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Guest uberstuka

Ftb Needing Advice: Best Mortgage?

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Guest uberstuka

I'll express the facts and keep this as simple as possible.

An opportunity has arisen for myself and the girlfriend to buy a substantial property in a prime location for around £60/70K below the average price for property in the area. This has come about due to the death of a close friends relative. The property in now in the hands of a solicitor and they are wanting an immediate sale with no complications. Being FTB's we are number one on the list of potential buyers. But we have to move quickly.

Our problem is this has come around a little early for us. We only have £30K deposit and we need to borrow £200K for the mortgage.

Before some of you flip - we CAN easily afford the monthly mortgage repayments, and though we desire this place firstly as a home for the forseeable future, we are aware that with minor renovation (the property is period 1920s, with only one previous owner, it's needs a new kitchen/bathroom but everything else is pure decoration), we can put this back on the market within a year and probably - and hopefully - make an excellent return. This is of course the `worst case scenario' should something unforseen arise.

Are we stretching ourselves? Yes, but this one (house) cannot be ignored.

My question is simple: What mortgage would you suggest we use to our best advantage (deposit £30K, needing to borrow £200K)?

We both very much appreciate any informed comments.

Thanks :)

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I'll express the facts and keep this as simple as possible.

An opportunity has arisen for myself and the girlfriend to buy a substantial property in a prime location for around £60/70K below the average price for property in the area. This has come about due to the death of a close friends relative. The property in now in the hands of a solicitor and they are wanting an immediate sale with no complications. Being FTB's we are number one on the list of potential buyers. But we have to move quickly.

Our problem is this has come around a little early for us. We only have £30K deposit and we need to borrow £200K for the mortgage.

Before some of you flip - we CAN easily afford the monthly mortgage repayments, and though we desire this place firstly as a home for the forseeable future, we are aware that with minor renovation (the property is period 1920s, with only one previous owner, it's needs a new kitchen/bathroom but everything else is pure decoration), we can put this back on the market within a year and probably - and hopefully - make an excellent return. This is of course the `worst case scenario' should something unforseen arise.

Are we stretching ourselves? Yes, but this one (house) cannot be ignored.

My question is simple: What mortgage would you suggest we use to our best advantage (deposit £30K, needing to borrow £200K)?

We both very much appreciate any informed comments.

Thanks :)

Short term : I/O morgage, make sure you save cash...

Long term : Fixed rate I/O morgage, save 7k per year in a stocks and shares isa

Make sure you do your research, use ourproperty.com on all the streets around the area, even put the data into excel and do a few graphs, is it really 60k below market value, etc etc....

Edited by moosetea

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Who can say if you are stretching - what do you earn - it's not how much it is, it's whether you can afford it.

A house from the 1920's with one previous owner - let's try gas, water, electrics, replastering, potential for reroof, repointing, new windows, proper insulation, kitchen, bathroom - not being daft, but if you think it's a kitchen and bathroom and a bit of paint - you need to wise up (unless it's all been done) - a £300K (assume 3 bed) house that needs doing from top to bottom could easily swallow £50K even if you do lots of it yourself. That's cash, not borrowings.

you need to get a tame builder to quote you for getting it right up to date. The answer may shock you.

And last bit of sanctimonious prosletysing, most GF and BF I know who have bought as GF and BF as FTB and tried to do a house up have split up during the renovation - you learn a lot about someone else under that sort of pressure (not saying you will, but saying you need to be certain and you need to be aware it can happen).

The worst case scenario is that it's only worth £230K when you've done it, you did not get a proper survey and it had strucutral problems, you had to rewire it, the gas needed replacing, the plastering was all shot, it needed new windows, you ran out of money and your GF left you. Apart from that, it's a doddle :) [tic obviously] - you really need to find out what it's really worth to you as a buyer, not to them as a seller - looking at websites in isolation gets you nowhere, you need to look at the other properties and get realistic costs to do it up and add between 30% and 50% to cover cockups in your sums.

Edited by Rachman

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Guest Winners and Losers

we can put this back on the market within a year and probably - and hopefully - make an excellent return.

