First time buyers help!

[berkshirecat]

This might be a really silly question but would love some advice!

DP and I would hopefully like to buy in about a year. We are both first time buyers.

How do you know how much you can borrow/will need in terms of a deposit? Can we go and chat to an advisor or anything now to get an idea of what kind of ballpark we are looking at? I've looked at online calculators but most suggest we will never be able to buy anything!

We were hoping to get a mortgage with a 5% deposit. Joint income of 100k. No debts or dependents. We have about 20k in savings at the moment for a deposit. Unfortunately we live in the south east so prices are high. Are we being totally unrealistic?!

Any advice we come!

On your incomes you should be able to borrow a maximum of around £350,000, but probably more comfortably around £300,000 (assuming you are both in 'regular' settled employment, good credit history, no debt, no large outgoings e.g. child maintenance).

So maximum maximum budget with your £20k deposit would be £370k, but probably life will be easier around the £320k mark - as you say this will be on a 95% mortgage which are obviously higher interest rate than lower LTV but possible. Bear in mind that you also need to budget for legal fees, mortgage fees and survey costs as well as your deposit.

If this is not enough to buy where you are, you could look into shared ownership, that budget should buy you a % share in a nice flat even in the more pricey parts of the SE (obviously there are also drawbacks to Shared ownership as well). As FTBs you can also look at government Help to Buy schemes...

You absolutely can speak to a mortgage advisor without committing at this point, London and Country are a good firm and won't charge you anything...

Ooh thank you @maxelly. That was roughly what I was thinking, but some of the basic online calculators seemed to suggest we would get less! Both have excellent credit ratings, stable jobs etc so that shouldn't be an issue. I really wasn't sure if we could talk to a mortgage advisor just for advice/quite a way before buying so thanks, that's really helpful

The more deposit you have the better to be honest. We bought as first time buyers with 12% deposit (35k). Some lenders will accept 5%, some won’t.
How much more can you save in the next year?

Don't buy a shared ownership unless absolutely desperate. Especially in the south east where they are massively overpriced, crap new builds.

Thanks @Pinkflipflop85 - we would ideally like to avoid that, as we know they're not great deals and also tbh I prefer older style properties.

@SoyDora - we are going to be a bit limited by how much more. We aim to get another 5k for moving costs but we also need to fly to New Zealand this year (elderly relative is dying) so that unfortunately means we will have to save for that too.

Make sure you maximise your savings with help to buy ISAs etc.

I was really surprised how much I was allowed to borrow. Also worth taking out a help to buy isa.

Remember it's not just about your income and deposit, it's also about your debts and credit utilisation. Do you or your partner have any loans, credit cards, car finance, store cards? In general you should be looking at a salary multiple of 3 or 4 depending on mortgage provider.

Are you still adding to your savings or is 20k the max?

''I was really surprised how much I was allowed to borrow''...

Yes it is a bit of a myth that lending has become stricter, people can still borrow many multiples of their earnings pretty much to the same extent as when the the lending and borrowing was considered to be reckless and irresponsible prior to 2008.

The only difference now is the repayment periods are considerably longer, so in reality people are actually borrowing and paying back even more due to the extended period of paying interest.

But there again the banks and the govt like nothing more than a nice little compliant, obedient, lifelong debt slave worker drone.

@BigBadBarryatemyboat we intend to add another 5k but that would be more for fees etc. So really deposit of 20k.

I don't have any debts - partner does have car finance of £200 per month but that's it. We have credit cards etc but paid off fully each month.

Where is your 100k money going? Could you cut down anywhere to save more? Food, eating out, TV contracts, phones, travel? Are you desperate to move soon? It I were you, I'd wait until you have 10% as the mortgage market then opens up. Definitely speak to a mortgage advisor. I actually booked appointments with the mortgage advisors in highstreet banks too (it's free). Nationwide were good for us. Good luck.