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First time mortgage and deposit advice

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  • First time mortgage and deposit advice

    Hi, I was wondering if anybody could give me any advice on a mortgages and deposits.

    My boyfriend and I are looking to buy the house that I currently rent. The person that owns the house has lived in Australia for 10 years and just wants a quick sale so as I have been renting the property for 2 years he has offered it to us for £110,000.

    The property however is a good sized 3 bedroom house with large garden and has been valued at £160,000. A few of the other houses in the same road have sold recently for between £165,000 and £170,000.

    As we would have £50,000 equity in the house from the start would we be able to get a mortgage for £110,000 without a deposit?

    This is the first time we will have bought a house so i'm not too sure how it works but having been looking at mortgages and from my understanding they are loan-to-value, meaning they give you 70% of the property value and you have to make up the rest.

    So in effect if 65% of the value is all we need then we could get a 65% mortgage without a deposit?

    Sorry if thats confusing! But if anyone knows whether that would be right or how it works if im completely wrong that would be great!

    We dont want to miss out on getting the house at such a cheap price but have no way of getting a deposit in time so any advice would be really appreciated!

    Thanks

    Dannii

  • #2
    Re: First time mortgage and deposit advice

    Basically, if the selling price is £110,000, that's the value any mortgage will be based against.

    The lender's position is that if you cannot make repayments, they want to be assured of being able to cover their losses - ie, your deposit.

    The fact that other properties have sold for higher is neither here nor there - next week the normal price could be just £120,000, and lenders presume a loss of 20% when repossessing so immediately it would only be worth £96k in their eyes.

    Comment


    • #3
      Re: First time mortgage and deposit advice

      It's an interesting scenario and a very exciting position to be in. Have you approached any banks yet? Your best bet will certainly be to get a broker since they'll be able to source you the best deal and work out the best lender for your specific circumstances.

      Good luck with it all, it sounds like you're getting a bargain!
      Free Guides For First Time Buyers!

      www.FirstTimeBuyerGuru.com

      Comment


      • #4
        Re: First time mortgage and deposit advice

        Ok, thanks guys.

        Wasn't sure if it would be possible or not, have an appointment with my bank tomorrow to ask them so will see what they say

        I thought I had read somewhere that the mortgage provider sends someone to value the property and as long as they argee that it is worth more it might be possible, also in reguards to the deposit to cover their losses, up until recently there have been 100% mortgages?
        But as I said am new to this so am probably wrong!

        Anyway thanks again and I will see what they say tomorrow

        Comment


        • #5
          Re: First time mortgage and deposit advice

          I'm not trying to say anything against the banks themselves but remember when you go to your own bank they can only set you up with their own deals. Using a mortgage broker, particularly one with no adviser fees may be more beneficial as they can search the whole of the Market. Im a broker myself and find a lot of buyers are worse off by only going to their bank.

          By all means get in touch and we could potentially save you money.
          Anthony
          Compare the Mortgage Market
          http://www.comparethemortgagemarket.com

          Comment


          • #6
            Re: First time mortgage and deposit advice

            Originally posted by ComareTheMortgageMarket View Post
            I'm not trying to say anything against the banks themselves but remember when you go to your own bank they can only set you up with their own deals. Using a mortgage broker, particularly one with no adviser fees may be more beneficial as they can search the whole of the Market. Im a broker myself and find a lot of buyers are worse off by only going to their bank.

            By all means get in touch and we could potentially save you money.
            Does that mean that what i'm asking is possible? I am going to meet with my bank so that I can ask them if it will be possible to get a mortgage without a deposit when I am only asking for 65% of the property value as I cant seem to find a deffinate answer either way anywhere else.

            As you are a mortgage broker are you able to tell me if that is possible or not?

            Dannii

            Comment


            • #7
              Re: First time mortgage and deposit advice

              You will not be able to obtain a mortgage without a deposit no. If you are buying the house for 110k then that will be the value that the bank will work to, not the 160k or thereabouts. The purchase price is the value of the house for mortgage purposes.

              Only thing I could see you doing it to maybe obtain the 10% deposit through a loan (if repayments are all affordable on the lenders affordability calculators) then to get that money back you could apply for a further advance in 6months time from the lender you go with.

              This transaction would just be a 'sale at undermarket value' to the bank and it would not be classed as a gifted deposit as the person making the gift is not a relative.

              What about a family member loaning you the 10% or even 15% deposit? they could have it back in 6 months when you do a further advance.
              Anthony
              Compare the Mortgage Market
              http://www.comparethemortgagemarket.com

              Comment


              • #8
                Re: First time mortgage and deposit advice

                Just got back from the bank and thats what they said too, oh well!

                Thanks for all your advice though, mortgages are very confusing the first time!

