Talk to me about mortgages; unexpected first time buyer

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  • Talk to me about mortgages; unexpected first time buyer
  • stayhigh
    Member

    Morning All,

    After my grandfather passing I am in the rather fortunate position of having been left an inheritance of around 20K and am figuring that after a life of renting, buying a small home is not a bad shout. It isn’t something I ever thought I would be in this situation so have never really paid that much attention to mortgages so am now rather confused by the possibilities. Obviously a mortgage advisor is a a good place to start but that in itself offers an array of choices for starters bank or independent. Independent is my thought here? As a nurse I have told there are help to buy schemes available with government equity loans and Help to Buy ISAs.

    So first up is there a good place online to get a bit more of an idea of whats what with these things? Google throws up 1000’s of hits for mortgage advice which is itself a bit daunting and if I’m honest its a little overwhelming at the moment.

    Premier Icon tomhoward
    Subscriber

    London & country were good advisors/ brokers for me. Free too, as they take a commission from whomever gives you the mortgage.

    mboy
    Member

    As someone who only bought for the first time 12 months ago, Martin Lewis – Money Saving Expert is a good place to start.

    Right. Next call… Be totally honest with yourself. How are your finances? I don’t mean the £20k inheritence, I mean your monthly incomings and outgoings and your credit score. Register with Experian (pay for membership too, it’s worth it for 2 or 3 months at least), use the tools on there to help you build your credit rating to the point where high street lenders are tripping over themselves to give you a mortgage at almost the base rate of interest. You need to understand not just how much deposit your £20k (which will quickly get eaten into if you’re not careful) gets you, but how you’re going to pay for the rest of the house and over how long.

    Speak to a good IFA. Good ones are worth their weight in gold. Crap ones aren’t worth wasting your breath!

    Are you under 40 years old? If so, open a Lifetime ISA tomorrow. You only need to put £1 in to open it, so don’t put any more in for now until you’ve worked out your plan of action (there are penalties involved in taking money out of a LISA if you don’t use it to buy a house).

    Open a Help to Buy ISA tomorrow too… Put the max you can in straight away (£1200), and setup a direct debit for the max each month (£200), and worry about it later (there are no penalties to closing a Help to Buy ISA without using the money to buy a house).

    Do all of the above straight away, before even looking at any houses on the market. You’ve got a few more steps to jump through yet (what you can afford to spend on the mortgage each month, are you going to sublet a room, are you looking for somewhere as a stepping stone to greater things or do you want somewhere to stay for long haul etc.).

    For the record, I spent most of my 20’s being pretty reckless with money, the first half of my 30’s learning a lot of lessons and paying for the mistakes I made in my 20’s, and now I’m approaching 40 I’ve gone so far the other way as to be a bit of a bore on the subject of saving money.

    Premier Icon MarkyG82
    Subscriber

    Money saving expert is a good start. We use an independent mortgage brokers who gets their payout through the lender so you never have to pay up front and they also get access to products the general public doesn’t.

    Premier Icon ajaj
    Subscriber

    Plenty of online mortgage search sites. Do that before seeing an advisor so you know what the IFA should be aiming to beat. Some providers will only sell through brokers. Look at lifetime cost or be prepared for the cost/hassle of switching often.

    If you’re a poor credit risk nothing you can do on the credit reference agency sites will make it much better.

    Many horror stories around key worker affordable housing. Be wary of help to buy (you take on more than your fair share of liability). The ISA advice above is good (basically free money from the government).

    Rob Hilton
    Member

    Help to Buy ISAs closed at the end of Nov. I just got in.

    Premier Icon spooky_b329
    Subscriber

    I was told by a couple of the banks that they don’t use credit ratings for mortgages, their affordability checks are what they are interested in. Perhaps I’m mistaken but I don’t think we were told they would do a credit check for our initial or remortgage appointments either.

    P-Jay
    Member

    I was told by a couple of the banks that they don’t use credit ratings for mortgages, their affordability checks are what they are interested in. Perhaps I’m mistaken but I don’t think we were told they would do a credit check for our initial or remortgage appointments either.

