Getting a mortgage before I turn 21.

[noisyrice]

I want to be able to get a mortgage before I turn 21, so I've got 3 ish years.

I'm looking at properties and mortgage calculators very regularly and with what figures I've put in, it gives me an estimated monthly payment of around £500-700.

I'm working full time and will be putting away £400 minimum each month from my wages, giving my Mum £250 for rent and then I should have about £400 to 'play' with. I am going to go and try and spend a lot less than I have been, thus enabling me to save a bit more each month.

I am going to aim to save £12k within two years, and then see where to go from there. I am seriously confused as to how I go about getting a mortgage? It's such a stupid question but do i apply online, or do I go into my bank? I don't understand.

Additionally, I would like to know the best way to build credit. I've never borrowed money like that, or been in debt. I'm not keen on the idea of credit cards, or high interest department store cards. I have looked on Very and saw their Take 3 stuff, but i am so uninformed on these things. Does Very count as building up credit?

TIA (Sorry it's so long!)

Having a contract mobile and a credit card you pay off each month will help build a credit history.

Are you expecting your wages to increase before you buy a house? In addition to the mortgage cost there's quite a lot of other expenses to cover if you'll be living alone.

Do a little research online to see what sort of deal you think will work for you. Things to consider: fixed versus variable rate, 'booking' fees (basically a lump sum fee you pay for setting up the mortgage - you can add it to your overall loan if necessary). length of mortgage (extra years = a lot of extra money you pay back when you work out the interest), and whether you can overpay without penalties. I don't really rate mortgage brokers so tend to do some research then approach the lender direct. You sometimes get preferential rates at a bank where you're already a customer.

Another thing to note - don't get an 'agreement in principle' until you're fairly settled on your lender - they run a credit check on you to set one up so you don't want too many of those on your record as they affect your credit score.

Also, you can get a credit card then set up a direct debit to pay it off every month. That's what I do - it means you're never really in debt.

Have a look at the help-to-buy ISA, OP.

If you put in £1,000 deposit (max) and pay in up to £200 per month, the government will give you 25% on top if you use that money to buy a house. I've given you the link to Halifax, but other places offer it, too. It's highly recommended.

I'd go to a broker to get a mortgage, London and country are frequently mentioned on here. We used one and he got us a good rate.

Credit reference files like you be on the electoral roll, have a landline telephone number & no missed payments. A mobiles enough to show regular credit being paid.

Our mortgage broker said bills like mobiles were the ones he was most shocked at, we paid £7.50 a month each on ours but he said he spoke to people who spent £45 a month each on them. He reckoned it looked extravagant on mortgage applications.

I would avoid credit cards. We had to have zero debt & the credit records show how much you owed each month. It makes it look like you can't live within your means.

I would start looking at "free" money. We swap our current accounts to get cashback eg Halifax is offering £100 to switch. The Co-Op is offering £150. Some require a minimum number of direct debits but you can set up DD to charities for nominal sums eg £1 & it still counts. Put the money straight into your savings.

We use cashback sites to get money back on online shopping and insurance for the house/car etc. A good offer recently was setting up an isa with shepherds freindly & getting £105 cashback. Again put the money away as soon as you get it. Your conveyancing will be £1000ish so it can pay towards that for you.

Look at everything you buy regularly eg cosmetics, sanitary protection and then research the cheapest place to buy them.

Take packed lunches with you to work & avoid takeout coffees or chocolate bars. If you want treats like that buy the multipacks in the supermarket instead. They work out half the price. Any food your mum doesn't provide research on mysupermarket.com. It will tell you the cheapest supermarket to use.

Alvin Hall writes books on frugal living and avoiding debt. He really changes the way you look at saving.

Frugality now and saving really hard will pay off when you want to move up the property ladder.

Good advice up thread. Also be aware that the bank will only loan you a multiple of your salary, regardless of what you think you can pay monthly. So if your salary is 20k/yr, they will only give you maybe 60k (not exactly sure if numbers but in my case it was 3-4 times my gross salary on a house I paid 50% deposit on. Without the massive deposit it would likely have been less. So go talk to a broker, they will help you undetstand your particular situation in front of lenders and give you advice on how best to prepare over the next 3 years.

Your salary is much more of a constraint than anything else. You could have a decent deposit and very low outgoings but you will still be constrained by your salary multiplier.

Her salary can increase though. The frugal habits help long term.

Banks these days look at affordability criteria which means they want to know about all of your other costs (council tax, utilities, childcare, commute, food, mobile, SKY, gym, socialising, holidays) and may ask for copies of recent bank statements as evidence. What a lender looks at varies from lender to lender (some disregard childcare costs which can make a massive difference if you have two preschoolers and are spending over £1000 a month on childcare), others take your word for it rather than need to see bank statements.
As well as budgeting for mortgage payments, you will need to budget for the costs associated with buying - stamp duty (if relevant), legal fees, survey fees, possible arrangement few on the mortgage, cost of moving (first home & local may well be very low).

