Topic: The 'Eeeek...buying/saving for a house' thread

[Mark Walters]

It depends on the tax bracket you're in really.

The new rules basically change so rather than paying tax on rental income - mortgage interest (and some other acceptable deductions) you will be paying interest on the entire rental income (again, minus some acceptable deductions). However you will get a tax credit worth 20% of the mortgage interest amount - if you're a lower tax rate payer then this basically means you pay no extra.

So for example (simplified), if your rental income is £10k a year, with mortgage interest of £5k a year, you'd of previously of paid tax on £5k. In the future you'll pay tax on £10k, but you'll get a 20% tax credit on £5k, so £1k.

The problem is that the £10k rental income is added to your income before tax, so depending what you earn that could push you into the next tax bracket.

You mention mortgage "interest" specifically there.  Does that mean that the actually repayment costs would be deductible?  So if your rental income is, say £1000 a month and you repay £400 a month and the interest is another £400, you only pay tax on £600 (£400 interest plus £200 "profit")?

[killer-heels]

You mention mortgage "interest" specifically there.  Does that mean that the actually repayment costs would be deductible?  So if your rental income is, say £1000 a month and you repay £400 a month and the interest is another £400, you only pay tax on £600 (£400 interest plus £200 "profit")?

Yep.

[pw1008]

It depends on the tax bracket you're in really.

The new rules basically change so rather than paying tax on rental income - mortgage interest (and some other acceptable deductions) you will be paying interest on the entire rental income (again, minus some acceptable deductions). However you will get a tax credit worth 20% of the mortgage interest amount - if you're a lower tax rate payer then this basically means you pay no extra.


So for example (simplified), if your rental income is £10k a year, with mortgage interest of £5k a year, you'd of previously of paid tax on £5k. In the future you'll pay tax on £10k, but you'll get a 20% tax credit on £5k, so £1k.

The problem is that the £10k rental income is added to your income before tax, so depending what you earn that could push you into the next tax bracket.

Yea my problem is if I rent for (round figures) £500 pcm and mortgage is £505pcm yet I pay insurance and estate agency fees am I going to pay tax on £6000 less expenses?

[paddysour]

Anyone jumping on the new ISA's then? The Halifax one looks great so far

Has anyone opened one of these? I did and deposited the initial £1000, but it then kicked me out of my account until I entered an activation code sent in the post.

I have now signed back on but I can't find any option for setting up the monthly payment for the £200?

[paul211b]

Anyone know much about searches that are carried out?

When I bought my house 14 yrs ago there were no issues.
 Seems now that the buyer's solicitor is asking about a public drain that runs under the property through the terrace.

No idea?

[cdav]

Has anyone opened one of these? I did and deposited the initial £1000, but it then kicked me out of my account until I entered an activation code sent in the post.

I have now signed back on but I can't find any option for setting up the monthly payment for the £200?

I just set up a standing order from my Lloyds current account with my Halifax Save To Buy ISA account details to fund the £200 per month- I think you need to set it up from the account you are paying from not the account the money will be going into.

[The G in Gerrard]

Has anyone opened one of these? I did and deposited the initial £1000, but it then kicked me out of my account until I entered an activation code sent in the post.

I have now signed back on but I can't find any option for setting up the monthly payment for the £200?

Read about it briefly. Is Halifax the best then? I'm with Santander.

[Zend...en the clowns]

Read about it briefly. Is Halifax the best then? I'm with Santander.

All the same mate as its government prescribed, me and the missus doing it with Virgin.

Here's the info : https://www.gov.uk/government/publications/help-to-buy-isa-factsheet

[paddysour]

All the same mate as its government prescribed, me and the missus doing it with Virgin.

Here's the info : https://www.gov.uk/government/publications/help-to-buy-isa-factsheet

It's the same in the sense they all give the £50 bonus on each £200

But the interest rates vary. Halifax are the best at 4%

[The G in Gerrard]

Cheers for replies

[Narwin Dunez]

Eek - had an offer accepted on a house.

[CraigDS]

Mine is with Nationwide and they've been excellent whenever I've had to deal with them. No idea on their current rates though and how they compare.

[killer-heels]

We've finally got our - roughly - 20% deposit saved up. It's taken a while and a curbing of my buying of tat, but we're there.

Has anyone got any positive recommendations for first-time buyer mortgages? The choice is absolutely overwhelming. Halifax will offer us the most $$ but I refuse to bank with them ever again. The best rate we've found so far that suits us is a 3.4% 5-year fixed mortgage, but that's only from my first bout of looking.

Why a 3.4% and 5 year fixed?

[Claire.]

Mine is with Nationwide and they've been excellent whenever I've had to deal with them. No idea on their current rates though and how they compare.

