Advice for a 1st time buyer please

Yes, unless you decide not to buy after all.

Yes, but it would be *more* risky to put down less.

No. Investing the money will pay less interest than a loan for the same amount will cost to service. In general, at least. You might get short-term offers of cheaper loans, but don't forget that the interest rates for loans are quoted as what you pay, but those for savings are not quoted as what you get, but what you share with the taxman.

I hope this mention of a self-cert mortgage doesn't mean you're thinking of lying about your income.

Ah, it does mean you're thinking of lying about your income. There's no way you can borrow 100k on 20k income, and if there is, it would be unwise to stretch yourself that much. Do you have any money of your own to contribute to a deposit, like the £20k you mentioned elsewhere?

By Jove! £1200 a month? That's 14.4% a year on a £100k loan. That's a bit steep.

Eh? £500 a month for a room? Must be a very luxurious room! You can rent a whole 1-bed flat for that much.

Let me get this straight. You want to buy a 2-bed flat with your mother and rent out one bedroom to a lodger. Your mother will want the other bedroom. Where will you sleep?

Hmm. Maybe your mother isn't polanning to live there after all but is just going to help you out. Now you want her to pay half the purchase price *and* a share of the mortgage?

Take their word for it.

No less safe than any other, unless you lie.

Sounds more like you've been and gone. Sorry.

Where do you live currently? I'd leave it for a while before jumping in.

You'd have trouble getting people to rent a room for £500. (Unless your local area is at that level)

You'd not be able to guarantee renting the room out so any lender would be worried that on your own you would struggle to repay the money.

Assume you only have your own income and savings to play around with. What would you do then? Is the picture any clearer for you?

Yes, absolutely! I would strongly second that. Nothing in this world is guaranteed but I think the outlook for the housing market would strongly favour a wait and see approach - at least until the new year. If the market takes off again I believe this will be a very slow-motion affair and you will be able to take your time. The days of market madness are behind us.

Are you aware that there was a property market crash in 1989 that sent prices plummeting? We can't know of course but it could happen again and many think it will.

I get the sense that your nervousness will put you at a disadvantage with some agents who may succeed in persuading you otherwise. Garner as much info as you can before you do anything at all. The link you've been offered above also has a forum and even if the advice is heavily skewed towards the likelyhood of a property crash, it would be worth asking yourself the questions that it inevitably raises.

Ronald Raygun:

But surely someone will borrow 100k to someone (or group) who has 100k of equity to put into the asset backing the loan, whatever the income. For the lender there's hardly any risk, they just sell the house should the borrower not pay, after all they do not care whether a mortgage is repaid by a borrower or a punter buying the repossessed property. With 50% equity it should be immune to house price falls for the lender. It is of course risky for the borrower(s), who may lose their entire equity, but that's not the lender's problem.

There's a long term graph produced by the Nationwide building society that nicely demonstrates the cycles, it'll be somewhere in one of the (many) previous posts -

Daytona

Although the risk of making a loss after repossessing the property from the borrower and selling it, as you rightly point out, is low, the lender would prefer not to have to go through the procedure at all. For this reason, most mainstream lenders are fairly strict about limiting the amount they lend to 3 or 4 times their annual income, regardless of equity. There may well exist niche lenders who would be prepared to stretch this factor to 5 or more in the right circumstances, or who operate "non-status" loans (which go one step further than "self-cert" in that they don't require the borrower to prove or even state their income, but merely to declare that they can afford the payments), they tend to charge interest rates which are higher than normal.

That's only partly true. When a lender repossesses a property and throws the owner out onto the street, it tends to make for bad publicity. Although it's usually completely the borrower's fault, if there is any hint that the lender encouraged the borrower to borrow more than he could afford, they can be seen as being partly to blame.

Lenders don't want to repossess property, its bad PR and hassle they would rather do without.

Phil Deane:

A bank is not a Citizen Advice Bureau!

Lenders specialised in distressed credit won't mind the PR, and do charge accordingly for the hassle. Also some normal bankers will probably do a specialised deal for people who have a sound if unusual financial case that fails crude automatic credit scoring. Conversely some cases that pass credit scoring can be much less financially sound than some cases that don't.

And the PR probably only matters to a point. I would not be surprised if some mainstream-ish banks think there will be a downturn but did take on borrowers that they know are likely to end up repossessed in case of an even modest downturn, and planned accordingly so that they can repossess profitably, without getting too bad PR when most other banks will also have to do it. Also, some others may believe this will be bad PR, but the bad PR is in 2 years time, while the future repossessees do add to this quarter's profit.

What a quaint expression!

Man1 in Pub: Hey mate, borrow me a tenner? Man2 in Pub: Don't mind if I do - give us the tenner then, ta! [Man2 agrees to *borrow* the tenner...]

Just to let you guys know, im gonna buy with my Mum and she will NOT be living there.

I live in London and £400 to £600 a month is almost standard nowadays. When i was a student i was paying almost £400 then and that was 5 years ago.

A sub prime lender will not care, I was talking about the main "normal" lenders"

Assuming the "normal" bank knows he is a First Time Buyer, wants a joint mortgage, with someone who is not going to live there(investment property for the mother), 5 times his single income, and he is going to rent a room out?(legal problems once the tenant is recognised, and problems occur) That would be against most "Normal" lenders policies (I am assuming of course the lender is told of all of these things)

If she's paying for the mortgage, would a join mortgage not be sensible as it'll probably help with the income multiples?

Where?

In 20 minute commute to waterloo right next to a frequent station, good single rooms in flats go for about 400 a month, on what are ~200,000 flats, I can't imagine anywhhere that flats are significantly cheaper, or rents significantly higher. Equally single room renting seems to have significant voids in my experience of trying to find it

- the rooms are always empty.

Jim.

Thats one of the problems. By having his mother on for increasing the income multiples, he is falsifying and distorting the risk. His mother will not live there,

What's the problem with that, you can get a mortgage on a property you don't live in, loads of people have them. Why is there an increased risk if only one of them lives in the property? Surely the risk is reduced with the relationship between the bank and the joint owner of the property?

Jim.

Was told because my mum is old, i could not get a 25 year mortgage and i could get stung with inheritance tax.

Thanks for everyones advice so far. I did not realise buying a house was this difficult

In message , cliptomaniac writes

In fairness, buying a house is not that difficult, although the one you are looking at is beyond your means. If your mum is willing to put up the £100K, why not just borrow what they will lend you, and buy a house for that?

(Sorry if it's been said before)

This is a complete red herring.

a) If your mum already has the money, you'll get stung for the tax anyway.

b) If she doesn't have the money and the house price doesn't go up much, the bit that you inherit is cancelled out by the loan you will also have inherited. (Note that you don't normally inherit debts but if it's secured on the property and you want to keep same you'll have to take over the loan)

c) If the house price goes up by enough to put the amount of money you inherit into the IHT range (exceptionally unlikely) you'll have to pay tax. But, this is money that you wouldn't have at all if you didn't buy the house so you'll still be better off by the 60% you get to keep.

tim