What's the deal with mortgages risk wise

[Veggielove84]

Hello

We are first time buyers. We could be getting approved to buy a 2 bedroom place, however yes the interest rate is going to be 5. something for 5 years fixed, but what happens if you cant afford it after that? If rates go to 10% yes ok but our benefits wont last for the next 25 years, what if its more than 10 % etc. I know none of us know the answer to that.

I know repossession is a big issue right now and in the event of that we would not get back into private so easily , we have 2 kids, 1 is autistic, we have good names as renters and our rent is actually paid almost in full right now by our universal credit however I am not getting any family support, my autistic daughter hates it here but we are close to husbands work though and moving doubles the fuel costs. We home educate so no school to factor in.

So we stand to lose hundreds in benefits a month buying and then the banks putting rates up could screw us over in the future and then what ?!

Husband works full time gets around 2200 a month pay plus we get universal credit a bit but will drop 550 a month minimum though if buying instead of private renting. Also get the child benefits and child disability and carer element on universal credit also the Scottish child payment x 2 but that's not all guaranteed forever which is cool but would obviously need to be thought about.

I need some advice if possible please.

Thanks

[KokoKardash]

What's the risks with your rental why are you leaving rented to buy.

What holds the bigger risk- failing to secure a tenancy next week if your LL sells and comparable rents increase? Or owning your own home?

[ComtesseDeSpair]

If you reach the end of your fixed term and can no longer afford to pay your mortgage (because your income has dropped and/or higher interest rates make your repayments unaffordable) your lender must by law work with you to try and help: short term that could include offering payment holidays or a temporary interest-only product; longer term they could look at extending your term to make your monthly repayments lower. 

Ultimately if none of these are viable then the property has to be sold to repay the mortgage debt. You’d aim to take that decision yourself and sell it on the open market over repossession.

[Veggielove84]

this is good advice, thank you both so much!

[AfraidToRun]

You could extend the term, you'd pay more interest overall but your monthly payments would be less. Some banks will extend mortgages to age 80 but you would probably have to show you have some form of income up until then.

[hattyhathat]

I would see a broker who will assess your risk and eligibility

[Veggielove84]

Yes we have been told by a broker that they have sent full application to the bank and we are just waiting on a definite yes or no to come soon. We were given a mortgage illustration after being told what type of amount we could be entitled to borrow. Its in the banks hands at this moment. Just got a bit spooked by the news lately.