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Original poster

How do we know our maximum we can offer?

65 replies

NotJustACigar · 09/03/2014 08:15

A house we love is on the market at £289,000 and we are going to view it today. It's been on the market for six months and has dropped in price from £299,00 recently. The EA has told us the owners are motivated because they've found a place they want to buy. However they also say another couple is booked in for a second viewing today. Of course we don't know whether there is any truth behind the second viewing couple or if its just a tactic to make us rush?!

We will offer £250k fully expecting it to be rejected. If/when it is, we will consider going slightly above the stamp duty threshold. We only have £30k down payment due to losing money on our last house sale. But we have a good income (70k combined and I have a review panel in May where I am very likely to be promoted raising out income to £80k combined). We have a mortgage agreed in principle for £250,000. We also have a relocation package from work that will pay for the survey, solicitors, moving costs etc but not the stamp duty.

I'm thinking the highest we can possibly go is £272,000 and get the stamp duty added to the mortgage. Does that sound like a crazy plan? We don't have any DCs and our car is paid for. We have overdraft facilities of 5k in case of emergencies. And we absolutely love the house.

OP posts:
TerribleHumanBeing · 09/03/2014 08:19

You should be able to get a mortgage for 5x joint income as you are over the 60k mark.

Have you got a mortgage adviser?

Lagoonablue · 09/03/2014 08:20

How long you taking the mortgage out for and can you afford the monthly payments? Build in the possibility they will rise at some point.

I recently moved and knew our limit as knew what the monthly payments would be for the houses we liked.

Original poster
NotJustACigar · 09/03/2014 08:25

I forgot to mention that DH is 47 so our broker at London and Country said we should go for a 19year term so as not to go past his retirement age. However I'm the higher earner £50k and am a relatively young and sprightly 41 Grin.

We live cheaply and know for sure we could manage payments even if interest rates rise. And my job is with the government and really quite secure.

OP posts:
Knackeredmum13 · 09/03/2014 08:30

You can't add stamp duty to your mortgage anymore.

Surely if your agreed mortgage is 250k that is as high as you can go?

Fridayschild · 09/03/2014 08:33

the money advice service has a calculator showing you how much the mortgage will cost if interest rates rise

Original poster
NotJustACigar · 09/03/2014 08:35

Knackered £250k is the agreed mortgage but we also have £30k to add to that so total of £280k. Are you sure we can't add stamp duty to the mortgage? If not we will have to try to ask the sellers to pay half the stamp duty and find the cash for the other half.

OP posts:
IHaveSeenMyHat · 09/03/2014 08:36

If you have an agreement in principle for £250k then you can't realistically offer any higher than that because you don't know for sure whether the bank will agree to you borrowing another £22k+

If I were you I'd go back to your chosen bank for an appointment with a mortgage advisor. They can tell you the maximum you could borrow.

Original poster
NotJustACigar · 09/03/2014 08:38

IHaveSeen we wouldn't need to borrow an extra 22k as we have 30k in cash.

OP posts:
whineaholic · 09/03/2014 08:39

Yes, you definitely won't be able to add stamp duty to your mortgage , that will have to come from your own pocket.

whineaholic · 09/03/2014 08:41

What LTV and deposit % are you looking at? Most lenders want at least 10% and if you only have 30k you are not going to do that as you need fees and stamp duty in that .

BumWad · 09/03/2014 08:46

Your income is similar to mine and DHs and our max mortgage is going to be £170K (buying a property for £200K with £30K deposit). This is the highest we will borrow even though the bank will lend us more. We are early 30s.

Our mortgage payments will be approx £950 a month, yours will be higher. We can be frugal too, but want to be prepared for when/if rates go to 5%. Maybe you should do some calculations? Also we are ttc so that may not be an issue for you.

A budget plan may help, cost of insurances, bills etc.

Don't mean to be down in the dumps about it just make sure you can really afford it OP.

Also when applying for our mortgage in principle last week the adviser at nationwide mentioned something about regulations changing with regards to lending? Something about them scrutinising budgets more??

NoArmaniNoPunani · 09/03/2014 08:47

Your earnings are the same as ours and we had 28k deposit. We couldn't afford to spend over 250k on a house. If you spend 260 your stamp duty will be £7800 leaving you a deposit of less than 10%.

Does your mortgage agreement in principle stipulate what the loan to value % should be?

