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Young couple after Mortgage

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  • Young couple after Mortgage

    Hi all im new to this forum and i am after some advice

    Me and my girlfriend are thinking about getting a mortgage but were unsure whether anyone will give us one or how much deposit is needed.

    Our circumstances are
    I am self employed and she is currently on maternity leave and she is only going back to work part time in january
    We earn 15,000 a year between us (including child tax credit)
    and we are only 20 years old

    Any advice would be really appreciated
    Thanks

  • #2
    Re: Young couple after Mortgage

    The quick answer, Breezybreslin, is that mortgage companies usually lend several times the applicant's income (this varies from lender to lender) but most require you to put down a deposit of 10% (although this too can vary). Generally, the more deposit you can raise, the better the mortgage deal. However, all of this depends as well on your financial circumstances and your credit history.

    Other forum members who work in the mortgage business would be able to give you more precise information than that, but I think what might be holding them back is uncertainty about whether you are financially in a position to take on a mortgage (this is known as "affordability") because, after all, you have a girlfriend and a new baby to support and so your household finances must be quite stretched; and also whether, at 20, you have really given yourself enough time to build up a credit history.

    I do think it is to your credit to want to look to the long term and make a secure future for your new little family by planning to buy a home. Most people, however, approach the prospect of buying their first home as a long-term project, taking two or three years to save up a deposit and to build up that credit history. That is what I did when I was 23, not much older than you, and if it is of any help to you, this is how I did it. Of course, you may already be doing all, or some, of these things in which case, I can only apologise for offering you stale advice.

    The first thing to do is to set out a monthly budget, listing your income and subtracting all of your outgoings (rent, council tax, electricity and gas, phone, groceries, etc). Work out how much, if any, is left over at the end of the month.

    Next, open a savings account and put aside as much as you can at the end of every month. This might be very difficult for you just at the moment because you are facing all sorts of extra expenditure for the baby. However, the point is that your savings need to be made regularly and so if this means that some months, you can only afford to put away a pound of two, then so be it. As long as you can show that you have been a regular saver, this will help to convince a mortgage lender in the future that you manage your money well and that you know how to live within your means.

    Next, think about how you can increase your income. I did as much overtime as I could in order to push along my two-year plan, but as you are self-employed, could you take on extra work? If you can, then try to put at least some of the extra money aside to increase your savings.

    Once you feel that your finances are firmly under control and you are managing to save, think about applying for a credit card. However - and this is golden advice - ONLY use it for budget essentials such as the weekly grocery shop; ALWAYS pay off the bill in full every month and NEVER miss a payment or make a late payment. This will build up your credit history nicely.

    After two or three years, take stock of your progress. If you have increased your income and you are living within your budget and you have set aside some savings and you have built up a good credit history, that would be the time to think about buying your first house. I know this seems a long time to wait, Breezybreslin, but honestly, you need the time, the plan, and the savings in order to give yourself the best chance to succeed.

    If I have missed anything out, or if I've given you the wrong advice, I am sure that someone else will be along shortly to add their comments....However, I wish you and your family the best of luck.

    Comment


    • #3
      Re: Young couple after Mortgage

      Very good advice from Jeannie D there breezybreslin.

      Just a couple of things to add ......

      As you are self employed you will need a good solid history of reliable and sustainable income in order to get accepted for a mortgage. Most lender's will take an average of your last three year's net profit figures and base their lending decision on this figure. Some use an average of the last two year's figures but even then would like you to have been self emplyed for 3 years to show your commitment to the career you have made for yourself.

      So although your income is £15,000 at present a mortgage lender may not base their lending on this figure if your profits in the previous 2 years have been lower.

      Self employed people often try to reduce their income tax bills by using an accountant to help them to reduce their net profit figures by using allowances and maximising their expenditure but unfortunately this is unhelpful when you come to borrow a mortgage as the lender will ask to see your accounts and will use the net profit figure to calculate what you can borrow.

      Jeannie is correct that you do need a minimum of 10% deposit at present unless you are using a special scheme to buy with such as shared ownership or using your parent's property as security for part of your loan. The best advice is to find a local mortgage broker that you can sit down with and discuss your situation face to face (preferably one that doesn't charge for a consultation). Ask around friends / family / colleagues if they know anyone that they trust enough to recommend to you.

      If you find that getting a mortgage at the moment is tricky then again Jeannie's advice is spot on. Put some money aside each month. Not only will this help you to fund your purchase by building up your deposit but it will also get you accustomed to not having that money every month.

      If you can manage to do this, then you ca be more confident that signing up for a mortgage shouldn't cause you too much trouble, but if you find that you just can't afford to save every month then you really need to carefully consider whether you should be commiting to the regular payments that you need to make to a mortgage.

      Best of luck
      ____________________________________________
      Property for sale in Torquay

      www.thomasdobner.co.uk

      Comment


      • #4
        Re: Young couple after Mortgage

        Me and my girlfriend were just thinking about getting a mortgage because at the moment we are paying £500 a month rent and a mortgage on a house of about £50,000 works out at about £300 a month over 25 years

        Also my credit history isn't bad at the moment but i do have a lot on credit including 2 mobile phone contracts, 1 laptop and 2 catalogues but i have never missed a payment but maybe it would be better for me to pay all these off before applying for a mortgage.

        Thanks for all your advice i really appreciate it and i think i will take it and pay off my debts and start saving in my ISA account and then try in a couple of years

        Comment


        • #5
          Re: Young couple after Mortgage

          That sounds like a very sensible plan to me. Let us know how you go on and if you need any further help or advice, you now know where to look!

          Comment


          • #6
            Re: Young couple after Mortgage

            I agree that is a sensible plan.

            Although buying seems cheaper when you compare £300 mortgage to £500 rent don't forget that when you own the property you will also be liable for extra costs that as a tenant you don't have to pay for (property repairs & maintenance and building insurance for example) so you wouldn't be saving £200 in reality.

            Also, when you buy you need to make certain that the place you purchase is suitable for you both now, and in the foreseeable future, as moving on is a lot more complicated and costly when you own rather than as a tenant.

            Lastly, you do need 10% deposit at the moment so clearing some of your debt and saving up will be of help. The mortgage market is slowly improving though and you may be able to get a 95% mortgage at some time in the future so it's worth keeping abreast of changes every now and then. Bear in mind though - the smaller your deposit the higher the interest rate you are likely to be charged so supplying a larger deposit makes your mortgage payments much cheaper (not only because you get a lower rate of interest, but also because you will be borrowing less).

            As Jeannie has said, if you need any more help or info just ask any time, but ultimately a conversation with a mortgage broker is probably the best way to proceed when you feel ready to find out more.
            ____________________________________________
            Property for sale in Torquay

            www.thomasdobner.co.uk

            Comment


            • #7
              Re: Young couple after Mortgage

              thanks again everyone for the advice i will keep you informed

              Comment


              • #8
                Re: Young couple after Mortgage

                Although buying seems cheaper when you compare £300 mortgage to £500 rent don't forget that when you own the property you will also be liable for extra costs that as a tenant you don't have to pay for (property repairs & maintenance and building insurance for example) so you wouldn't be saving £200 in reality.
                Yes, but IMHO it is anyway better to invest in your own property than to pay during many years for the flat which will never be yours.

                Comment

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