My partner and I would like to buy our first home this year but aren’t sure if we can manage it.
We think we could get a small house in our area for about £270,000 and should have a deposit of about £30,000 by the time we come to buy.
I earn £39,000 and he earns £36,000, so our combined income is £75,000, are we likely to be able to get a mortgage for the amount we need and how much would it be each month?
Our rent is currently £1,300 per month and we could pay a bit more than this but buying would wipe out all of our savings.
Can they do it? The prospect of buying a home is exciting but our readers want to check they can meet all the costs. We asked mortgage broker Ravesh Patel for his advice
We could hopefully rebuild an emergency fund reasonably quickly as we wouldn’t be saving for a deposit any more.
Are there any other costs we need to consider when purchasing or owning a home – and can we afford to buy?
Ed Magnus, of This is Money, replies: First and foremost, well done for saving up a deposit. That won’t have been easy over the past few years amid high inflation and rising rents.
Lenders will usually ask you to put down at least 5 per cent of the property’s value, and in many cases 10 or 15 per cent.
If you feel you can muster up a £30,000 deposit for a £270,000 house purchase later this year, it will mean you have surpassed the 10 per cent threshold.
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It is also worth factoring in the additional costs of buying a home, as this may eat in to your deposit. You will also need to pay fees to a conveyancer or solicitor, which can be as high as £3,000 depending on where you are buying.
You will also likely pay for an independent survey before you exchange contracts, which can highlight if anything is wrong with the property, such as subsidence, damp or rot. These tend to range from anywhere between £300 and £1,500.
You might also want to leave some financial wiggle room for the cost of furnishing the home when you move in or for any immediate repairs that might await you.
Luckily you won’t have to factor in stamp duty. Currently, first-time buyers, who have never owned a property before, get a tax break, with stamp duty starting at £425,000 rather than the standard £250,000 threshold.
Once you have your deposit settled, you need to know how big a mortgage you can borrow and what the mortgage repayments will be.
This will be decided by the mortgage lender based on your income, age, other debts and monthly outgoings.
An easy way to establish the kind of mortgage you could get is by speaking with a mortgage broker. They will be able to run an affordability check to see what the maximum you can borrow is.
They will need information from your bank statements, payslips or tax returns to do so.
As a rough rule of thumb, most lenders typically limit people to borrowing no more than 4.5 times your annual income.
However, it can be lower if you have other loans and debts, or potentially higher if your incomings and outgoings are robust.
It is also possible to borrow more than 4.5 times your income with certain lenders, depending on how much you earn and how large your deposit is.
There are also certain lenders that provide higher multiples for certain professions.
You might find you have to shift your expectations once you have done your research, but hopefully your deposit and maximum mortgage borrowing will be enough to buy the type of home you’d be happy with, in the area you want to live in.
For expert advice, we spoke to Ravesh Patel, director and senior mortgage consultant at broker Reside Mortgages for his take on your situation.
Ravesh Patel replies: Based on your combined income, buying a property for around £270,000 with a deposit of £30,000 looks affordable for you.
You may even be able to borrow more, since some lenders can offer up to five times your income.
However, factors such as your age, outgoings, existing debts, and whether you are a UK national play an overall role.
Expert: Ravesh Patel, director and senior mortgage consultant at Reside Mortgages
It’s best to consult a mortgage advisor to explore all your options so you can make an informed decision.
Monthly mortgage payments depend on which rate you qualify for and the overall term of your mortgage.
For example, if we look at an interest rate of 5.19 per cent, a mortgage amount of £240,000 will cost around £1,316 per month over a 30 year term and £1,188 per month over a 40 year term.
However, a longer mortgage term means paying tens of thousands more in interest overall.
A mortgage advisor can help you find the right balance between term and monthly payments, considering your living costs so that you are not financially overstretched.
You should also consider other costs like stamp duty. As a first-time buyer, you won’t pay any stamp duty on properties under £425,000, which is a significant saving.
Some lenders may charge a product fee ranging from £0 to £1,499, and there might be a valuation fee of around £200. Legal fees for a purchase price of £370,000 can be around £1,500, depending on the Solicitor.
Lastly, it’s wise to have a buffer fund beyond your deposit for any unexpected expenses or property improvements.