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what do I need to know about getting a mortgage?(68 Posts)
Me and my wonderful DH would like to look into getting a mortgage. We are both first time buyers.
We are thinking about going to an independent advisor for this? Are there any alternatives or is this what you'd recommend?
In terms of a deposit, we have a bit saved but we're thinking about maybe getting a loan to bump up the deposit, we'd pay less on a loan overall. Can a loan be used for this? We'd only need 5/6 grand.
Any other little hints and tips about buying houses? What to look for when viewing. What to change when going into a new property? (Check Windows and doors etc)
I want to go into this with my eyes wide open and would like some real experiences and advice.
Getting a loan to finance your deposit will reduce your overall affordability for the mortgage plus, it doesn't look good if you are unable to save that much from your current income.
Lenders will ask where the deposit came from- I believe some will simply decline because it is a loan. It would be better to wait and save a bit more.
Do you have a help to buy ISA? You won't pay tax on the interest and government will contribute to it.
I would go to an independant mortgage broker, not one that works in an Estate Agents or Bank.
A lot of lenders won't accept a loan for the deposit and as someone has already said, it will reduce your affordability and mean you couldn't borrow as much.
Yes a lot of people will
Not take a loan being part of the deposit. If you can save £5k you haven't a hope of paying back a six figure sum.
At the moment our rent costs 650, the monthly mortgage repayment would be 342 so we could pay back the loan with the difference of that, a loan repayment would only be 149 per month so with loan and mortgage we'd still be paying a few quid a month less than we are now, it's just the fact our rent is so high that were struggling to save faster.
Unfortunately it doesn't work like that OP.
Getting a loan to pay a deposit is very likely to result in you not actually being able to secure a mortgage.
I understand that on paper it makes sense to you but a lender has to be seen to be responsible and lending to people who have to resort to borrowing in order to get a deposit together, is not deemed responsible.
It's why thousands of people are stuck renting- a mortgage would be way cheaper if only they could get one.
Loans aren't allowed for deposits. You will need to declare where your deposit came from and as soon as you do it will be a no go.
Any loan amount will reduce your affordability too - I've just applied for a mortgage and it wasn't as simple as 4x my salary which I think it may have been before. They will go into detail in all of your outgoings and any loans will reduce the amount they lend quite significantly - I have a car on finance and the loan amount is around £5000, it reduced the amount I could borrow by 20k. You have to provide details of loans plus 3 months bank statements so you won't be able to hide the loan.
I went to an independent broker who could advise me on which banks would be most likely to lend, eg Santander need a 15% deposit for a flat so they were a no go for me. I wouldn't have known this and if I applied myself the application would be immediately turned down; ironically any you have turned down shows on your credit file and works against you!
Your best option is to see a broker and chat to them about your circumstances, this is free and they will quickly advise you how much you can borrow. You can't make the full application until you find a property but knowing how much you can afford will put you in a better position to sellers. At least then you'll know how much you can borrow, or how much you have to save!
A help to buy ISA is a good idea and pays 4% interest plus bonuses. I have only had mine open for 3 months yet when I complete on my house sale I will get £600 back.
It's also a good idea to sign up to experian and check your credit score, in case of any surprises you will have time to improve your rating. Try not to apply for any credit in the 3 months leading up to the mortgage application as again this doesn't look good.
Talk to a couple of mortgage brokers by all means but apply direct to the bank or lender in question when you are in a position to actually apply for the mortgage. Many such companies in my experience of dealing with mortgage brokers (from the viewpoint of a person who also processed mortgage applications) were completely inept and did not offer anywhere near the sort of service they should have provided to their clients.
You must not use a loan to bump up the deposit; you will need instead to save up the 5/6K and wait a bit longer.
Hello OP, hope you get your mortgage sorted. Whoever at MN who gave the thread its "discussion of the day" title: surely it's a minefield not a mindfield?
It depends on how credit worthy you are. We have remortgaged a couple of times, and also moved house. We used the broker the first time, but went direct with HSBC and first direct subsequently. I wouldn't pay a broker anything. They can't actually find better deals then I went direct. I've talked to London and Country which is recommended by many here.
We wouldn't have thought to go direct until a friend told us. Then we discovered many people we know also go direct!
I'm with Cass168 - what tf is a mindfield???
Do you have a close friend/ family member who would loan you the deposit over a year?
Since you are both first time buyers, you could both open a help to buy isa, it doubles your government interest.
Also, Nationwide does a save to buy account. The interest has gone down on it, but regular payments, not missing payments etc count towards your credit with the bank.
I think I've read a little on the help to buy isas. I must look into them more. Does it take around 3/4 years to save in them though? Is there a £200 monthly maximum?
What is the discussion of the day?
I wouldn't like to ask anybody for the money I don't think.
