First Time Buyer Advice Please

A question about : First Time Buyer Advice Please

I was wondering if anyone could offer advice please. I'm currently in the un-envious position
of preparing to purchase a house as a first time buyer.
I have set aside around 3k as a deposit and around 75% of the completion costs.
I have a number of questions that I would like to ask:

1) If I have an outstanding loans at around Ј200 per month including 40 a month student debt.
Is it advisable to pay off my loan with the bank (Non Student loan) and then take a newer loan at a more favourable rate
before I take out a mortgage? I could also reduce the monthly payments by extending the
terms by borrowing additional funds and strecthing the loan an extra 2 years? This would also leave extra money for the house move. Is it
a good idea to extend a loan and possibly use this to boost the deposit before completing a mortgage?

2) If I am also pushing myself to 3.6 times my salary and looking at fixed rate mortgages
can anyone offer any suggestions regarding products. Any other type of mortgage seems
a bit risky in the current climate.

I realise that its not the best time to buy a house but its a house to live in for
2-3 years I'm after and hopefully not a negative equity situation I'm stepping into?

Any advice for a first time buyer in this climate would be advised.

Thanks

Best answers:

• for once I'll echo lisyloo's sentiments . It's a fairly risky time at present, buying as a short term investment for 2-3 years is riskier even still and probably the period most likely to cause negative equity, longer term investments and buying now may not seem such a high risk
• Hi,
  As mentioned by Woby, it's a very difficult time for all first time buyers at present with all uncertainty over house prices. As you're only looking a house for the next 2-3 years, potentially this puts you in very volatile territory. Unfortunately I can't offer you any guidance of where property prices will be in 2-3 years as there are too many variable and it's very subjective. My personal view is a soft landing/ slight retracement however I could easily be wrong... it depends largely on what happens to interest rates. Negative equity can't be ruled out!!!
  With regards to your comments on your personal loan it's very much a question of striking the right balance. Ignoring your mortgage situation, it's usually good advice to seek out better rates, however you have to weight up the pros and cons any penalties that may be payable under your existing agreement.
  With regards to extending the term of your loan you'll have to take a very close look at your budget. Increasing the term, means you'll be paying longer and end up paying more over the term however it will lower your monthly commitments. Generally speaking this will increase the size of mortgage available as lenders tend to annualise any monthly commitments and reduce them from your annual salary before calculating how much they will lend. Many first time buyers have gone down the consolidation route and extended the term of their debts in order to get on the housing ladder as they were not prepared to wait. All I can say is be careful not to over commit.
  With regards to using any savings available to reduce your loans before you take a mortgage, then really, it depends on the loan to value of the mortgage you're looking for. Mortgage deals tend to get more competitive as your deposit increases, you also have to be mindful of things like "mortgage guarantee insurance" which may kick in.
  With regards to recommending a specific deal unfortunately I can't help. I think Payless has already mentioned this in another thread, It could be viewed as giving advice which is a dangerous thing to do without completing a full fact find. Have a look at the moneysupermarket website, although it will still pay you to shop around as they don't cover any exclusive deals.
  Hope this help
  Simon
• Excellent advice from MortgageExclusive (Simon) and very well expressed.
  Pay of all your loans asap apart from the student loan. Let them wait for their money. Your loans will be taken into consideration regarding the affordability aspect of the morgtage. So borrowing from Peter at an uncompetitive rate to pay Paul's deposit will not impress.
  J_B
• Well, generally true, J_B, but if having a loan outstanding at a higher rate means a bigger deposit and a better LTV%, that may be better. If you have a loan on 5% of your house at 8% but it enables you to borrow the remaining 95% at 0.5% lower than it would have been with a 100% mortgage, you will be well ahead with the loan and the better mortgage that results.
  IF you can afford the loan and still qualify for the mortgage -- which may be doubtful if you are looking at 3.6 times salary.
  In any event, the original question was whether or not to pay off the loan and take out a new loan at a better rate. Which, if you can get the better rate, and there is no prepayment penalty/rule of 78 rubbish, is always a good idea.
  Extending the loan means lower payments but you will pay a lot more interest. But it may make it easier to afford the mortgage.
  You've not really told enough about your situation, but if my son were asking me about buying for 2-3 years right now, I would tell him, "No way!" It is hard for me to imagine a situation where that would be wise in today's market. You could easily end up with negative equity and have no way to pay it off -- you just don't seem to have any resources to cover the real possibility of a 15-20% drop in prices over that time period.
  Of course, prices could be that much higher in 3 years, too, but the downside risks are very real.
  Easy for me to say sitting here in my house with a mortgage less than 40% of the value of the property, of course. I'm swimming in a pool where the water is nice and warm and comfortable and telling you not to jump in because it might get cold.
  But that's the way I see it, and I'm not alone in that view.
  If you do go ahead, we normally say, "Contact MortgageMan or Payless", but they are both gone or going on holiday. Simon hasn't been around as long, but his advice to you was good, it wouldn't hurt to contact him to see what kind of mortgage he can come up with for you. He won't tout for business here, it's against the rules, but that doesn't mean he can't help you if you contact him directly. You can also check other sources and see what they find for you, Charcol & such.