                Neither myself or my boyfriend have much family so dont have anyone we could ask unfortunutly but we have a fairly high joint income and currently pay £800 rent so think we could cover the loan repayments and the mortgage and still be saving a little every month so hopefully that will be fine.

                Thanks for all your advice

                Dannii

                Comment


                • #9
                  Re: First time mortgage and deposit advice

                  Have you looked at getting a loan for the 10% of the purchase price? This could be done on a temporary basis as 6 months down the line you could have the house revalued and then further advance so much out of it to repay the unsecured loan. As long as the mortgage and loan repayment is passed on affordability by the lender chosen you should be fine.
                  Anthony
                  Compare the Mortgage Market
                  http://www.comparethemortgagemarket.com

                  Comment


                  • #10
                    Re: First time mortgage and deposit advice

                    Hi Danni

                    Do you have any savings to speak of? If you can get a 5% mortgage deposit together you could certainly purchase the property then reap the better interest rates when you come to remortgage.
                    Free Guides For First Time Buyers!

                    www.FirstTimeBuyerGuru.com

                    Comment


                    • #11
                      Re: First time mortgage and deposit advice

                      You could possibly do as Dan S says and obtain a 5% deposit for the property and go on a 95% deal which are roughly 6% at the moment. Then, in 6 months remortgage to a better rate and pay the early repayment penalty of 3% of the mortgage. might work out better that way as to start with you will have a 95% LTV deal then in 6 months you would be picking a deal for approx 3% at 65%/70% LTV.
                      Anthony
                      Compare the Mortgage Market
                      http://www.comparethemortgagemarket.com

                      Comment


                      • #12
                        Re: First time mortgage and deposit advice

                        Are you allowed to put names of banks and mortgage companies on here? My last post seems to be deleted so guessing maybe not?

                        I'll rephrase my last question! Is it better to go with a well known bank or mortgage company or with the best rate?

                        I've found one that is 95% LTV and only 3.95% for the first 3 years and then goes up to 4.45% after that which seems pretty good from what I can find? I spoke to them yesterday and they were really lovely, the only thing is its from a company that I have never heard of!
                        I cant find anything negetive about them on the internet but really my question is, is it a good idea to go with them as they have good rates and we dont need as much deposit or is it best to go with a more well known company and pay a bit more?

                        In reply to Dan we havent really got much savings, between myself and my boyfriend we have around £2500, plus £1200 that i have down for the rental deposit on the house which obviously we cant get to at the moment, but it does mean we can get a smaller loan for the remainder if we only have to find 5% Thanks though, I hadn't realised you could get 95% mortgages before as my bank had given me the impression that the minimum deposit was always 10%!

                        Thanks again for all being so helpful, know i'm asking stupid questions but its quite confusing for a first timer!

                        Comment


                        • #13
                          Re: First time mortgage and deposit advice

                          I quite sure you are allowed to mention lenders names on here. There is no need for you to worry about using a lender that you have not heard of before. Some small societies will have niche lending criteria so may offer good rates although if you want to let me know who this lender is I can have a quick search and see what deal they are properly offering. This could be a 3/4/5 year stepped product which may end up costing you more anyway. Using a broker is quite beneficial for you as they will know the exact deals being offered.
                          Anthony
                          Compare the Mortgage Market
                          http://www.comparethemortgagemarket.com

                          Comment


                          • #14
                            Re: First time mortgage and deposit advice

                            Ok thats cool,

                            The one i have found is Newbury Building Society, they only lend to people in their area but our postcode is one of the ones listed.

                            The one that I have been looking at is the First Time Buyer Offset Mortgage at 95%.

                            Do you think that seems ok? I am employed but my boyfriend is self-employed with 2 years accounts so that limits us a bit as a few of the good rate ones i've found dont take self-employed.

                            I spoke to a Mortgage broker from tmbl group who said 'Unfortunately lenders do not accept deposits being borrowed. It must come from your own funds, or a gift from family members.'
                            So am a bit confused!

                            We have been approved for the for the loan so was going to ring Newbury Building Society back on Monday to get things started if you guys think its deffinatly ok to get the deposit from the loan?

                            Comment


                            • #15
                              Re: First time mortgage and deposit advice

                              The Newbury deal is fine to go for, either a 3 year or 5 year variable rate. This would also be ideal for your situation as their early repayment penalty is only 1% so if they hiked the rate up you could remortgage to another lender for approx £1k penalty.

                              As far as the deposit, you would need to check with the policy of Newbury aswel as to whether they would find it acceptable. If not, a gifted deposit from a family member would be fine.
                              Anthony
                              Compare the Mortgage Market
                              http://www.comparethemortgagemarket.com

                              Comment

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