A first-time buyer: is this amount too much?

[meistar]

I'm a FTB and about to make an offer for a house we really like. It's a 3-bed property in West London and the asking price is £900k. We have an AiP with 85% LTV and planning to apply for a mortgage immediately if offer is accepted.

I am a bit stressed - is 900k too much for a FTB? As I have no experience with mortgages, do you think we'll have any problems getting an approval? Our credit score is literally "excellent" but still, I cannot be sure..

What do you think?

How secure are your jobs/do you have contingency for if one of you loses their job?

Ì have no idea. It depends on how much you earn. How secure your jobs are and how much back up savings/assets you have to fall back on if interest rates go up or your circumstances change.

The fact that you’re a FTB is irrelevant. That’s a large mortgage with a low deposit so I’d feel uncomfortable with that LTV personally.
But it really depends on what you earn, how secure your jobs are and whether you have any plans for the future that would impact your earning capacity

I'd say our jobs are secure, we have extra savings which should cover us for a year if we both happen to lose our jobs (hope it never happens!). To be honest, we haven't used a loan at all so far, so that's why I'm a bit stressed! Only loan we have had so far are our credit cards.

I'd guess most people buying a house for 900K would have a substantially bigger percentage deposit. But you won t know till you approach a building society, bank or broker.

The 900k part is irrelevant. Depends on earnings / outgoings. You've surely gone over this with your financial advisor?

No amount is too much for a first time buy if that's what you can afford. A friend of mine and her husband bought a £3m flat as a first time buy. it really depends on your financial situation. My first home was £300k but we are buying a new property and my husband is a FTB and its a four bed house also worth similar to yours.

Just be wary of a few things inc the poss the bank could not loan you out as much as you think so may have to put in a bit extra compared to what you initially anticipated and making sure you take into account all the additional fees inc surveys, lawyers, registration, new furnishings, redecoration and some contingency for various repairs which always end up sprouting up.

As long as your job is secure and you have some funds as back ups both of which you said you do you're probably be fine.

And if you’ve got a year’s mortgage repayments saved up then maybe you should think about using that £50k in your deposit?

There’s very few mortgages available at 85% LTV so feels like you might struggle to secure one but if you have an agreement in principle that’s presumably a good start. On a 25 year term you’d be looking at current rates at £3.5k per month repayments. You must have a good idea if that’s doable on your income or not.

I get £4k, even more.

It doesn’t sound like you’re comfortable spending that much so might be worth reconsidering.

Prices are more likely to go down rather than up so a 900k property carries more risk than 450k one if you want to move in a couple of years.

Is it a house or a flat? Have you got any children yet? People often change their mind on the property and area when they get round to having children.

Personally, we’re risk averse so have always lived in much cheaper properties than we could afford. We’ve preferred to invest the money saved and it’s nice to know you don’t ever need to work another day if you don’t want to at a relatively young age.

It’s all relative to earnings. If you don’t meet affordability then you won’t get offered a mortgage. If your jobs are secure (as they’re ever possible to be) then go for it!

I would go for a mortgage where overpayments are allowed and try and reduce it as much as possible if you get bonuses or just pay a bit off from savings as and when they accumulate.

If £900k is too much for that particular property, then yes, it is too much for an FTB (or anybody). Did you offer lower or asking etc? How long was the home on the market for? Have you checked sold prices for similar properties in the same area etc? Guessing you have done research etc. It's just an odd question to ask because ultimately, if you can afford the purchase price (and mortgage offers are based on affordability criteria) how can somebody define whether a particular amount is 'too much'?

You say you have an AIP but worried you may not get approval to proceed with sale- when did you get the AIP?

@GreyishDays

And if you’ve got a year’s mortgage repayments saved up then maybe you should think about using that £50k in your deposit?

Not sure that's the best advice in the current climate. Besides, it's always encouraged by mortgage providers that you have a significant buffer in savings, should something go horribly wrong. I think they specify having at least 4 months' salary (at least mine did).

Crikey. When I was FTB my house cost me 32k

Yeah. On one hand it’s good to have a buffer, on the other having so much saved up, and a small deposit seems a bit unintuitive.

That was to Small

Using FTB to buy a 900K property put you in a very vulnerable position, a downturn of 10% make your homes being in negative equity.

@Otot no it doesn't. at 15% they are putting down a £135k deposit. a reduction of 10% would reduce them by 90k. and unless they're planning to sell within 5 years its irrelevant what the current market is.

A 35 year mortgage will set you back by around £3k a month plus bills and some contingency for repairs. so need to decide if you can afford that

[quote Bells3032]@Otot no it doesn't. at 15% they are putting down a £135k deposit. a reduction of 10% would reduce them by 90k. and unless they're planning to sell within 5 years its irrelevant what the current market is.

A 35 year mortgage will set you back by around £3k a month plus bills and some contingency for repairs. so need to decide if you can afford that[/quote]
Thanks, 5% or 15% deposit?

See if you get the mortgage

It’s a substantial house, in London, you must be strong earners as more average FTB couples in London are buying in 4-500 range

You have savings

Fact that there are 2 of you is a big risk mitigator

Absolutely worst case (both lose jobs) - contracting, or you could rent out 1-2 rooms to lodgers (my neighbour lets out loft bedroom& en-suite which has allowed her to buy a substantial house on a medium income)

If it’s too much of a risk you won’t get the mortgage...

Just out of interest.... why haven’t you bought earlier?

That’s a huge mortgage with quite a small deposit, so I wouldn’t be happy about it. You’ll be in quite a vulnerable position.

@Otot they're getting an 85% LTV ratio so that's a 15% deposit

@Bells3032, oic.. thanks

@GreyishDays

Yeah. On one hand it’s good to have a buffer, on the other having so much saved up, and a small deposit seems a bit unintuitive.

Not sure it makes a great deal of sense to pool all of your money into a single property, particularly in the current market. That said, I do agree it's a small deposit relative to the price of the property. My flat was £315k and I put a 6 figure deposit down. I also kept circa £45k back as a buffer etc. It didn't make sense for me to pool all of my money into my flat, but then I didn't need to as my purchase price meant I wouldn't be over-stretching.