sorry for all the questions, I just know we have some wise old heads on this forum and I'd be grateful to tap into that wealth of knowledge and experience.

Any help or advice would be greatly appreciated. Cheers.

[J8 SVG]

going through our first purchase at the moment (Just come across the biggest roadblock so far as the mortgage valuation came back as a big fat NO due to some damp but hopefully we can get that sorted quickly)

Some thoughts:

- Clear all your debt before going in, more than anything this will boost your credit score.
- The mortgage company will expect you to be saving so any input to savings and pensions will be seen as a good thing as you're in control of your money
- Don't buy something with visible damp (See above) even if you have the funds to fix it once you buy it
- There are currently no 86-95% mortgages so you will need minimum 15% deposit.
- Get a good mortgage advisor, ours is free as he takes commission from the mortgage company and has been very useful for advise going through this purchase

We've ended up with a fixed rate of 2.99% for two years, not great compared to last year but affordable and we are buying a doer-upper so hopefully we can increase the value before getting a new mortgage in two years time and increase our equity

[Rob_125]

Houses are a long term investment, so I wouldn't worry too much about how the market is going to play out, you could wait forever for a fall. Start viewing houses to get a feel for the market.

[RichTT]

BulletToothTony said:

Any help or advice would be greatly appreciated. Cheers.

I wouldn't be overly concerned about the housing market as a whole unless you plan on flipping it or moving in a relatively short time period. Overall house prices trend up same as the stock market. It's time in market that will keep you in good stead rather than moving in and out as trends dictate. We're not going to see the same level of gains over time that say the last 30-40 years has but I wouldn't worry in the short term.

But do your research into the areas where you're looking to buy. Is it up and coming, are there good schools nearby, is there business / shops / industrial areas? etc etc. Use Google street view to have a look at the streets & areas nearby.

Re; rates & applications. The higher the deposit the better your rates are likely to be. Find a mortgage comparison site and play with the numbers to see what it comes out at. Rates are low at the moment anyway and there are some stellar longer term (2-5) year deals available that allow you to plan ahead financially.

In general terms all of your outgoings will be assessed for mortgage affordability. Any high interest debt is best cleared ASAP. 3% isn't high but it's still debt and will count against your affordability score. They will review your spending habits over at least a 3 month period to see what you typically spend your money on and make a decision against that and your credit score.

On 32k a year with 8 grand debt you will be able to borrow between 80k (likely) and 130k (less likely) dependant on deposit. To make your chances of being successful in applying I would think you would need 10-15% deposit. (or as other have said they're not even available).

How would I play it?

1: Clear the debt at 3%
2: Work out what you think you can afford monthly for a mortgage and play with a mortgage calculator - Be realistic, no point living in a large empty house living on beans and toast.
3: Work out what you can get with a 10-15% deposit within the above bracket
4: Spend a lot of time on property sites learning about the areas that you want to buy into (good if you already know the area / town).
5: Don't get hung up on property values over time
6: Hold off on the company share scheme until you clear your debt, buy in next year when you have a better idea on outgoings
7: Have a sound financial plan for the future, once your debt is serviced take into account building a 6 months outgoings / emergency fund first. Houses can be expensive when things go wrong and even just maintaining what is already in good condition.

Also, some advice that I wish I had followed when I was younger. Take 5-10% of what you earn in take home pay. Find a good S&S ISA and stick that on a DD for the day after you get paid and then ignore it. Compound interest is financial magic.

[Stevil]

Drop Sarnie a message on here and he'll be able to offer some advice, he's a mortgage advisor and handles a good chunk of the PH mortgages.

[CubanPete]

J8 SVG said:

going through our first purchase at the moment (Just come across the biggest roadblock so far as the mortgage valuation came back as a big fat NO due to some damp but hopefully we can get that sorted quickly)

Some thoughts:

- Clear all your debt before going in, more than anything this will boost your credit score.
- The mortgage company will expect you to be saving so any input to savings and pensions will be seen as a good thing as you're in control of your money
- Don't buy something with visible damp (See above) even if you have the funds to fix it once you buy it
- There are currently no 86-95% mortgages so you will need minimum 15% deposit.
- Get a good mortgage advisor, ours is free as he takes commission from the mortgage company and has been very useful for advise going through this purchase

We've ended up with a fixed rate of 2.99% for two years, not great compared to last year but affordable and we are buying a doer-upper so hopefully we can increase the value before getting a new mortgage in two years time and increase our equity

Not sure on the damp being an issue mortgage wise unless the valuation is running pretty close to the bone.

