Mortgage advice

[pinningwobble]

DH and I will be buying somewhere in April next year. If we stick to our savings plan we ought to have saved a 50,000 deposit by then. We are currently renting.

We will be ttc our first quite soon and the intention would be that I would be a SAHM.

IF all works out as planned i would probably be either on maternity leave or pregnant by the time we come to apply for a mortgage. DP is on 80k and I'm on 30k. What would you advise - should we apply for a mortgage on both our incomes or just DP?

I'm sorry if it's a daft question, I am a total novice at this sort of thing so would very much appreciate any advice.

If you are employed, whether on mat leave or not, you should specify this. But consider whether you can afford repayments if you do not go back to work.

I would apply with both but make sure you budget for only your DH. That's what we did and it meant mat leave was fine. I went back to work through choice and it means our household income is 'healthy' and we are able to also save.

Good luck with house hunting

Thank you! Yes, that's what I think we'll do. I also haven't completely written off the idea of returning to work, just want to make sure we've planned prudently.

So can I be cheeky and ask, with DP salary (4200 a month after tax but he also gets a good yearly bonus and his salary is likely to increase), what would be the max you would spend on mortgage repayments?

With a £50k deposit (does that include cash saved for the stamp duty?) you'll be limited to borrowing about £300k at most decent offers. DH could probably borrow more but you won't have the cash to put down on it. Monthly repayment would be roughly £1200 which is about what id be comfortable with

The bank or building society will tell you what the maximum they will allow you to borrow is, it's not up to you to decide these days. They will look at your income and expenditure, and credit references, and tell you.

I doubt any lender would take a bonus into consideration when assessing the affordability of the loan you are asking for - unless you can prove it's never been below a certain amount for a number of years, and that it's pretty much guaranteed income. I'm not sure "his salaray is likely to increase" would influence the lending decision either, though it would influence your decision on how much to borrow.

Goodness that's way less than I expected! BIL and SIL earn more or less same salaries, had 55k deposit and their house was 450k. I wouldn't have gone that high but thought we'd be able to manage a 375 property - shows how much I know!! :)

However I'm not massively fussed about buying as soon as I can. We pay an extortionate amount in rent at the moment. So in theory when our lease on the flat comes to an end next April we could rent somewhere cheaper for a couple of years and save.

Unfortunately we need to stay in London and 300k will not get us anything. Will need to rethink!!

No I know they wouldn't take bonus or possible salary increase into consideration, I didn't mean that, was just musing in terms of our own financial planning.

We have no debt and our credit history is good, hopefully that will help a little.

The questions the mortgage adviser will ask will include details of any proposed changes to your income. If you know you are going to become a sahm but don't declare this, then effectively you are committing mortgage fraud. Sounds harsh I know.

Where I work if you are on maternity leave then we require for you to put it in writing that you are going back to work, and on what potential hours/salary, and may also write to your employer to get confirmation of the terms.

But things change, plenty of people think they are going back then change their mind and then don't, and of course the lender can't force you to!

But the crux of it for you is, if you apply in joint incomes then yours ceases, the chances are you will then be left with a mortgage you can't afford.

If you know you are going to become a sahm but don't declare this, then effectively you are committing mortgage fraud.

This is true too.

The rules are there for a reason - the lender wants to be sure of getting the money back and that you're not rendered homeless in the meantime!

I'd suggest having some preliminary exploratory conversations with a mortgage lender to find out what you're situation is - how much you could borrow under different scenarios, and what the monthly payments would be.

You'll be asked about dependants too - as a couple with kids has less disposable income than a couple on the same salary with no kids.

It's deliberately much harder to borrow money than it used to be.

50k is only a 13% deposit on £375k and you'll be quite limited in lenders who will accept 10% (if any, they're weren't any when we bought last year at v similar figures) you need at least 15%, and don't forget you'll need about £8-10k cash for stamp duty depending on how much you buy for. So a £375k house you need to save £65k and for £300k about £50k. Plus a couple of grand fees etc.

Your DP is on 80k and if you won't be working you may well find that lots of lenders will limit you to three times his salary so £240k plus your £50k (but some of that will be gone in other costs of moving). I think you're being unrealistic about what you'll be able to borrow but would recommend you speak to one of the banks. They'll soon give you an idea of what you can borrow.

Speak to an independent broker.