Rossendale

What is the absolute maximum sum you think you could afford/get a mortgage approved at?

The cheaper areas of Greater Manchester are rising faster than most parts of the country. You might be advised to virtually overreach yourself at this stage in order to land somewhere in a decent area. Afterall location is everything.

Typically, if property prices are on the up, a couple of years down the line the sum which scares you now is likely to look cheap then. You should avoid making a decision now - which commands fees, etc - which you regret shortly after you've moved in because you don't like the area/commute, etc.

If you're disciplined regards savings then I'd personally recommend an interest only mortgage. It's relatively straight foward to pay the interest only repayment and save/invest more on the side than you would have paid in captial if you had a repayment mortgage. Plus in lean times you can pause your saving and pay the lowest monthly amount possible. There is some fascinating science behind this if you're interested.

 

Interest only mortgage - with no vehicle to pay off capital is not science its madness.

 

Quite true. Though if you reread my comments you'd realise that's not what I'm proposing. Quite the opposite in fact.

The current obsession with repayment mortgages and paying off early in this country is simply a rebound to the Endowment nightmare. However if you analyse a repayment mortgage it's actually rather poor value. Of course the counterpoint is if you choose interet only you need an alternative vehicle. Unfortunately there are many people taking out interest only who haven't thought through the capital growth vehicle.

 

My understanding of an interest only is that it would allow you to get on the ladder at least. Just don't let it become a thing. The best bet might be a tracker mortgage because they seem to be more flexible allowing you to over pay one month when you can afford it, or pay less the next month.

 

There's no reason not to stick with an interest only mortgage. The more you analyse them the more they make sense (not in all circumstances of course).

 

Some americans might not agree http://money.uk.msn.com/Investing/I...s/Moneyweek/article.aspx?cp-documentid=856854

 

My income varies about 20% each month so a tracker does sound ideal. Some months a £330 mortage will be a doddle to pay, others I might find it hard after living expenses so a tracker sounds ideal.

I am still not sure I will even be able to get a mortage though as I am self employed I will need a self certification mortage, everything is pointing to very high interest rates.

I am just wondering if its all worth it to end up with a house which involves a two hour commute or one in riotland.

 

There seems to be some confusion about what a tracker mortgage is here. I've got one and I have no facility to pay lower amounts than the contractual ones each month.

 

I was looking into an interest only mortage too, its very very risky but it might suit me as my earnings are likely to go up. The big problem is though I worked out that my savings won't match the different of the total amount owed. It would only work if I sold the property after 25 years then pocketed the difference.

This way I would make money out of the property market but I probably will end up with no home after 25 years. This is better than nothing but really not ideal.

 

If you can meet a repayment type mortgage payment (which pays the interest and a gradually increasing amount of the capital sum) you can pay an interest only mortgage payment and make a sufficient investment to grow a capital sum which will clear the capital at the end of the term.

 

I believe my mortgage allows me to completely skip one or two payments per year if circumstances required it, as well as increase repayments as or when I have extra cash. My rate is still very competitive, last time I looked I couldn't find a better deal. I'm with the Royal Bank of Scotland.

Needless to say I've never skipped a payment nor increased one, but the facility is there if I should need it....

 

£330pcm is either going to take forever to pay off, or be an extremely small mortgage. A more realistic figure is £500.

Also be aware that in the first years of a mortgage, especially an interest-only mortgage, any change in interest rates will have a disproportionate effect on your repayments.

A tracker mortgage is simply about interest rates. The mortgage rate is bank base rate + x%. As soon as the bank base rate changes, your mortgage rate changes. This is different to a standard variable rate mortgage in that the standard variable is based on the mortgage company's "standard rate", which will track any increases in the base rate very quickly but will be much slower to track any decreases.

A "Flexible" mortgage allows you to take payment holidays, overpay, underpay, etc. A "discounted" mortgage has a lower rate for a specified period (typ 2 years).

I have a "Discounted Flexible Tracker". Confused yet?

 

Isaac please explain why this would affect an interest only mortgage more greatly.

 

In terms of absolute repayment it does not. In relative terms your monthly repayments will go up by a larger %age for a given rate rise than with a repayment mortgage (because the interest forms 100% of the payment, rather than the declining %age that it does on a repayment).

 

Ah but my advocation of interest only isn't based on the same reprayment / borrow more argument, it's based on the borrow the same, pay less, invest in your own vehicle argument so this doesn't apply.

 

Rossendale isnt too bad, and its not that far from Manchester. I'm surprised you can find one at the price your looking at.

Personally, Id buy a house even if it means you'll be strapped every month. I need to do plenty of decorating on mine but I do abit at a time, saying that I am on my own and dont worry about gutting a room and living in it!

 

Why dont you look at Radcliffe, Little Lever etc, okay they arent great area's (esp. LL) but at least the tram is easy to pick up and cheap.

 

Radcliffe is cheap but I went there a few weeks ago and was horrified at a couple of sights. Lets just say dirty old men is all I can say as this is a family site.

I am thinking auctions may be good way to go, buy somthing run down and do it up. I can do a lot fo the DIY myself so as longs as the central heating (if fitted) and wiring is safe most the stuff is just materials.

At the moment I am just trying to save up badly so I have at least 5% deposit, should take 3 months. I've even been chasing up leads trying to drum up more business

I've seen a flat in Stockport I could afford but its not the nicest part of Stockport.

 

Also watch out for "cheap" properties in generally more expensive areas - if they're cheap there's a reason for it. Have a good look and get to know your target area. Be careful not to buy in haste. It could be an expensive mistake.
Jeff

 

Indeed.