Our home had some damp issues. Most of it is sorted now, chimneys rebuilt, repointing in progress, and a roof leak sorted. Even when it is 'dry' as an old property with no damp course, lime mortar and no foundations it will read damp on a meter compared to a new build.

[BulletToothTony]

RichTT said:

I wouldn't be overly concerned about the housing market as a whole unless you plan on flipping it or moving in a relatively short time period. Overall house prices trend up same as the stock market. It's time in market that will keep you in good stead rather than moving in and out as trends dictate. We're not going to see the same level of gains over time that say the last 30-40 years has but I wouldn't worry in the short term.

But do your research into the areas where you're looking to buy. Is it up and coming, are there good schools nearby, is there business / shops / industrial areas? etc etc. Use Google street view to have a look at the streets & areas nearby.

Re; rates & applications. The higher the deposit the better your rates are likely to be. Find a mortgage comparison site and play with the numbers to see what it comes out at. Rates are low at the moment anyway and there are some stellar longer term (2-5) year deals available that allow you to plan ahead financially.

In general terms all of your outgoings will be assessed for mortgage affordability. Any high interest debt is best cleared ASAP. 3% isn't high but it's still debt and will count against your affordability score. They will review your spending habits over at least a 3 month period to see what you typically spend your money on and make a decision against that and your credit score.

On 32k a year with 8 grand debt you will be able to borrow between 80k (likely) and 130k (less likely) dependant on deposit. To make your chances of being successful in applying I would think you would need 10-15% deposit. (or as other have said they're not even available).

How would I play it?

1: Clear the debt at 3%
2: Work out what you think you can afford monthly for a mortgage and play with a mortgage calculator - Be realistic, no point living in a large empty house living on beans and toast.
3: Work out what you can get with a 10-15% deposit within the above bracket
4: Spend a lot of time on property sites learning about the areas that you want to buy into (good if you already know the area / town).
5: Don't get hung up on property values over time
6: Hold off on the company share scheme until you clear your debt, buy in next year when you have a better idea on outgoings
7: Have a sound financial plan for the future, once your debt is serviced take into account building a 6 months outgoings / emergency fund first. Houses can be expensive when things go wrong and even just maintaining what is already in good condition.

Also, some advice that I wish I had followed when I was younger. Take 5-10% of what you earn in take home pay. Find a good S&S ISA and stick that on a DD for the day after you get paid and then ignore it. Compound interest is financial magic.

Cheers J8 and Rob.

Thanks for the in depth reply too Rich, appreciate your help mate. I'm currently paying off the debt as slowly as possible currently as I'm investing as much as I can every month in a trading ISA and a separate trading account with IBKR that would be subject to capital gains tax. My rationale is basically cost opportunity, and inflation is just diluting that debt as I pay it off slowly with a fixed rate interest or zero as far as the credit card debt goes. Do I need to worry about how very large percentages of my monthly wage are going out into trading accounts every month?

All my expenses are covered and I've never missed a bill or payment, but I haven't really been mindful of how that may appear to an underwriter et al going through my bank statement with a fine tooth comb. Could that prove an issue with a mortgage application?

Is it true paying back a loan early (ignoring any early repayment penalty etc) can have a negative impact from a credit scoring perspective? E.g. a lender sees you as more likely to end an agreement early to the cost of them losing on interest etc? Or is that an old wives tale?

The share scheme at work is particularly attractive though because it's a fairly safe way to make 100%-200% over the next 3 years given the company's expected movement (though nothing is guaranteed of course). The share price is guaranteed every month at the initial agreement date with the discount, with £10k put in over 3 years that could be worth £20k-£30k or possibly even more by the time I'm 33. It would allow me to spend less time actively focusing on finding investments and all the risk that brings. It's very appealing for that reason. You think I should knock it on the head though if buying a house is a goal in the short term? Should I go ahead, the money is stuck there for 3 years and if I wish to withdraw any early it'd be for the cash value and terminate the agreement, so it'd effectively just be an interest free savings pot in that scenario, though all things considered it is a appealing currently. Not sure what to do in truth.

