First time buyer in 40s

[Diorinthecountry]

Morning

We currently rent a social house in a very rural area. We like the area we live in its a lovely community with stunning views, lots of lovely walks etc. However it can be isolating over the winter. Our house needs a new bathroom, kitchen and the sitting room re done. We would pay for all this ourselves and have permission to do the work. We have lived here for ten years. There is me, dh and dd 12.

Last week we went to view a show home on a new build estate. The new estate is in a good area and closer to a town. All the three beds are currently sold but they are planning on building more in the future. The three beds sold for £375K I've completely fallen in love with the new build house. It would have so much more space than our current house, we could move in and have no work to do.

However we only have £10k of savings. Dh and I have our own business which had a low net profit over the covid years. We have made significant changes to increase our net profit and could keep saving into our deposit fund.

Is there anyway the new build house could be a possibility?

I've spoken with an independent mortgage advisor. Who said to look at what our net profit is and times it by four.

Dh and I honestly don't know what to do for the best and are in a bit of a pickle. Should we just give up the idea of getting a first time mortgage in our early 40s or is it possible?

Sorry for the rambling on and thanks for any advice.

It's likely you'll be able to borrow 4-5 times joint income and need at least 10% deposit.

You can mortgage up to age 70, so you'd be able to spread the payments out over 30 years (presuming you're both 40).

Depending on interest rates, you'll have quite a big monthly payment. I'd say, with a 10% deposit, you'd be looking at at least £1200-£1400/ month, but I'm basing that on our current rate (no idea what it is!) but it was fixed a couple of years ago...

I do not know if this is a possibility or not but can you have a guarantor on a mortgage or is that not a thing?

@RestingRulers I think you can get a guarantor but unfortunately we don't have anyone to ask. I wouldn't like to do that anyway as my finances would be someone else's problem then.

@justsayingthat that's the rough figures we got for monthly payments on the mortgage calculators we played about with. Our current rent is £480 per month.

I would speak to several mortgage brokers and see what they say. You can put a number into L&C and get a 'you could get a mortgage for x to y' agreement in principle, but those figures they churn out are very much dependent upon personal circumstances, and are pie in the sky for most folks, frankly. They told us we can get up to £523 and the best we're getting is £441 and that's at a push.

Our recent personal experience: OH is 41, I am 47. They will lend us 441k on his salary (108k PA) but in order to make it affordable, they discount me (I am ill and can't earn) and only take into account his salary, then a bunch of lenders are stretching that mortgage out for THIRTY THREE years. In fact, some lenders are looking to apply and are taking me out of the mortgage completely, because even though I'm not a child, I'm considered a dependent because I have no income.

Yes, 33 year mortgages are now a thing! At least for now, anyway. Friends we are buying from are even talking about getting a mortgage to the age of 77.

However, I think the only reason they're prepared to stretch it out to a 33 year mortgage for us is because of his high salary.

Call some brokers, for sure. Remember, if what you hear back makes you despair, things could be very different in a year or two years time. Affordability criteria are quite harsh at the moment but they haven't always been this way and they won't be for infinity either.

I would start with L&C; they deal with many, many lenders and their advice is free. If they simply say 'no, nowhere near possible', ask them what you need to do to work towards getting to a point in the future where the answer is 'yes.'

It's a tough one when your current rent is that low and if it means you'd be paying roughly double on a mortgage 😕.

I think it would definitely be worth if it if you were in a private rental, but I don't know for a secure HA tenancy, sorry.
I'm in a similar position to you in that I can probably afford to buy for the first time in my life, but do I want to take on a big debt of a mortgage all on my own in my mid-40s, when the HA house I'm in is almost guaranteed for life and my rent and water charges are less than £400 a month...

I'd say you would struggle to get a mortgage for a £375k property with only £10k deposit, that's not even 5%.

As an absolute minimum you'd need 5% deposit so £18750 and then would need to find a lender who would go to 95% on a new build as many won't and there aren't many lenders who do 95% lending
If you found one you'd then need approx £79k joint income baring in mind most lend take an average of the last two years profits
Plus the mortgage payment would be huge compared to what you're paying in rent now even if you took the term to age 75

I'm sorry, with those figures that house is unaffordable.
I bought a couple of years ago at 41 and had £37k deposit, borrowing 4 x my salary, which ended up being about £900 pcm mortgage payments but they would be higher now I assume.
you need at least 10% deposit and you won't be able to borrow more than 5 x income at the very most.

A 10% deposit is what you should be aiming for. 10k is more than likely too low.

New builds have a tricky market currently - lots of companies are putting incentives in place like stamp duty, deposit contribution, mortgage payments.

What they won't do is lower the list price of the house unless they are desperate to sell. If the market falls further, they may not even build those future houses - we went to see a new build estate recently and the sales woman said their second phase might not go ahead as planned. I was a bit surprised by that as five minutes earlier she was telling us about how busy she was.