    Credit scores are pretty much meaningless, either you’re perfect (no defaults, CcJs etc) good (same but maybe a missed payment here or there or Sub-prime.

    Affordability is indeed more important, but they’re linked. If you’re sub-prime you’ll still get a mortgage (especially with a £20k deposit) but the rate will be high which of course means higher payments which wrecks affordability.

    Don’t pay for search data, all the info you need is on MSE for free. Credit karma (formally known as Noddle). Is free and easy to use. Basically if you’re free of CCJs and defaults move onto affordability.

    MSE, Money Advise Service and most banks offer online calculators, they vary hugely but are a good yard stick.

    Once you know what they’ll lend, decide what you want to pay. We were offered nearly £400k which would cost us over £2k a month, sod that.

    Once you have all that, you can either use a broker, an online comparison site or your bank. TbH I don’t have much faith in brokers, everyone told me to use one, but IME they seemed to use a kind of comparison site of their own. Ours causes more trouble than they were worth.

    There’s no ‘magic deals’ out there, there’s bad ones, but the good ones are much of a muchness. If your pressure point is APR, then get one with a low one, they’ll want £1k arrangement fee plus you’ll pay your own legals. Want free legals (lots of FTBs do) then sure, but you’ll pay the cost via higher payments. Same goes for no-fees and cash-back deals.

    Saying that, I do have a Banking and Finance background which helped a bit, but mortgages are pretty different to what I was doing.

    Once you’ve done all that, and actually found a place, prepare yourself for the hell that is dealing with solicitors!

    Premier Icon slackboy
    Subscriber

    As someone who only bought for the first time 12 months ago, Martin Lewis – Money Saving Expert is a good place to start

    Do what mboy says, that’s the best advice I’ve heard on the subject for ages.

    mrsheen
    Member

    Don’t let estate agents railroad you into meeting with their in house mortgage advisor. They’ll try it on even after you’ve got one and up til completion date.

    A few random points

    £20k wont get you far darn south , Northern half or Sctland then its a sizable %

    The monthly mtg lump will be scary but if you have been renting it may be comparable

    Factor in house and contents insurance in your costings

    One Account or offset mtg great if you spend less than you earn and are a responsible adult

    Solicitors cost alot , dont do alot , and are generally rubbish . Almost ditto house survey. You would be better with a decent builder who knows his onions and what things cost or are likely to cost in the near future.

    Think stamp duty is waived for FTB so thats a bonus

    Penion mtg fell out of favour but if you are a little older, pay 40% tax then the new pension rules might mean this could be a useful tool. You pay the interest only, you pay eg £200 a month into PPP, Gov rebate the tax and turn your £200 into £280.

    Getting a fixed term now before the Brexshite fall out recession hits might be a wise move , its a hedge but you know where you are each month and budget accordingly.

    Question everything a professional mtg seller and estate agent tells you .

    Shared ownership or housing association blocks can be potential nightmares with awful neighbours as they clump together some of the less desirable people who will steal your bikes to buy drugs

    stayhigh
    Member

    Thanks for all the replies so far guys, lots of useful things to think on and read about. That’s my Christmas night shift reading sort if nothing else. I’m 42 and live on my own in the south east so am aware this limits my options somewhat. That said I don’t have a pressing need to move so have time on my hands to read and learn and not rush a decision which is a good thing.

    muddyjames
    Member

    The Barclays website has a page where you can put your income and out goings in and it will do a soft credit check (shouldn’t harm your chances of getting a mortgage) and tell you how much you can borrow. You don’t need to use Barclays but you’ll be able to trial amounts and then get an agreement in principle (estate agents like these as it shows a lender is at least in theory happy to lend you the money)

    schrickvr6
    Member

    5 years fixed seem to be the go to, Principality and 1st Direct/HSBC had the best rates last time I checked.

    Premier Icon chakaping
    Subscriber

    Sorry for your loss.

    With regard to mortgages, I can recommend first direct.

    Very good to deal with and were very competitive on rates and flexible on repayment terms.