I disagree with Fluffy's point about a credit card. Getting one, using it and paying it off by direct debit actually shows more sensible use of your money than not having one and not benefitting from the added protection that comes from buying products over a certain value (£100ish) with a credit card. It certainly doesn't immediately flag "can't live within their means". When you buy a house, there may be bigger purchases that you want or need to make at the same time and it is may be better to do that on a pre-existing credit card than one you apply for at the same time as or shortly before your mortgage application as credit card applications trigger a credit check. Having said that, if you get a credit card at the time & it has a 0% interest on purchases for a year, then that might come in handy.
When I bought my first flat, I got a new credit card with 0% interest on purchases, bought all of my furniture (about 3k), saved £250 a month so I could pay it off at the end of the year if need be but flicked it to another 0% card, paid a £3k overpayment on my mortgage which was accruing interest at a rate of 4.59%, continued to save £250 a month & repeated at the end of that 12 month period. I did quite nicely out of the credit card companies in that period, especially as I had to make a claim under s75 on one of the bits of furniture I had bought. These days, I think there is usually a transfer fee and mortgage rates are lower but it shows that credit cards can be managed in your favour.

I agree with boa. When we bought our first house I was a student so everything was done on dh's income abs ourgoings. He'd never had a credit card, bought anything on finance and never had any credit for anything. It was amazing how many lenders wouldn't touch him because he hadn't demonstrated he could manage money on loan. The fact he'd been able to always safe up enough to buy a new car and afford everything he needed outright didn't count for anything. As suggested by our mortgage advisor, he got a credit card, used it for one tank of petrol a month and set the direct debit to pay off the full balance each month.

Most friends have found it's the deposit required that limits their ability to buy. Start serious saving now and you'll be in a much better position when you come to buy. Good luck op.

We need op to ring a broker & find out what's best 😂

Ours was really against cc use.

Ours was really against cc use.

Oooh, fight fight fight fight!

For what it's worth dh was turned down by four lenders for not having enough credit history before nationwide took pity on us.

My lender didn't give much of a shit about credit history at all seemingly

I got a mortgage at 19 but couldn't get a phone contract a few weeks previous!

I didn't have anything in my name at all except a savings account and current account.

Would recommend using a broker

My lender didn't give much of a shit about credit history at all seemingly

It definitely depends on the lender.

Another good point up thread about needing a CC for bigger house purchases once you're actually moved in. I think the fact that the vast majority of adults (anecdotal - I haven't done a scientific study!) have them means you won't be penalised for having one and paying it off monthly. Surely it's the done thing?

I agree on Having a phone contract and a credit card, it doesn't mean you can't manage your money, but will help build a credit history.

My DS got a large inheritence when he turned 18 last year, consequently he will hopefully be able to get on the housing ladder sooner rather than later, once he is working after Uni.

We therefore advised him to upgrade his youth bank account to an adult one that allowed direct debits. His phone contract (previously in my name) was up for renewal, so we bought the handset for xmas and he got a SIM-only contract in his own name. He is also looking at getting a credit card to use for small purchases and pay off each month, Lloyds do a student one with a low credit limit.

He is very sensible with money, preferring to save rather than spend his earnings from weekend job, so we know he will be sensible with a CC and it will contribute to him building a good credit history.

To buy a property you also need money for all or some of the below

Solicitor fees/conveyancing

Stamp duty

Property survey

Mortgage set up fee

Land registry fee

Deposit

House and contents insurance

Life insurance

Land/environmental survey fee

Some unexpected fees that your solicitor may recommend that you pay before the purchase

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Once you have purchased the property you will need money for bills, furniture and household goods eg oven, washing machine, fridge and ongoing maintenance - you can buy these smaller items second hand or via freecycle, gumtree, car boot sales

It is good to have an emergency fund in case something unexpectedly breaks

Good luck

We've just bought our first house which was 180k, with solicitors fees, deposit etc upfront payments were over 20k. And that was with putting some fees in our mortgage plan. Main outgoings which we now face that were different to when we rented are buildings cover and life cover so we are insured against one of us dying or getting too ill to pay the mortgage. Our council tax and water bill have also gone up significantly.

Yes, lenders can be against credit cards in the sense that too much debt will be a negative factor, but using one and paying it off every month, shows you can handle credit responsibly, and build a decent credit history, which is always a good thing.

Suggest getting a second or third job and save all the money for a deposit
Second and third jobs need to be easy to reach distance wise
I think you also may pay more tax on a second job
Or do overtime on your main job

However I think banks will only take your main job into account for how much you can borrow eg 3x salary

When you are looking to buy house look at places that you have not looked at. The further away from a city the cheaper the houses are, although you then will spend money on commuting

You don't pay "more tax" on a second job. You're allowed 10k tax free earnings, then everything else is taxed at 20%, unless you earn over 43k.

It's you total earnings that is important, not how many jobs you have.

For example, 1 job @ 25k....... (10k tax free then 20% of 15k = £3 k tax)

2 jobs , 1st @ 20k (10k tax free then 20% of 10k = 2k tax)
2nd @ 5k (you've already used your allowance so 20% = £1k)
Total tax over 2 jobs (same salary as 1 job, as shown above) = £3k