So - go and make an appointment at the sales office, speak to them. They'll probably have a broker you can talk to and then you'll know more. Self employment mortgages are a different kettle of fish to the standard so it might be a bit trickier but you won't know until you ask.

Oh and new builds often don't come with flooring or turf - try and get that thrown in as an incentive if you can.

Sorry to rain on your parade but the numbers don’t add up.

That size mortgage and deposit will mean very high monthly payments with current mortgage rates. We are FTBs in our 40s. We are looking at houses for £315-325k with a 25% deposit and potential mortgage payments are coming out at around £1.1-1.2k. No way could we buy a £375k house. I think you need to go online and put numbers into some actual mortgage calculators to see what comes out.

Also bear in mind you will need money for conveyancing, and then for upkeep and maintenance - and really you need an emergency fund. Buying a £375k house with £10k savings just isn’t wise especially right now.

There will be other options. I would wait, save, and also look in lower price brackets.

You can go over age 70. My mortgage provider was willing to go to 72

Even if you found someone who’s give you a mortgage, let’s say 5% (which I’d argue is unlikely) fixed.

£365,000 over 30 years is £1900/month.

Your rent is dirt cheap.

Your net profit x4 is about right, and in the nicest possible way, you aren’t going to get a mortgage of that size with a £10k deposit

Could you scour Rightmove for a newly refurbished, bigger property that is cheaper? Maybe in a slightly different area? This would get you on the property ladder in a more affordable way and then you reassess in 5-10 years time and potentially get something even better. You're too young to give up on owning your own home - I'd say go for it!

Thanks for all the insightful comments so far. They are much appreciated.

Just to clarify we can add to our deposit fund so ideally would have a deposit of £30k plus a separate fund for legal fees etc. They haven't broke ground on the new houses yet.

It is a difficult decision either stay in a secure three bed house at £480 per month or save like mad and buy a house but have heavy mortgage payments each month.

Hope you don’t mind me asking- Why do you want to buy if you have secure low rent housing?

@qpmz thanks that's a good idea and it wouldn't put as much pressure on us financially I suppose. We could explore that option.

Wish I hadn't went to look at the new build houses. They are so lovely.

I would stay put and save like mad. I don’t think it’s affordable for you atm.

would a 2 bed work? would be cheaper.

Have you looked at shared ownership?

@BrieAndChilli what's shared ownership?

The new builds do have two bed apartments or two bed semi detached. Think these are around £250k mark. They are really lovely also.

We thought three bed as we have an older son and him his partner and our grandchild stay in a room when they visit us. Me and dh have a room each as he snores really badly.

We bough last year. We weren’t first time buyers, but had fallen off the property ladder so had to start again. DH was 57 and I was 51. He earns just over £70k including his military pension. I don’t work because I’m ill so I’ve no income to be taken into account.

In theory you can get a mortgage to aged 70, in practice it’s much more difficult. We went with L&C and got a 10 year fixed so it will be paid off before DH retires. We’re over paying so it will be paid off before then. Our mortgage is small (£120k) in comparison to DH’s wage as we had a very substantial deposit.

Don’t give up though, there will be a house out there for you. But get some advice to see how much you can afford first.

When DH and I were house shopping 5 years ago, we could only borrow 4.5x our joint income. Luckily, we didn't max out on the mortgage and only borrowed 3x.
I'm guessing that even if you can fish out 30K of deposit you'd still need to have the joint income of 75K to be able to afford the house in question

Fyi, a government incentive has been running for a year or two now to back lenders who give 95% mortgages. That's due to end in December, but it was also due to end in December last year and they renewed it.

If it does go away, and there is no telling if it will until the final hour, you will find far fewer lenders prepared to offer 95% mortgages and they will be more costly.

This means you will need closer to 47k to move. A 10% deposit, then conveyancing fees, survey fees, removal firm costs, any upfront costs the lenders want for the loan (which can sometimes be added to the mortgage).

It sounds like you are in the right housing situation but in the wrong area. Can't they offer you alternative accommodation in an area you prefer on similar terms to the ones you have now?

Thanks @KievLoverTwo we could put in for a swap not sure about asking to move to another area. Thank you will look more into this option.

So glad I started this thread. Lots of helpful advice and suggestions.

During covid times our net profit dropped to £35k we have made lots of changes which we implemented last February when we seen the economic crisis coming. Our projected net profit for the next few years will be £100k or over. However the tax man will get a bigger cut of that.

Lenders won't use projected figures especially at such high loan to value. They will usually work on the last two years figures that have been submitted to HMRC
There are also limits on new build properties the lender I work for wouldn't go higher than 85% on a new build house, less on a new build flat