You have to remember that in addition to a 10% deposit you may also have to pay stamp duty. We are buying at the moment for a house worth nearly 300k and it's an extra 4.5k on top of the 30k we need saved. Take into account solicitors fees and its another 5-6k after the deposit.
I wouldn't recommend getting a loan, the banks are looking in depth into people's outgoings and this would effect your mortgage amount or even if they would accept you at all.
We've used London and Country brokers, they have been absolutely brilliant so far. We aren't paying them as they receive commission from the banks.
It might be worth finding out how much you may be able to borrow now so you know how much you need to save. The brokers can give you an idea with a "soft search" which doesn't actually show on your credit file.
Once you're ready to apply, I would say have these documents ready beforehand as it's been a hassle for us to gather everything last minute...!
3 months bank statements
3 months payslips
P60's (handy but not essential)
Bank statements to prove your deposit
ID and proof of address
Also, if anyone gives you money towards your savings, they will also have to sign forms and prove their identity. My Mum gave us £1300. She has had to declare where the money is coming from, that she will have no rights over the property and that it is not a loan. She has also had to have her passport certified by the estate agent!
In short, the banks make you jump through quite a lot of hoops so be prepared! I would recommend London and Country as a broker, they've been excellent and done all the leg work for us. All over telephone/email.
Also budget for the mortgage surveys and fees which so far have cost us almost £1000 we weren't expecting.
Good advice from Cheesy Baps, including about getting a broker to do a soft search to give you an idea of how much you can borrow. It gives you a realistic idea of whether now is the right time for you to buy or whether you need to save longer.
I also used London & Country - very comforting as a first-time buyer, as they explained things well (although I wasn't impressed by the solicitors they recommended).
Op, it's clear you are very green in the world of mortgages. London & Country or a similar broker would be a very good option to help you understand the basics. You won't have to pay out any money - they work on commission paid by the lenders but are not tied to any specific lender.
The other place to go is to the Money Saving Expert mortgage forums. They often have brokers who will answer message board queries. However you need to give as much specific financial detail in your posts as possible if you want a meaningful answer. (same goes for here actually)
Interesting bibliomania - we've been using L&C's recommended solicitors Foot Anstey and they have been head and shoulders above any other conveyancer have ever used (and I'm a lawyer so I know what to expect).
Mindfield - MNHQ?? I was hoping it was a deliberate play on words inspired by something in the thread but would seem not.
I think if you do some research online and look at a lot of different rates and calculators, you can get great deals without going to a broker. It's worth making the effort really to understand how each type of mortgage works, because this is the single biggest investment you're ever likely to make, and no broker knows you as well as you know yourself! Also, it helps when you make future decisions on housing if you really understand how different kinds of product work.
But bear in mind that there IS a bit of luck involved. DH bought our house literally a couple of weeks before the financial crash. It meant he bought it at the top of the market and it immediately lost value, so it looked like a terrible decision! But it also meant he secured a mortgage at a fraction of a percent above the Bank of England base rate, which then sunk to an all-time low. Which means we pay virtually no interest and have been overpaying like crazy reducing the term - while the house has actually regained its value and some in the same period. I would love to pretend this was all planned and clever financial management, but it wasn't in the slightest.
Jessie, I was thinking it was a pun as well - mindful/minefield, maybe?
I was recommended a different solicitor by L&C - it doesn't seem fair to name them here, but the main problem was that it was clear that I was very far down their list of priorities . I can understand they needed to wait for information on the searches etc, but they sat on things for a long time, and made stupid mistakes like sending things to the wrong address.
I agree that MSE is great - you can get a free booklet for first time buyers, which is really helpful in getting your head around the terminology.
Thanks for all the advice. Will have more look into t this week. Do overdrafts tend to go for or against someone?
More financial information would be
My DHs salary is 18500, we have 2 DCs
I am on a zero hour contract and work between 4 and 12 hours a week.
The house we are looking at is on for 74950 but the current owners may go lower, we don't know yet.
We have no car, a credit card each with 1000 on each, and 200 on a very account. Never had any ccjs or ivas. When I was younger, I let a mobile phone contract default on my account when I was in a dire situation and that 6 year period hasn't passed yet so it's still visible.
I'm not even 100% we would get one, my DHs salary is a bit shit
Any debt will count against you, including overdraft and credit card debt.
I just wanted to add that you may not get the rate (and consequently the monthly repayment) that you think you will - it's usually the best case rates that are publicised. Once you've gone through affordability and added the extra costs on etc it can change considerably. We remortgaged last year (end of fix) and were hoping for a rate around 2.3% but the best we could actually get was 3.6%ish, which made a considerable difference to the repayments.
As PPs have said, I'd definitely recommend talking to a broker (London & Country were helpful, even though we ended up going direct) to get a ballpark idea of what to expect.
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