Don't count your chickens on that one. It could happen, but I wouldnt be banking on it at the moment.

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if you are near the salary cut off for many mortgages which I guess would be a combined figure of around 60k, nationwide are fairly good on the affordability front. They have a calculator on their website.

Think seriously about how long you would definately be in the house and try not to get a extended redemtion penalties beyond this. Unlike many people on this site, I'd be wary of 10 year fixed. 5 would be nice if you can find something good (less if you really are keen to re sell). Trawl all the comparson sites. IIRC there is also quite a good guide to (re)mortgaging on moneysavingexpert.com.

I'm sure you seen all the sort of stuff thats on the bbc's propert site (http://www.bbc.co.uk/homes/property/buying_index.shtml) but its the sort of stuff thats worth rereading.

Best of luck.

Edited by swervy_ervy

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Guest uberstuka

Who can say if you are stretching - what do you earn - it's not how much it is, it's whether you can afford it.

A house from the 1920's with one previous owner - let's try gas, water, electrics, replastering, potential for reroof, repointing, new windows, proper insulation, kitchen, bathroom - not being daft, but if you think it's a kitchen and bathroom and a bit of paint - you need to wise up (unless it's all been done) - a £300K (assume 3 bed) house that needs doing from top to bottom could easily swallow £50K even if you do lots of it yourself. That's cash, not borrowings.

you need to get a tame builder to quote you for getting it right up to date. The answer may shock you.

And last bit of sanctimonious prosletysing, most GF and BF I know who have bought as GF and BF as FTB and tried to do a house up have split up during the renovation - you learn a lot about someone else under that sort of pressure (not saying you will, but saying you need to be certain and you need to be aware it can happen).

The worst case scenario is that it's only worth £230K when you've done it, you did not get a proper survey and it had strucutral problems, you had to rewire it, the gas needed replacing, the plastering was all shot, it needed new windows, you ran out of money and your GF left you. Apart from that, it's a doddle :) [tic obviously] - you really need to find out what it's really worth to you as a buyer, not to them as a seller - looking at websites in isolation gets you nowhere, you need to look at the other properties and get realistic costs to do it up and add between 30% and 50% to cover cockups in your sums.

lol Jesus! Fear! Fear! FEAR!

You forgot to mention the `War on Terror' and impending Armageddon. Do you work for either the Bush or Blair administrations? ;)

Seriously though, points taken, and something to definitely think about.

We can afford it, that much we do know for certain.

There's not much point in listing in detail the why's and wherefore's of this particular house -

I'm not trying to sell it to you. Of course - so far - all the possible checks have been done (brother is a builder, mother is a renovator). When I say it's only in need of redecoration I mean all the walls, ceilings, floors etc are near perfect for their age. No replastering, wiring and/or major plumbing needs to be done (most of it has already been updated sometime during the last 10 years) . But I agree, who knows once we really start stripping back. We're not skipping into oblivion with this one, we realise that there may be hidden problems along the way.

However, this is all piss and wind. All we're really needing to know is what would be the best possible mortgage for us to take on under these circusmtances.

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OK - what is the % chance of needing to flip in 12 months?

If reasonably high, go for IO, with a view to refinancing to repayment if/ when you think you are staying put. If low, go for plainest vanilla repayment mortgage, with lowest overpayment/ exit costs. Rule of thumb in finance is that every adjective a product has adds cost... (but a five year fix may be worth it for the insurance aspect)

Me, I wouldn't go the IO/ ISA route unless very sure of what I was doing. It is adding investment risk (ISA) onto houseprice risk. Repayment at least gets rid of one risk...

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Guest uberstuka

Short term : I/O morgage, make sure you save cash...

Long term : Fixed rate I/O morgage, save 7k per year in a stocks and shares isa

Make sure you do your research, use ourproperty.com on all the streets around the area, even put the data into excel and do a few graphs, is it really 60k below market value, etc etc....

Thanks. :)

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I'll express the facts and keep this as simple as possible.

An opportunity has arisen for myself and the girlfriend to buy a substantial property in a prime location for around £60/70K below the average price for property in the area. This has come about due to the death of a close friends relative. The property in now in the hands of a solicitor and they are wanting an immediate sale with no complications. Being FTB's we are number one on the list of potential buyers. But we have to move quickly.

