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xane
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- #31
I'm on my third house now, so some experience and advice ...
Mortgages have what is known as indemnity insurance, this is what the lender takes out to ensure that if you run off they can claim back the full amount, unfortunately lenders are not stupid and they get _you_ to pay the premium which can be a sizeable %age of the value, this only actually applies if the mortgage is over 80% (?), so unless you have 1/5th of the price it is probably better to spend the deposit on furniture as there is no real benefit and it will have only a marginal effect on the replayments, although you probably need at least 5% to get the good deals.
Always try and go with a proper Building Society, not a Bank or Finance Company, or one of these Building Societies that became a Bank (like Halifax for example). AFAIK Nationwide is the biggest lender and still a Building Society, and is the one I have stuck with for the last two houses. The benefits of a B/Soc are twofold (a) you get better deals in the long run and (b) if they get carpetbagged (convert to a Bank) you get a lump sum.
Watch out for special deals, one of the traps is you have to take out buildings and contents insurance for the first few years with the lender, this is normally much higher than what you can get from Direct Line, etc, and sort of claws back whatever you save in capped interest rates for the initial period.
Endowment mortgages are not very good now, the only benefit is you can transfer the policy between mortgages and prevent paying higher premiums on it, this is relevant in my case as I have one endowment still running from my first mortgage. There is a lot of argument about endowments right now, many will not return the investment and you get left with a shortfall, however, if you have one that is more than 10 years old it is not time to panic yet, it is likely it may mature okay.
The alternative is repayment, which is best right now, but like fashions it could change. The problem with mortgages is you have no idea what will happen in ten years, let alone 25 or 30 (the normal run of a mortgage) and you are unlikely to have the same house anyway, so go for what gets you the best deal short term (5-10 years).
The advantage today is that the market is slim and lenders are fighting it out, so all the stupid restrictions have all gone as people don't want to be tied in anymore. My last mortgage had a discount that ran for five years, if I had changed house within that time I'd had have to repay part of it, no such clause for my current mortgage, they are a lot easier to get out of.
There is never a "bad" time to buy, having a mortgage is way better than renting, and can even be cheaper in some cases, remember the money you put into a property you get back later, and its a solid investment, whereas rent money goes into someone elses pocket.
My first house cost me £69K, I took out a £62K mortgage, five years later it was worth £50K, I'd have had to find £12K from somewhere if I wanted to sell it. I rented it out, which was enough to cover the mortgage and any expenses and three years later the price was £75K and I sold it making a slight profit, the moral is dont worry about price crashes as you can always get through with little trouble them and the money can come back eventually if you are prepared to wait, also remember that house prices are relative, your house may fall in value but generally so will everyone elses, including the one you want to buy next.
Once you are on the "mortgage ladder" you can make good, the earlier you start the better and easier it gets, right now my property is worth around 2.5-3 times the mortgage, I could sell up move out of London and buy a property outright on the profit, and eliminate the mortgage entirely, its a good position to be in.
The prices of property is sometimes obscene, the second house sold got me over £100K profit (which of course I needed for house number three so I never saw any of it).
Also consider "expenses", lawyer fees is only part of it, you have stamp duty which is normally far greater, and any repairs don't come cheap, so look for things like gas boilers, water system, guttering and roofing, locks on doors, etc. Most call outs start at £40-50, the costs can quickly accumulate.
Good Luck !
Mortgages have what is known as indemnity insurance, this is what the lender takes out to ensure that if you run off they can claim back the full amount, unfortunately lenders are not stupid and they get _you_ to pay the premium which can be a sizeable %age of the value, this only actually applies if the mortgage is over 80% (?), so unless you have 1/5th of the price it is probably better to spend the deposit on furniture as there is no real benefit and it will have only a marginal effect on the replayments, although you probably need at least 5% to get the good deals.
Always try and go with a proper Building Society, not a Bank or Finance Company, or one of these Building Societies that became a Bank (like Halifax for example). AFAIK Nationwide is the biggest lender and still a Building Society, and is the one I have stuck with for the last two houses. The benefits of a B/Soc are twofold (a) you get better deals in the long run and (b) if they get carpetbagged (convert to a Bank) you get a lump sum.
Watch out for special deals, one of the traps is you have to take out buildings and contents insurance for the first few years with the lender, this is normally much higher than what you can get from Direct Line, etc, and sort of claws back whatever you save in capped interest rates for the initial period.
Endowment mortgages are not very good now, the only benefit is you can transfer the policy between mortgages and prevent paying higher premiums on it, this is relevant in my case as I have one endowment still running from my first mortgage. There is a lot of argument about endowments right now, many will not return the investment and you get left with a shortfall, however, if you have one that is more than 10 years old it is not time to panic yet, it is likely it may mature okay.
The alternative is repayment, which is best right now, but like fashions it could change. The problem with mortgages is you have no idea what will happen in ten years, let alone 25 or 30 (the normal run of a mortgage) and you are unlikely to have the same house anyway, so go for what gets you the best deal short term (5-10 years).
The advantage today is that the market is slim and lenders are fighting it out, so all the stupid restrictions have all gone as people don't want to be tied in anymore. My last mortgage had a discount that ran for five years, if I had changed house within that time I'd had have to repay part of it, no such clause for my current mortgage, they are a lot easier to get out of.
There is never a "bad" time to buy, having a mortgage is way better than renting, and can even be cheaper in some cases, remember the money you put into a property you get back later, and its a solid investment, whereas rent money goes into someone elses pocket.
My first house cost me £69K, I took out a £62K mortgage, five years later it was worth £50K, I'd have had to find £12K from somewhere if I wanted to sell it. I rented it out, which was enough to cover the mortgage and any expenses and three years later the price was £75K and I sold it making a slight profit, the moral is dont worry about price crashes as you can always get through with little trouble them and the money can come back eventually if you are prepared to wait, also remember that house prices are relative, your house may fall in value but generally so will everyone elses, including the one you want to buy next.
Once you are on the "mortgage ladder" you can make good, the earlier you start the better and easier it gets, right now my property is worth around 2.5-3 times the mortgage, I could sell up move out of London and buy a property outright on the profit, and eliminate the mortgage entirely, its a good position to be in.
The prices of property is sometimes obscene, the second house sold got me over £100K profit (which of course I needed for house number three so I never saw any of it).
Also consider "expenses", lawyer fees is only part of it, you have stamp duty which is normally far greater, and any repairs don't come cheap, so look for things like gas boilers, water system, guttering and roofing, locks on doors, etc. Most call outs start at £40-50, the costs can quickly accumulate.
Good Luck !
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