Rob B
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Registered: 8th Jan 04
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Me and the Mrs are looking at two properties both priced in the region of 180k.
between us we have 100k for a deposit although we don't really want to put all that down. Are the rate changes really that drastic if we say put 25k down each and then had a joint mortgage.
I don't have any income for the last 2 years, not concrete income anyway however she does. I do however have a fair amount in the bank but don't know if this will benefit us?
Reason i don't want to put down all the money is to hopefully use some to buy another property to rent out.
Any help appreciated,
Cheers
PS - looked on compare sites at fixed rates but was hoping for the opinion of others who have been there.
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Ian
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Registered: 28th Aug 99
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You can probably get a fairly sensible LTV threshold without putting anywhere near that much down. Even going on the highest possible threshold I cound find just looking at a few lenders of 60%, that is still only £72k and that gives you access to every single mortgage product that they offer.
Even with £50k down you are still above the 75% threshold which should still have some good rates in. Not as good as with more down but as you say, you can probably employ the spare money elsewhere.
Your history of income may be a worry though, without knowing her salary it's difficult to know to what extent but she'll still have to satisfy an affordability ratio against her monthly income. I would assume they won't consider yours at all unless you can somehow self certify - although that itself probably introduces a few other issues.
Then you have the issue that holding money back is mathematically the same as lending it to yourself at the rate that you have agreed the mortage at. So if you keep £50k to spend on another house, it'll cost you £80k to do that in terms of what additional interest you will accrue on the residential mortgage.
Plus BTL rates are typically poor, LTV will also need to be good on that property, small mortgage on a let means you have taxable income etc. etc. it's not just as simple as holding a bit back to go in to property.
Also be wary of fixed rates particularly if they have a fee. When the rate runs out and you want to remortgage you'll have more fees. Attractive rates are usually negated by the resulting regularity of arrangement charges. 2 year at 3% might sound good but remember you're paying over £20pm on top of your projected payment because of what it cost you to agree to it.
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dannymccann
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Registered: 9th Aug 06
Location: Doddington, Lincolnshire
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Why not look at offset products? That way you keep the majority of your savings as ready cash to use if needed but while you dont use it to spend you keep it as capital against the mortgage reducing the interest charge.
We've only got 6 or 7k of savings but when I remortgage I want to go offset route to reduce the interest penalty as much as possible without paying off a massive chunk of mortgage and losing the savings for a rainy day
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AndyKent
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Registered: 3rd Sep 05
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What Danny said, I'll be switching to a First Direct offset in a year or two (when I actually have some savings to offset!).
Much rather keep the cash liquid than tied up in a fixed asset.
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Rob B
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Registered: 8th Jan 04
Location: Area Motorsport Drives: Race EP3
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quote:
Originally posted by dannymccann
Why not look at offset products? That way you keep the majority of your savings as ready cash to use if needed but while you dont use it to spend you keep it as capital against the mortgage reducing the interest charge.
We've only got 6 or 7k of savings but when I remortgage I want to go offset route to reduce the interest penalty as much as possible without paying off a massive chunk of mortgage and losing the savings for a rainy day
Purely cause i don't understand what they do, i presume it means that you can release money that is equity within the house? I really have no clue about this it's all new to me. 
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Rob B
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Registered: 8th Jan 04
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quote:
Originally posted by Ian
You can probably get a fairly sensible LTV threshold without putting anywhere near that much down. Even going on the highest possible threshold I cound find just looking at a few lenders of 60%, that is still only £72k and that gives you access to every single mortgage product that they offer.
Even with £50k down you are still above the 75% threshold which should still have some good rates in. Not as good as with more down but as you say, you can probably employ the spare money elsewhere.
Your history of income may be a worry though, without knowing her salary it's difficult to know to what extent but she'll still have to satisfy an affordability ratio against her monthly income. I would assume they won't consider yours at all unless you can somehow self certify - although that itself probably introduces a few other issues.
Then you have the issue that holding money back is mathematically the same as lending it to yourself at the rate that you have agreed the mortage at. So if you keep £50k to spend on another house, it'll cost you £80k to do that in terms of what additional interest you will accrue on the residential mortgage.
Plus BTL rates are typically poor, LTV will also need to be good on that property, small mortgage on a let means you have taxable income etc. etc. it's not just as simple as holding a bit back to go in to property.