Our problem is this has come around a little early for us. We only have £30K deposit and we need to borrow £200K for the mortgage.

Before some of you flip - we CAN easily afford the monthly mortgage repayments, and though we desire this place firstly as a home for the forseeable future, we are aware that with minor renovation (the property is period 1920s, with only one previous owner, it's needs a new kitchen/bathroom but everything else is pure decoration), we can put this back on the market within a year and probably - and hopefully - make an excellent return. This is of course the `worst case scenario' should something unforseen arise.

Are we stretching ourselves? Yes, but this one (house) cannot be ignored.

My question is simple: What mortgage would you suggest we use to our best advantage (deposit £30K, needing to borrow £200K)?

We both very much appreciate any informed comments.

Thanks :)

Figures dont matter for general advice

These are some important factors to consider

*Lowest interest rate you can get

*Longest fixed rate for payment stability

*least costs involved

*Least penalties or least costly penalties

*most flexible in terms of over/under payments etc

Basically the cheapest with the best terms. This site is not the place to ask but you should talk to a number of mortgage providers and if possible independant financial advisors about specific mortgages and advise. Do not act on any particular advise you are given in forums.

Good luck

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Guest uberstuka

Don't count your chickens on that one. It could happen, but I wouldnt be banking on it at the moment.

Point taken. But for how long can we hide under the table waiting for the bomb to drop? Living in fear of what may be is no longer an indulgence of ours. All any of us can be certain about is what's happening now, and believing that we have any hold on or control over unfolding events is dellusional.

The `signs' say all is bad, wait? Yes, we could wait... but for what? A cheaper price? A better deal? We're looking for a home, and this is what so many forget. An investment is not our reason for purchase. Making a place to live is; and if this costs, then we'll pay. If we need to sell, then we sell.

If the house is to be ours it will be, but we can no more predict or dictate the terms of this than we can the weather. We can make informed decisions and listen to instinct, therefore this purchase `feels' right.

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[sorry, was just trying to make sure Eyes are open ! - seems they are] You still need to do the diligence on what sold for what where though - I guess you have already done it and you are not just taking someone's word that it's cheap.

If you want to flip [or trade up might be a bit fairer], then a long term lock in may not be a good idea - a 2 year fix can be had for about 4.39% interest only with lock in for that term, if you want no lock in I guess you are up at about 4.5% - but you take the risk on the interest rate rise. There's no point in repayment if you need the cash to do it up and it's short term - the odds are you would have to borrow more than you repay at higher rates to fund the fixing up - so don't bother - HOWEVER, if there is even the slightest chance you don't flip in a year, you have to be iron willed and set up a repayment vehicle - or you will fall behind rapidly on where you would have been.

You also need to think long and hard what you do if you can't flip at a profit - work out now what you need for it, where you guess the market for the house done is and work out your budget and be cruel on yourselves keeping to it.

If it were me in that position, I would be looking at no lock-in, flexible and interest only if that's possible - that way you end up using your cash whilst you have it to subsidise the interest for some period at least and you end up being able to take it out as needed. I would think the 0.5% extra interest on that flexibility is about £20 a week - worth it in my book given you may be able to offset your spare capital against it anyway.

But I am Mr Risk Averse (as you have seen !)

Edited by Rachman

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Guest uberstuka

if you are near the salary cut off for many mortgages which I guess would be a combined figure of around 60k, nationwide are fairly good on the affordability front. They have a calculator on their website.

Think seriously about how long you would definately be in the house and try not to get a extended redemtion penalties beyond this. Unlike many people on this site, I'd be wary of 10 year fixed. 5 would be nice if you can find something good (less if you really are keen to re sell). Trawl all the comparson sites. IIRC there is also quite a good guide to (re)mortgaging on moneysavingexpert.com.

I'm sure you seen all the sort of stuff thats on the bbc's propert site (http://www.bbc.co.uk/homes/property/buying_index.shtml) but its the sort of stuff thats worth rereading.

Best of luck.

Thanks for your help. :)

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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