    If you’re earning ok then there’s no need to overthink it, just see what you could afford and how the repayments stack up against your rent.

    No need for an IFA in my opinion, it’s not rocket science.

    stayhigh
    Member

    @ chakaping: thank you. He passed away last October however have only just found out about the inheritance. To say its a bit of a shock is somehwat of understatement!

    One of the issues I can see at the moment is having only qualified in July this year I’ve only been in post for 5 months. Previous to my training I was a support worker for 13 years but on a lower salary. It may well be worth my while to wait until the end of the summer so I can say that I have been in post for a year and would have had a (very minor but every little helps) increment by then too.

    Also since 2016 I have moved three times too. All rented properties with no arrears or issues and stayed for a year plus in each property just wonder if it looks a bit shifty on an application. Again leaving it towards the end of summer would make that look better as would have been were I am currently for two years by then.

    Financially I have 2.5k on a credit card which is being paid off monthly now I’m no longer a student and a £900 OD which again is on its way down. If all goes according to plan these will both be cleared and closed in the next 6 months too. Outside of that to the best of my knowledge I don’t have any outstanding finances.

    Premier Icon tthew
    Subscriber

    You’d be better off paying the credit card and overdraft off with the £20k then re-saving it, due to the interest charges.

    Solicitors cost alot , dont do alot , and are generally rubbish .

    Not true, ours was good and spotted that the extension had no planning or warrant so got indemnity insurance from the seller. Get local recommendations.

    With regard to mortgages, I can recommend first direct.

    That’s who we are with, however our experience of switching was awful, wish we had gone back to our original conveyancer. The company they use are worse than useless and messed several things up when we were switching (to the point they faffed about so long our deal expired and we had to start all over again). First were good about it though and IIRC we got a months payment in compensation.

    I have a spreadsheet that originally came from MSE (IIRC) that’s great for mortgage comparisons (PM me if you want it). Our first mortgage was through an independent broker and it turned out to be crap- he stitched us right up no doubt for his own benefit, it’s my fault for not double checking. Every mortgage after that I sorted myself – it’s dead easy.

    As above a good solicitor is worth his weight in gold. We dabble a little in commercial property and use a guy the local big time commercial guys use and apart from looking like he’s wearing his dad’s suit he’s great and has spotted and sorted some sticky issues.

    joefm
    Member

    You need to figure out how much you can borrow via a calculator such as on Nationwide’s website. There’s not much point thinking a lot at the moment if what you’re told you can borrow is not enough to buy somewhere you can tolerate.

    Then you can go view places you may be able to afford.

    At some point you’ll need to get a mortgage in principle (some estate agents like these but they never checked us) from a lender if you plan on making an offer. They perform a credit check so avoid doing these too much and pick a lender that would likely lend to you. If you’re applying for less that the total amount you need to borrow you’re chances of securing a mortgage are better.

    In fact nationwide were pretty good with us as FTB’s and a lot of other FTB’s. Their rates were almost the best too. It was a pretty easy application and pretty quick. Glad we didn’t pay for a broker. With all the online tools I don’t see the need if you’re financially ok.

    muddyjames
    Member

    Having just moved for the second time and used a different solicitor I can confirm some are rubbish (the one we used first) and some are good ( the one we used this time). As with everything don’t go for the cheapest as you get what you pay for. Our buyers used a cheApo online / mail one and they were worse than awful – stupid questions (One we had was “we notice you’re not near a coal mine has this ever caused you problems!!) and never available, even to our buyers who were paying them.

    Premier Icon chakaping
    Subscriber

    Yep, get recommendations for solicitors. Ideally from several people and with examples of what was done well.

    I could tell you a horror story, but suffice to say I was happy to pay top whack for a city of London firm to handle my last move after the local guy bungled my previous move in several ways.

    Premier Icon lesgrandepotato
    Subscriber

    Don’t rush in. Some good advice about paying off the cc’d and overdrive. Get that done and may yourself back with what you would have spent on repayments.

    So 20k is a good start, but it’s only one start. Are you in the right area to be buying? You’ve just been given opportunity. Where might it go? Once that’s down, then think about buying.

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