Same here, and they have also been excellent, apart from not understanding that a wage slip in PDF form that's printed out isn't something I've knocked up meself at home, if you have those type of slips then probs best off to get something from work to accompany it cos it was a right pain in the hoop.

[Wigwamdelbert]

Mine is with Nationwide and they've been excellent whenever I've had to deal with them. No idea on their current rates though and how they compare.

Thirded. Been with Nationwide since our first home (now on house #3) and they have been nothing but fantastic.

[CraigDS]

Just watch any early repayment charges with 5 year fixed if you may be looking to move before the end of that.

I know mine with Nationwide is something like 5% of the remaining amount, which is a fairly large amount to be honest.

[Wigwamdelbert]

Just watch any early repayment charges with 5 year fixed if you may be looking to move before the end of that.

I know mine with Nationwide is something like 5% of the remaining amount, which is a fairly large amount to be honest.

But, on the flip side, if you keep a Nationwide mortgage for the new property, they do not charge this

[CraigDS]

But, on the flip side, if you keep a Nationwide mortgage for the new property, they do not charge this

Is that with a new mortgage with them or transferring the existing?

[Wigwamdelbert]

Is that with a new mortgage with them or transferring the existing?

what we did was keep the existing loan, and take an additional loan in a new mortgage account for moving

[Wigwamdelbert]

So, if you're still in the house you bought as a first-time buyer, but you then remortgage after your term is up, do you still get FTB mortages or are you then into the realms of being able to pick and choose from all the mortgages?

You'll not get FTB mortgages, once the term expires on a fixed rate, you will usually move onto the lender's Standard Rate automatically, but this will be detailed in the mortgage offer. So it is worth looking at and shopping around as the fixed term rate alone isn't the be all and end all of the mortgage term. If the lender is offering a good rate at the end of the fixed term, then this might appeal to you as well, as obviously, to get another fixed term offer, you will have to buy into that

[killer-heels]

Early stages of looking, however, I am inclined towards a fixed rate for the financial certainty it offers. I have been a money cretin for an enormous period of my adult life and it has taken me a long time to rectify the money errors I made in my mid-twenties. The BoE predictions are that 2016 will be relatively flat, but will almost certainly increase in 2017. As I predict it will take the best part of the first half of this year to find, buy and move it would mean that most of our mortgage repayments will take place at a rate above what it is now. The fixed rate mortgage negates that fear largely. We plan on spending at least 4 years in the place we buy so 5-years fixed works in that context also.

We're visiting my partner's dad's long-time financial guru next week, so hoping he can shed some more light on what's best for us.

If you have a loan of 200k and 50k deposit (20%) for example then a mortgage at 3.4 costs around 990 a month. Post office have a 3 year fixed rate at around 2.35 with a 995 product fee. So in 3 years you will be paying almost 4k more at the 5 year fixed deal compared to the 3 year one.

If you remortgaged again and the interest rates went up 2% in 3 years (which i would be highly dubious about it going up that high) then you would pay approx £105 a month more than if you did that 5 year fixed thing. Add to that a remortgage arrangement fee of 995 then it would cost you 3.5k more for those remaining 2 years. But even in that for the first mortgage i have not factored in the equity you would have built up and the capitol you would have paid in 3 years.

My personal opinion is that you would be saving a fair chunk of money by fixing for a shorter term. But thats just my opinion but see what the advisor says.

[killer-heels]

I am probably being overly cautious and that's something I'm happy to acknowledge. From being financially flippant I have probably gone a little too much the other way.

As a FTB though, the fear that when you come to renew a mortgage and the interest rates are up at 6+% is somewhat paralysing.

Yeah thats understandable and its up to you like i said its just an opinion.

I think if interest rates are up to 6% in 3 years then most people will be fucked. They have in the last few months gone from late 2015, early 2016, late 2016 to even 2017 for a possible rise. Even then you cannot imagine it will be a sharp rise.

But again do what you are comfortable with.

[paddysour]

I am probably being overly cautious and that's something I'm happy to acknowledge. From being financially flippant I have probably gone a little too much the other way.

As a FTB though, the fear that when you come to renew a mortgage and the interest rates are up at 6+% is somewhat paralysing.

I'll be buying this year and the way I see it is that I'm better off going for a variable rate at the moment while interest rates are low. After the initial 2 or 3 years I can go for a fixed rate as the rates start to rise.

With the variable I'll be on a lower rate, allowing me to pay off more of the principle. Then I can fix at a comfortable rate.

