Thinking of buying- Stupid question

Lau2976

I'm thinking of buying a house in the coming year. I have a decent amount of money saved and was wondering if I have to take a mortgage for the full amount of the house.

E.G If a house is 200,000 and I have 100,000 saved, can you take out a mortgage for the remaining 100,000?

Sala

It is no longer possible to get a mortgage for the full amount (100%).

Provided your income is sufficient to get 100k you can apply for that. You need a minimum of 20% deposit from next year but since you have 50% you'll be fine. Remember you'll need to pay stamp duty, legal fees etc

Lau2976

Sala wrote: »

It is no longer possible to get a mortgage for the full amount (100%).

Provided your income is sufficient to get 100k you can apply for that. You need a minimum of 20% deposit from next year but since you have 50% you'll be fine. Remember you'll need to pay stamp duty, legal fees etc

Perfect thanks I felt like an idiot asking my mortgage advisor and then he explained it in a way that made it even more confusing!

Mrs OBumble

The only stupid question is the one you don't ask.

A few things for you to remember, though:

You need to budget for extras on top of the price of the house. At a minimum the solicitor and surveyor costs. Most likely you will need to buy furniture and household appliances, and possibly also curtains and flooring too - and the last two will need installation unless you're very good at DIY.

You will need to insure the house - some companies offer a discount for the yearly payment up-front, which will be more than the cost of borrowing the equivalent amount for year.

Also, you should keep a cash-reserve for maintenace problems that you simply have to pay to fix, or other unexpected expenses (car breakdown etc). And also to cover your living expenses for a while (I usually think 12 weeks in this country, given the speed of the welfare system ) if you get sick and cannot work.

The numbers can vary a lot depending on what you have to buy vs already own or can get cheaply. But if you have 100k and the house price is 200k, then you may need to borrow perhaps 120k after all the above.

Once upon a time, banks would try to sell you even more "Shure'n why not add an extra 10k for a holiday while we're doing the paperwork" - those days should be over, but if faced with someone with a 50% deposit, it may be tempting for them to try the line on you anyways. I'd never agree to something like this, but it is a very personal call - you just need to be sure that you know what you're agreeing to, and that it really is sensible. (IMHO if you want a holiday after getting a mortgage, start saving. And until you have the savings, stay put and enjoy the house you just purchased.)

Deenie123

Lau2976 wrote: »

Perfect thanks I felt like an idiot asking my mortgage advisor and then he explained it in a way that made it even more confusing!

A piece of advice for you for the whole process. If you find yourself in that situation again, what you say is "I'm sorry, I don't understand what you're saying, can you rephrase it in terms I understand please?"

Don't walk out of a bank feeling confused. Don't hang up from an insurance company feeling confused. They are obliged to explain so that you understand. If they're using jargon, just ask them to speak plainly. Same goes for tradesmen, professionals, estate agents etc. You're the one with the cash, don't hand it over and don't sign until you understand and are happy with the terms.

jpm4

Mrs OBumble wrote: »

The numbers can vary a lot depending on what you have to buy vs already own or can get cheaply. But if you have 100k and the house price is 200k, then you may need to borrow perhaps 120k after all the above.

In the above instance - in general would it make more sense to borrow the 120K to cover all expected expenses , or put 80K of your money towards the deposit, 20k of your money to the expenses, and only borrow 100K from the bank?

Basic stuff I know, but am buying soon and trying to figure this out!

Beano

jpm4 wrote: »

In the above instance - in general would it make more sense to borrow the 120K to cover all expected expenses , or put 80K of your money towards the deposit, 20k of your money to the expenses, and only borrow 100K from the bank?

Basic stuff I know, but am buying soon and trying to figure this out!

the 20K would be in addition to the purchase price. You would still need 200K to actually buy the house. If you only borrow 100K where is the other 100K coming from if you are keeping 20K for expenses?

Mrs OBumble

jpm4 wrote: »

In the above instance - in general would it make more sense to borrow the 120K to cover all expected expenses , or put 80K of your money towards the deposit, 20k of your money to the expenses, and only borrow 100K from the bank?

Basic stuff I know, but am buying soon and trying to figure this out!

In general, it's cheaper to borrow on the mortgate than a personal loan, because the bank can get their money back from the house if you default, whereas personal loans are not guaranteed.

Specifically it depends on the mortgage interest rate vs a personal loan interest rate - and whether the bank would give you the latter as well as the mortgage.

Also on whether you think you can pay the mortgage back faster than the bank want you to or not, and what the penalties for this might be.

Short answer is - there is no short answer, you need to do sums to work out a few scenarios for your situation, see how much the differences is, and decide from there. In fact: make the bank help with the sums - but keep a close eye on how much interest you will pay over the life of the loan, that is the figure which they will try to have you not realise.

the_syco

Lau2976 wrote: »

Perfect thanks I felt like an idiot asking my mortgage advisor and then he explained it in a way that made it even more confusing!

Get a new mortgage advisor; if he confuses you with the lingo, christ knows what he's hiding from you in plain sight. Finding out he told you something that will cost you money down the line should be learnt of now!