Also be wary of fixed rates particularly if they have a fee. When the rate runs out and you want to remortgage you'll have more fees. Attractive rates are usually negated by the resulting regularity of arrangement charges. 2 year at 3% might sound good but remember you're paying over £20pm on top of your projected payment because of what it cost you to agree to it.
Ian, what do you mean it would be like paying 80k instead of 50k? Sorry for my noobness 
Also, Mrs annual income is around 32k before tax. Mine is higher but not through means that can be submitted. (Not dodgy, just buying and selling of cars etc which i'm now setting a business up to do)
[Edited on 01-08-2011 by Rob B]
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Fad
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I think what I an is getting at is if you can afford to put down more it will in effect reduce the overall mortgage.
For the sake of keeping 50k in the bank this may eventually cost you £80k in interest over the full term of the mortgage. Remeber you are borrowing 50k rather than spending it.
The crux of it is the more you put down the more favourable the rate and less money you need to borrow, hence less interest to pay in the long run.
[Edited on 01-08-2011 by Fad]
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AndyKent
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Offset means you keep cash in a separate account. Rather than earning any interest on it like you usually would, instead you don't pay any interest on the same amount off your mortgage.
For example, you buy somewhere costing £100k, you put down £20k deposit and keep £30k in your offset account. You only pay interest on £50k of the mortgage.
You don't earn anything off your savings, but you have access to spend it if you need to.
Save you a bloody fortune in the long run and means you don't tie up all your cash.
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dannymccann
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Registered: 9th Aug 06
Location: Doddington, Lincolnshire
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Also, no offence, but if you are struggling to understand mortgages please go and see an all of market independent financial adviser (usually free), as the sums of money we are talking about here are important to make the best decision about!
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Ian
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Registered: 28th Aug 99
Location: Liverpool
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I mean the mortgage is a debt and as such it attracts interest.
If you don't pay off the debt, you attract more interest.
Therefore if you keep the money for other purposes, the residential debt doesn't get paid off as quick. Total cost of that over the time you have it will be higher.
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Paul_J
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Registered: 6th Jun 02
Location: London
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quote:
Originally posted by AndyKent
Offset means you keep cash in a separate account. Rather than earning any interest on it like you usually would, instead you don't pay any interest on the same amount off your mortgage.
For example, you buy somewhere costing £100k, you put down £20k deposit and keep £30k in your offset account. You only pay interest on £50k of the mortgage.
You don't earn anything off your savings, but you have access to spend it if you need to.
Save you a bloody fortune in the long run and means you don't tie up all your cash.
That is interesting to know.
Yeah I think some people who don't get mortgages, neglect the effect of the interest payments - for example going for a longer repayment term may make your monthly repayments smaller, but in the long run makes you spend far more on your mortgage (including not paying off the actual mortgage for ages).
Rob I've got a great Excel spreadsheet where you can put in your deposit, your mortgage amount, length of term and % interest and see what your repayments will be month by month for the whole mortgage term... it's really eye opening playing with the numbers.
For example, my colleague has just got a mortgage with his girlfriend.
Property is £255,000
They had £38,000 deposit.
They are borrowing ~ £220k - over 35 years!
The total interest they will have paid in 35 years is £350k!!! (thats not repayment, that's just interest).
The total repayment will be like £570k - for a house only worth £255k.
Not to mention, per month it's like £1100 in repayments, which initially only pays off about £100 of actual mortgage and the rest (£1000) is just interest. This continues for about 12 years - where after 12 years they'll have only paid off about £15k of debt, and still owe £208,000 - despite having shelled out over £120k by this point in repayments.
About year 18 they get to 50:50 split, where they're paying about £500 mortgage off a month... but ultimately the bottom line is, they're going to pay a fortune on top of what the house is worth. They would have been far better off buying a cheaper property (They honestly didn't need a 3 bedroom house, with garden / garage etc at this stage).
In comparison, my sister put down I think £60k on a house worth £170k - thus borrowing about £110k over 25 years. I think she'll only have a total of £80k interest over the time - meaning she'll only have paid about £250k for a property worth £170k (not too bad).
[Edited on 02-08-2011 by Paul_J]
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Hammer
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Registered: 11th Feb 04
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quote:
Originally posted by Paul_J
In comparison, my sister put down I think £60k on a house worth £170k - thus borrowing about £110k over 25 years. I think she'll only have a total of £80k interest over the time - meaning she'll only have paid about £190k for a property worth £170k (not bad).