If you fix now for 5 years you are potentially losing out on the low rates currently, which means paying off less of your principle, and then having your fix come to an end when the rates have already been rising for two or three years. In that scenario your fix will have been for nothing

[CraigDS]

Most recent indications from leading economists I've seen have been there will probably be something like a 0.5-1% increase by the end of 2016, more than likely the low to mid of this.

[Narwin Dunez]

Think I'm gonna pay a mortgage adviser, mortgages are tough.

All I know is I want a low rate for a long time, with the ability to overpay.

Bank of Dave?

[killer-heels]

Think I'm gonna pay a mortgage adviser, mortgages are tough.

All I know is I want a low rate for a long time, with the ability to overpay.

Bank of Dave?

Spend what you can afford, no more than 30-40% of any joint income, stray towards peace of mind and dont worry if that peace of mind decision means that you ended up paying a bit more over a period of time (like Lfsea's example).

[filopastry]

Think I'm gonna pay a mortgage adviser, mortgages are tough.

All I know is I want a low rate for a long time, with the ability to overpay.

Bank of Dave?

I dealt with London and Country brokers on mine, just a call centre broker but they've been good in my dealings with them, the upside is you don't have to pay them anything, they get commission from the bank/building society you get the mortgage from, but unlike most other brokers they don't charge a fee to the borrower on top of that.

Unfortunately mine was all for nought as my purchase fell through yesterday, so back to square one again.

[Narwin Dunez]

Went with a broker someone recommended on Linkedin.

I'm happy to pay for them to sort most of it out for me.

2.79% for 2 years, no survery or arrangement fee and £250 cashback

After 2 years I'll have 15% instead of 10% equity in the house so can remortgage at a better / equal rate.

[filopastry]

Just had an offer accepted on another property, this seems to be in a better position to proceed at least, short chain and it has fully formed, so hopefully we will have more luck second time round.

[paddysour]

Just had an offer accepted on another property, this seems to be in a better position to proceed at least, short chain and it has fully formed, so hopefully we will have more luck second time round.

Did you lose any money when the other purchase fell through?

[filopastry]

Did you lose any money when the other purchase fell through?

Thankfully not really,  just 150 for advance legal fees.

We held of on survey as we knew the chain hadn't formed up properly on the other side, and rolled the mortgage fee into the mortgage, so didn't have to pay that unless we completed.

[CraigDS]

No interest rate rises for the foreseeable future according to head of BoE.

http://www.bbc.co.uk/news/business-35351217

[killer-heels]

No interest rate rises for the foreseeable future according to head of BoE.

http://www.bbc.co.uk/news/business-35351217

Not surprising.

[CraigDS]

Not surprising.

Still being predicted for end of the year, or possibly start of next.

[killer-heels]

Still being predicted for end of the year, or possibly start of next.

Think thats massively optimistic. A lot of people have said mid 2017.

I dont think there will be a rise in rates this year.

[filopastry]

Economic outlook is looking weaker if anything and the oil price situation will help keep inflation in check (although they will no doubt keep an eye on Sterling as it has fallen significantly recently).

Still I would say no sign of any imminent rise.

That said I will still probably lock my rate in for 5 years, if only because  buying in London I would struggle to predict the house price rises/falls over the coming years, I don't particularly don't want to have to try remortgage in a couple of years when I might be in negative equity or just a bad LTV situation, as I am only putting in 15%. That might not be a likely scenario but it is certainly possible.

So while fixing for longer probably leaves me worse off, I will take that hit for a bit of certainty.

[muyuu]

I'm planning to buy abroad, let for some time, and then maybe move up to a decent house here if it's ever sensible again. London is madness right now and for the foreseeable future. And not just London, most of the country is overpriced.

[owens_2k]

Question.

Is it more beneficial to get onto the property ladder as soon as possible and then upgrade to a bigger house or would you say its better to save as much as possible and then go straight for a bigger house?

My friend recently moved into his second (bigger) home and it cost him the best part of £11k in fees etc to move house. Also with the added stress of being in a chain im wondering if its better to save as long as possible to avoid having to move.

[CraigDS]

Depends, is probably the most accurate answer.

If you feel the first house is undervalued, or you can add value to it, or that the area is likely to increase in value over the period you live there, then it could well be worth buying now then moving up. However you'd have the risk of that increase in value not being realised, as well as the risk of the place not selling quick at all when you want it to. Plus as you said there will be a bunch of costs involved when buying which that value increase will need to cover before it being beneficial.

Then again even if the house itself only breaks even, or a small loss, then would this likely be less than what you're paying for a place to live now? Or would having your own house/space be worth this additional cost over the time?

So as said, depends! 

[Narwin Dunez]

If you're paying rent that is more than your interest payments would be on a mortgage, I'd say it's better.

The rise in property value over a few years should even out the slimeball fees if it's in a good area.