First time buyers - what can we afford?

[TheresNoFudgeHere]

Hi all, forgive me for being ignorant but we are first time buyers so just looking for a bit of advice.

We’ve been told we can borrow up to £262k, and we will have a £23k deposit. Our combined gross income is 58k, however a bit more with out of hours/nightshift payments.

I’m trying to figure out what we could actually afford monthly. I think ideally we wouldn’t want to be paying more than £1000 a month for the mortgage.
What kind of house price range should we be aiming for?

Google mortgage repayment calculator and choose the maximum loan tab, put the maximum monthly payment you want

https://tools.moneyhelper.org.uk/en/mortgage-calculator?calculationType=repayment&price=200%2C000&deposit=23%2C000&termYears=30&rate=5.25#results

Use a tool like this and play around with property price and term length.

I wouldn't advise maximising the borrowing length. A £200K property would cost just under £1000 per month, with a £23K deposit, over 30 years and with 5.25% interest.

The reason I would advise against a longer mortgage is that you'll be paying back so much interest (the same amount as your repayments), even if you shorten the mortgage term later.

Also, remember to factor in whether £23K is your deposit, or whether that is how much cash you have saved.

You will also need cash for solicitors and moving fees, a double months payment on your mortgage up front, mortgage fees, and immediate work or goods needed (i.e. a washing machine and fridge).

Thank you - we have reserved 10k for moving, solicitors fees and buying white goods (that’s the only furniture we don’t own).

I wondered if we could still take the 35 years option but then overpay where we can?

We took a 35 year mortgage when we first bought, we over pay enough to make it a 25 year mortgage with the hope that we can pay down even quicker when we don't have 2 in childcare anymore.

It helped when my husband was training for a new career and had no income for 6 months as our payments were nice and low I could cover everything and then started overpaying again

Don't forget that as soon as you own a house you will need to have a pot for fixing and replacing things too. Easy to forget but can end up being really expensive if you are unlucky

Others will be more ofay (is that the word?) with affordability, but can I just check:

We’ve been told we can borrow up to £262k, and we will have a £23k deposit. Our combined gross income is 58k, however a bit more with out of hours/nightshift payments.

Who told you this?

In order for this to be ACCURATE, you need a phone call with a mortgage broker (or a bank) who will spend 45 minutes plugging in all your salary/income/debts/outgoings/number of children, etc into their financial systems, then if they say 'you can borrow up to 262k with Nationwide over a 25 year term', it stands a fair chance of being pretty much right, and you won't have the disappointment of offering, only to find 240k is your max.

Until someone does those checks for you, any online systems you use are likely to be wildly inaccurate.

Hi, we gave all these details to Moneybox who worked out the mortgage in principle.

We're on about 48k and are FTB, we've been through the repayments with an advisor and at the moment it came out to be about 200k with repayments of 1k a month. We do have a smaller deposit though.

We have a combined income of £63k and borrowed £205k, put down £85k. Our repayments are £1150 over a 22 year term. Don’t forget cost of solicitors, movers, etc

I don't personally see a problem in having a longer term when you are FTB. You've got plenty of time ahead to adjust the term in various directions as you remortgage, move house etc in the future - and your salary changes with your life circumstances.

When I bought my favourite house I could only afford interest only to start with (not a good idea) and I worked out how much I could afford a month and then had a mortgage based on that. I then changed to repayment later and made overpayments as much as possible.

If you go the full term you will end up paying more but I've always given myself some slack the first year because there's always something to buy or pay for when you first move in.

Personally I’d buy / borrow towards your upper limit; but get a longer term mortgage (assuming you are 20/30s). You can then overpay it; and less likely you’ll have to move again soon which is a massive waste of money and stressful. Maybe look at properties marketed around £275k? Worth getting a mortgage advisor who can show you the different options depending on borrowing amount and term-only you know how much you’re willing to spend monthly

Most lenders will only lend around 5x your annual salary. That would be about £290K add to that your deposit and you've probably got about £330K to spend.

You're probably looking at around £1500 a month repayment.

But best off speaking to a proper mortgage broker. Good ones are worth their weight in gold.

I agree with @Peonies12 I would borrow towards the higher end and make sure you get as much house as you can for your money. Either good space or potential to extend. Don't worry about the condition, you can do it up over time, but I would get the space to minimise the amount of times you need to move and pay stamp duty.

I would also consider what industry you work in/your career prospects/education level.

When we moved into our first house 10 years ago, we were earning ~£50k together. 10 years later we're now on a combined income of £105k and one of us is PT.

It's hard to believe, but your income is likely to increase over the next 5-10 years so personally I think it's well worth buying in a nice area and/or getting space now, house prices will only increase over time, and you'll likely have more income to play with too in a few years.

I wouldn't get a cheap house unless it has potential. Keep pushing, it's the only way to accumulate equity.

I seriously doubt many lenders will be lending 5x salary at the moment. That would have been generous even before interest rates rose and certainly not without a huge deposit.