This above all else proves how much of an idiot you are despite your essay writing 
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John
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Registered: 30th Jun 03
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What has need got to do with anything?
I've got 4 bedrooms, a garden and a garage, I certainly don't need them, I wanted them and have the means to get them.
Most new buyers will probably take it out over a longer term, fully intending to bring it down to something more reasonable after the hard bit of the first few years has passed.
If you need a spread sheet to work out that the interest is loaded at the start you've got problems.
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Aaron
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Registered: 9th Aug 04
Location: Cottingham, East Riding
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quote:
Originally posted by Paul_J
In comparison, my sister put down I think £60k on a house worth £170k - thus borrowing about £110k over 25 years. I think she'll only have a total of £80k interest over the time - meaning she'll only have paid about £190k for a property worth £170k (not bad).
 and the £60k she "put down"? She gets given that back to her does she?
[Edited on 02-08-2011 by Aaron]
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Paul_J
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Registered: 6th Jun 02
Location: London
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quote:
Originally posted by Aaron
quote:
Originally posted by Paul_J
In comparison, my sister put down I think £60k on a house worth £170k - thus borrowing about £110k over 25 years. I think she'll only have a total of £80k interest over the time - meaning she'll only have paid about £190k for a property worth £170k (not bad).
and the £60k she "put down"? She gets given that back to her does she?
[Edited on 02-08-2011 by Aaron]
Oh yeah, forgot about that £60k
but my point still remains, the interest she pays is a lot less over 25 years than if it was stretched to 35 years. that was what my post was about.
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Paul_J
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Registered: 6th Jun 02
Location: London
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quote:
Originally posted by John
What has need got to do with anything?
I've got 4 bedrooms, a garden and a garage, I certainly don't need them, I wanted them and have the means to get them.
Each to their own, but I'd expect northern prices to be cheaper - to allow you to 'get more you don't need' for less than down here.
For the £250k they are paying, it is going to cost them a fortune for that extra room and garage in repayments over the duration of the mortgage, where as a place with 2 bedrooms in a similar location would've meant they could've afforded the repayments over a shorter duration and perhaps not crippled themselves as much.
Despite the fact you have the means to get them, I know my colleague and I know he's going to be scraping by month after month to pay his mortgage, for essentially rooms he doesn't need.
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VrsTurbo
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Registered: 8th Jun 10
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quote:
Originally posted by Paul_J
quote:
Originally posted by John
What has need got to do with anything?
I've got 4 bedrooms, a garden and a garage, I certainly don't need them, I wanted them and have the means to get them.
Each to their own, but I'd expect northern prices to be cheaper - to allow you to 'get more you don't need' for less than down here.
For the £250k they are paying, it is going to cost them a fortune for that extra room and garage in repayments over the duration of the mortgage, where as a place with 2 bedrooms in a similar location would've meant they could've afforded the repayments over a shorter duration and perhaps not crippled themselves as much.
Despite the fact you have the means to get them, I know my colleague and I know he's going to be scraping by month after month to pay his mortgage, for essentially rooms he doesn't need.
I have 3 bed semi dont need it. could quite happily live in a 1 bed apartment. But at this time its best to look at it as an investment and you should look at a mortgage as the "full term" fixed rates are fixed for the max of 5 years so after then you remortgage or continue. so when you remortgage you could cut the term substantually.
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VrsTurbo
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Registered: 8th Jun 10
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quote:
Originally posted by Rob B
Me and the Mrs are looking at two properties both priced in the region of 180k.
between us we have 100k for a deposit although we don't really want to put all that down. Are the rate changes really that drastic if we say put 25k down each and then had a joint mortgage.
I don't have any income for the last 2 years, not concrete income anyway however she does. I do however have a fair amount in the bank but don't know if this will benefit us?
Reason i don't want to put down all the money is to hopefully use some to buy another property to rent out.
Any help appreciated,
Cheers
PS - looked on compare sites at fixed rates but was hoping for the opinion of others who have been there.
+ you'll have to make sure the banks will be happy with you not having an income on paper they may only base the mortgage on her.
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Aaron
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Registered: 9th Aug 04
Location: Cottingham, East Riding
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quote:
Originally posted by Paul_J
quote:
Originally posted by Aaron
quote:
Originally posted by Paul_J
In comparison, my sister put down I think £60k on a house worth £170k - thus borrowing about £110k over 25 years. I think she'll only have a total of £80k interest over the time - meaning she'll only have paid about £190k for a property worth £170k (not bad).
and the £60k she "put down"? She gets given that back to her does she?