Original poster
NotJustACigar · 09/03/2014 08:48

Thanks, all. Are you sure about stamp duty? This must be out of date then
www.moneysavingexpert.com/mortgages/stamp-duty#seven

So lets say we offered £272k if vendors paid half of stamp duty. This means we would need to find £4080 for stamp duty.

We put down £27,200 for 10% LTV. This leaves us with £2,800 towards stamp duty. We would need to find another £1280 before closing. This is very doable for us as our outgoings are low. All other fees are paid by my job.

OP posts:
MrsFlorrick · 09/03/2014 08:49

Stamp duty threshold is £250k. So anything at that price or over attracts a 3% charge to be paid upon completion out of your own pocket.

So if you agreed a price of £270k for the house you SDLT would be £8100. Your legals perhaps £1000 for the purchase.

So if you have a mortgage offer of £250k and £30k in the bank, I would say your max offer is £270k.

However you could go to the estate agent and offer £249k and bleat about the hike in stamp duty over £250k. (Hike is from 1% to 3%!) and see if the vendors offer to pay your stamp or just accepts the £249k.

You don't get anything if you don't ask.

nerdgirl72 · 09/03/2014 08:51

We bought just over the stamp duty threshold last year and had to factor in having the cash to pay this, the mortgage is only given on the actual value of the house.

I think you will get on to dodgy ground tax law wise if you ask the vendors to pay half, but I am sure others will have more advice on this.

NoArmaniNoPunani · 09/03/2014 08:53

Your calculation for stamp duty is wrong OP. It's 3% so will be more like 7-8k rather than 4k

Original poster
NotJustACigar · 09/03/2014 08:53

Thank you,Mrs, that's about what I'm thinking as well. Legals etc are covered by work.

At the moment DH and I are able to put £2k per month in savings. Our rent is £750. I really and truly don't think payments will be a problem for us even if interest rates rise. We aren't ttc and are willing to put everything we have it to a house as we don't have expensive tastes at all in clothes, cars, holidays, etc. I buy second hand clothes and we shop at Aldi and drive a tiny car with £20/year road tax. We are honestly very frugal in other areas of our lives and prefer living that way.

OP posts:
Original poster
NotJustACigar · 09/03/2014 08:54

NoArmani the calculation is based on the vendors agreeing to pay half stamp duty. I thought that was a pretty common request when paying slightly over stamp duty threshold?

OP posts:
NoArmaniNoPunani · 09/03/2014 08:56

So will your lender give you a 95% mortgage?
If not, I don't see how your sums work out.

Original poster
NotJustACigar · 09/03/2014 08:58

I don't think there are errors in my sums NoArmani though of course I could be wrong. LTV in them is 10%.

OP posts:
NoArmaniNoPunani · 09/03/2014 09:00

Oh I just noticed you are saving 2k a month. How long have you been doing that for? Can't you just add that to your deposit to make a larger deposit? You'll have more mortgage options open if you with a better loan to value ratio

MrsFlorrick · 09/03/2014 09:03

Just bear in mind before you offer that your mortgage will be based on a minimum
Loan to value ratio. Ie 95%.
So if you offer less, you will get less
From the bank. Your top up equity doesn't shrink in % with a lower offer.

Ie if you offer £250k for the house with a 95% mortgage, the mortgage you will get will be £237,500 and the rest your deposit.

Obv if your LTV ratio isn't 95% then the figures look different.

whineaholic · 09/03/2014 09:03

Good luck with asking your vendors to pay half of YOUR stamp duty. I have never heard of this happening but there is always a first time.

Original poster
NotJustACigar · 09/03/2014 09:06

Thanks again, all. The problem is that we moved and sold our last house for £25k less than we bought it for three years previously. Also for nearly a year before it sold we were paying rent plus mortgage and DH was unemployed for that year. Otherwise we would have a much bigger deposit! All that is water under the bridge now but I just say it to explain why we don't have more in savings even though I claim we are frugal.

Yes we can keep saving £2k per month but the time limit for my work paying our legal fees etc expires in September and also house prices are rising so we don't want to wait around longer than we have to.

OP posts:
MrsFlorrick · 09/03/2014 09:07

Ah just seen. Your LTV is 10%

That means if you offer £270k, your deposit needs to be £27k and your mortgage advance will be £243k.

This means that you do not have the £8k for stamp duty.

Unless you borrow cash from family as a top up or agree that the vendor pays half.