As far as a length of a repayment for the mortgage goes, what kind of strategy would you take there mate?

25 year, shorter, maybe longer?

Shorter means you pay less interest but pay more every month, longer means more interest but inflation dilutes that debt and frees up cash in the short term to allow you to invest elsewhere to offset the greater interest total and hopefully come out better off. No guarantees though obviously. Your thoughts on this mate?

Thanks for all the help thus far fellas

[bigandclever]

BulletToothTony said:

.
As far as a length of a repayment for the mortgage goes, what kind of strategy would you take there mate?

25 year, shorter, maybe longer?

Shorter means you pay less interest but pay more every month, longer means more interest but inflation dilutes that debt and frees up cash in the short term to allow you to invest elsewhere to offset the greater interest total and hopefully come out better off. No guarantees though obviously.

Only my opinion .. I took a 15 year mortgage because in my head I wanted to clear it ASAP. What I wish I’d done is taken a longer 25 year mortgage and over-paid the monthlies as if it were the 15 year term. That way, when my income took a hit (as it has) I could revert to lower monthly payments with no penalties / less stress that the mortgage co would get the hump.

[NickCQ]

My advice would be first to pay off short term debt then buy the property. I assume prices are reasonable in the NW but you want to put up enough of a deposit to get into a lower LTV / interest rate band (90%?)

Once you have that basic platform of financial stability (and assuming you are setting enough aside for your pension as well) you won't be able to do too much damage by gambling away the rest of your disposable income on trading platforms.

I wouldn't worry about CGT too much given the £12k threshold and carryforward provisions.

[NickCQ]

BulletToothTony said:

a friend of a friend having their application rejected because they spent money in Gregg's every morning before work apparently ha!

I wouldn't take stories like this too seriously. Probably something more serious going on that led to the decline.

[RichTT]

BulletToothTony said:

Thanks for all the help thus far fellas

I'm no financial genius, in fact it took me until I was 38 before I realised that I had to pay a bit more attention to my finances and be actively involved in them. You seem to have your head screwed on pretty well as far as making your money work best for you and are possibly just overthinking this all to a certain extent.

In that regards I can't offer you too much further advice. The ISA investment is an excellent choice and I'm assuming that the IBKR trading account is just a discretionary amount and not a firm commitment? If you think the shares are a good proposition over the longer term and it's an affordable commitment then go for it.

I would still pay off the 3% debt. but if you walk into a bank with a 15%+ deposit and a good credit history then I don't think you'll have a problem.

As the above said, take the 25 year, pay off more as and when you can.

You certainly appear far more financially savvy that I was at your age!

[Killer2005]

It's been a while since I've done residential mortgages but
1. Message Sarnie as the resident PH advisor.
2. Get yourself on the voters roll where you live, makes part of the mortgage process easier to deal with.
3. Your credit cards would be taken at a level of around 3%, but would depend on lenders.
4. Save as you earn deductions shouldnt be taken into account for affordability so no need to worry about those.
5. Deposit over 10% will help.

[J8 SVG]

CubanPete said:

Not sure on the damp being an issue mortgage wise unless the valuation is running pretty close to the bone.

Our home had some damp issues. Most of it is sorted now, chimneys rebuilt, repointing in progress, and a roof leak sorted. Even when it is 'dry' as an old property with no damp course, lime mortar and no foundations it will read damp on a meter compared to a new build.

I think lenders are being way more careful at the moment - with so many applications at the moment they can chose to take on lower risk properties

I agree with you though, it's a Victorian terrace that does have a small issue with the roof that we have the money to fix but it's been empty since the summer and has had no heating on since then so I assume none of this is helping

Specialist going in next week to do more than wave a damp meter around

[anonymous-user]

J8 SVG said:

- Clear all your debt before going in, more than anything this will boost your credit score.

Depends on the debt, apparently.

If it's a personal loan it could be better to leave it open: https://www.experian.com/blogs/ask-experian/will-p...