[Edited on 02-08-2011 by Aaron]
Oh yeah, forgot about that £60k
but my point still remains, the interest she pays is a lot less over 25 years than if it was stretched to 35 years. that was what my post was about.
Despite what James might say....DONT go into banking.
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John
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Registered: 30th Jun 03
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quote:
Originally posted by Paul_J
Each to their own, but I'd expect northern prices to be cheaper - to allow you to 'get more you don't need' for less than down here.
How many times have we covered this one on here 
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Paul_J
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Registered: 6th Jun 02
Location: London
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quote:
Originally posted by Aaron
quote:
Originally posted by Paul_J
Oh yeah, forgot about that £60k
but my point still remains, the interest she pays is a lot less over 25 years than if it was stretched to 35 years. that was what my post was about.
Despite what James might say....DONT go into banking.
Oh no, I made a silly mistake on a meaningless forum post I quickly wrote in 2 seconds, while working  Wow how will I ever live this tragic mistake down.
The point still stands regardless - with the mistake or not, taking the benefits of a lower monthly repayment from a longer repayment term will cost you far far more in the long run.
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AndyKent
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Registered: 3rd Sep 05
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I'm hammering my mortgage down and I hardly borrowed anything. Sooner get rid of it in 15 years than still have it round my neck when I'm fifty.
The daft thing is, the way the figures work out. I pay over £500 a month on my mortgage and I only borrowed approx £70k.
My colleague borrowed double that when the multipliers were much higher, yet still only pays £500 a month because she's gone for a silly long term.
When the multipliers collapse however no-one would consider lending me £140k despite the same level of overall affordability.
Weird.
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Aaron
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Registered: 9th Aug 04
Location: Cottingham, East Riding
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quote:
Originally posted by Aaron
quote:
Originally posted by Paul_J
quote:
Originally posted by Aaron
quote:
Originally posted by Paul_J
In comparison, my sister put down I think £60k on a house worth £170k - thus borrowing about £110k over 25 years. I think she'll only have a total of £80k interest over the time - meaning she'll only have paid about £190k for a property worth £170k (not bad).
and the £60k she "put down"? She gets given that back to her does she?
[Edited on 02-08-2011 by Aaron]
Oh yeah, forgot about that £60k
but my point still remains, the interest she pays is a lot less over 25 years than if it was stretched to 35 years. that was what my post was about.
Despite what James might say....DONT go into banking.
Fucking lol at the U2U i just got Paul_J about this comment of mine:
"Why's that?
Because I rushed out a meaningless forum post within 2 seconds without thinking too much about it?
Tad harsh.
I work as a software developer, working on accounting / finance software dealing with numbers daily without problems. I have an A-Level in Maths and completed my Maths for scientists and logic and discrete maths modules as part of my Computer Science degree.
The point I was hastily trying to demonstrate was that the monthly repayments may seem 'better' over a longer term, but the total repayment is far far higher.
With my silly mistake or not, that point still stood in my example."
My comment about not going into banking was a joke
*but seriously, dont do it.
[Edited on 02-08-2011 by Aaron]
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Hammer
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Registered: 11th Feb 04
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quote:
Originally posted by Paul_J
quote:
Originally posted by Aaron
quote:
Originally posted by Paul_J
Oh yeah, forgot about that £60k
but my point still remains, the interest she pays is a lot less over 25 years than if it was stretched to 35 years. that was what my post was about.
Despite what James might say....DONT go into banking.
Oh no, I made a silly mistake on a meaningless forum post I quickly wrote in 2 seconds, while working Wow how will I ever live this tragic mistake down.
The point still stands regardless - with the mistake or not, taking the benefits of a lower monthly repayment from a longer repayment term will cost you far far more in the long run.
You won't, you just stated that someone paying 80 grand interest on a house will pay 20 grand more than what they borrowed.
More the ramblings of a half wit than a mistake tbh.
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Paul_J
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Registered: 6th Jun 02
Location: London
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I'm sorry Hammer, that I was trying to give some constructive advice to my friend Rob B.
I think by the size of my essay, it's quite clear I was typing fast / rambling, but thankfully you and Aaron were here to point out the mistake so Rob wasn't confused any further.
At least Rob can get some useful advice from your replies to his question ... oh wait.
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