first time buyer advice

[timwilky]

My lad is now thinking it is about time he moved out. Great at last.


He needs a minimum of a two bedroom property, and has champagne taste with a shandy budget.

What are mortgage requirements these days. I am advising him to try to save about £5000 as a deposit and to take no more than 3 times his salary. Which means he cannot afford anything. (He is only earning £16,000/year)

He is looking at something called shared ownership and tells me no deposit is required. He is only 20 and has no savings. No credit history etc. Will mortgage companies take him on.

Even the cheapest houses locally are about £120,000 so I despair that they will ever get a place of their own.

To be perfectly honest, and I don't know how much of an option this is. But bare with me:

I reckon his best shot at getting somewhere half decent, in a half decent area (ie, realistic) is to rely on good old bank of dad again. However, if you do this, make sure that the solicitor you use for buying him a house drafts a basic "tennancy agreement" stating that he can live in the house, as if it is his (ie, you're not a landlord), under the condition that he pays you x per month for y months. You can charge whatever interest you see fit, whether that's more or less than the mortgage, your choice.

However, if that's not an option:

I recently took (moved into the house a year last jan) out a mortgage for 40 years. But that was mainly so we get no penalties for over payments etc. At the time, I was self employed. I'd been self emplyed for around 6 months.

They wanted the last 5 years worth of bank statements (which if he hasn't kept them will be a pain in the rear to get acceptable ones), but that was about it. I demonstrated that my income was stable, despite being self-employed (turns out it wasn't though).

I think the main reason I was accepted, was because of the £40k deposit we put down. Mortgage companies were throwing everything they could at us to get their hands on the deposit alone.

So if you can help him out with the deposit, it'll help a LOT.

Also, go talk to a mortgage advisor (with him), even if it's just to ask the same question there as you have here. They're worth the fee IMO.

I am in the same boat, house prices are so high it's ridiculous! Might almost be worth renting if the mortage interest is more than the rent and houseprices might fall a bit in the future. I dunno, I keep thinking about it, then crying. The house I rent now is worth £250,000, purely because of it's location in Oxford! I'll never get on the property ladder...

[fizzwheel]

£5k was what I was advised to put down as deposit when I bought my house a couple of years ago. I got lent 4.5 times my salary but I've heard of being offered more.

TBH Tim, I think the best thing you can do is take him along to see a Mortgage advisor and get them to tell him what he can and cannot afford.

In response to Warthog, I cant ever see house prices falling, The rent for my house would be roughly the same as my mortgage is, It was a bit of no brainer, If you can do it does make more sense to buy. But not everybody is lucky enough to be able to afford to get on the ladder to get started.

as warthog said i'd be worried about the house prices falling and your son being in negetive equity, most people i work with who are on an salary range from 18k to about 25k are choosing the 35 year mortgages to keep the payments low. i would avoid shared ownership they are a real bitch to sell on. my house is a no frills cheapy 3 bed semi but i'm glad in 12 months time i'll own all of it, it would be easy to sell up and buy a nice expencive pad but i'm living below my means with property if anything so i can start living a little soon.

just reading fizzwheels post, i do recon prices have to come down because first time buyers like tim's son are priced out of the market which is bad for property prices, if theres no first time buyers the demand for property will drop and so will the prices.

In the long run they won't fall, but seeing as they have been very high for a while I can see (or more just really hope ) them falling off a little before they continue their inevitable rise.

I would strongly recommend London & Country. They've won countless awards for their impartial and free advice. Although they are a broker, they are quite happy to explain any terms of a mortgage in plain English as well as look at options to suit your son, with no commitment/pressure to get the mortgage from them.

a cheap house is say £120,000 repayments over 25 years with no deposit is £867 per month at the svr! if first time buyers arnt earning 30k + PA prices will have to fall.

beware with mortgage advisers! they say they dont charge you but they do take a nice slice, would you work for nothing?