Is getting a mortgage straight after graduation a good idea?

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Random_user45
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I am currently doing a degree in economics and i am planning to mortgage a house as soon as I graduate and have found a job where I will have settled in the first 3months. I want to get a house soon as possible. I am looking somewhere in the region of £200,000. I have the full support of my parents who can offer me £50,000 and I already have £30,000 saved up, so a deposit of £80,000 would be the type of deposit i would make on the 200k house. Would it be viable to get a mortgage so soon or is this normal and the chances of me getting a mortgage are high given that fact that I will have a graduate job which is secure in terms of employment. Or I would be declined?
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londonmyst
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It depends upon your ambitions, credit rating, existing financial commitments, personal circumstances and how you feel as a new graduate about committing to paying a mortgage for a uk property for the next 20-25 years.
Have you considered theadditional cost of stamp duty and the risk of being left in negative equity if the property market drastically slumps over the next 2-3 years?
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Muttley79
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(Original post by Random_user45)
I am currently doing a degree in economics and i am planning to mortgage a house as soon as I graduate and have found a job where I will have settled in the first 3months. I want to get a house soon as possible. I am looking somewhere in the region of £200,000. I have the full support of my parents who can offer me £50,000 and I already have £30,000 saved up, so a deposit of £80,000 would be the type of deposit i would make on the 200k house. Would it be viable to get a mortgage so soon or is this normal and the chances of me getting a mortgage are high given that fact that I will have a graduate job which is secure in terms of employment. Or I would be declined?
What have you budgeted for legal fees, survey, furniture ... you need more than the purchase price.

I doubt you'd get a mortgage straight away now as they are much stricter - depends on your credit rating.
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RogerOxon
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(Original post by Random_user45)
I am currently doing a degree in economics and i am planning to mortgage a house as soon as I graduate and have found a job where I will have settled in the first 3months. I want to get a house soon as possible. I am looking somewhere in the region of £200,000. I have the full support of my parents who can offer me £50,000 and I already have £30,000 saved up, so a deposit of £80,000 would be the type of deposit i would make on the 200k house. Would it be viable to get a mortgage so soon or is this normal and the chances of me getting a mortgage are high given that fact that I will have a graduate job which is secure in terms of employment. Or I would be declined?
IMO, there are two issues; whether they'll give you a mortgage and whether you should take one. Three months isn't very long to know that you want to, and can be, with a company long-term. Depending on where you get a job, it's possible that you won't have too many local options, so may have to move, either because of company issues, or for career progression.

If you're in an area that you like, with at least a few potential employers, then it makes more sense. However, be aware that moving isn't cheap, and you may need to sell at a discount, due to no fault of your own. Your healthy deposit certainly helps. although the areas with the higher paying employers tend to be quite expensive - £200k isn't that much, IMO.

Do not budget to spend all of your capital on a house. Shop around for the best mortgage deal (don't trust anyone that claims to find the best deal for you - they need to be paid), and ensure that you have an emergency fund. Many people will want to make money from you buying a house. The only area where I would pay more is the survey - I would have a full structural survey, as the "homebuyer's" is a complete and utter joke.
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Random_user45
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(Original post by Muttley79)
What have you budgeted for legal fees, survey, furniture ... you need more than the purchase price.

I doubt you'd get a mortgage straight away now as they are much stricter - depends on your credit rating.
Having done a quick google search, I'm not sure if the figures are correct or not, but the things mentioned above should average around less than £5-7k? That isn't a lot, it is feasible because I can definitely have a family member give me that without doubt.

But yeah, they are stricter. I was hoping with the £80,000 that they would see how committed I was. I guess the only risk on their side and potentially my side is job security. I don't have a credit score at all which is also another setback. I just really want a house outside of London in the East Midlands but come to think of it, there aren't many job opportunities there as there is in London so that would also be difficult.
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Random_user45
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(Original post by Random_user45)
I am currently doing a degree in economics and i am planning to mortgage a house as soon as I graduate and have found a job where I will have settled in the first 3months. I want to get a house soon as possible. I am looking somewhere in the region of £200,000. I have the full support of my parents who can offer me £50,000 and I already have £30,000 saved up, so a deposit of £80,000 would be the type of deposit i would make on the 200k house. Would it be viable to get a mortgage so soon or is this normal and the chances of me getting a mortgage are high given that fact that I will have a graduate job which is secure in terms of employment. Or I would be declined?
(Original post by londonmyst)
It depends upon your ambitions, credit rating, existing financial commitments, personal circumstances and how you feel as a new graduate about committing to paying a mortgage for a uk property for the next 20-25 years.
Have you considered theadditional cost of stamp duty and the risk of being left in negative equity if the property market drastically slumps over the next 2-3 years?
I am committed to paying for 20years as I would be living there. But I was hoping to pay it off earlier once I settled, maybe chip off 10-12 years.

I thought that stamp duty doesn't apply to houses below £500,000?
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Random_user45
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(Original post by RogerOxon)
IMO, there are two issues; whether they'll give you a mortgage and whether you should take one. Three months isn't very long to know that you want to, and can be, with a company long-term. Depending on where you get a job, it's possible that you won't have too many local options, so may have to move, either because of company issues, or for career progression.

If you're in an area that you like, with at least a few potential employers, then it makes more sense. However, be aware that moving isn't cheap, and you may need to sell at a discount, due to no fault of your own. Your healthy deposit certainly helps. although the areas with the higher paying employers tend to be quite expensive - £200k isn't that much, IMO.

Do not budget to spend all of your capital on a house. Shop around for the best mortgage deal (don't trust anyone that claims to find the best deal for you - they need to be paid), and ensure that you have an emergency fund. Many people will want to make money from you buying a house. The only area where I would pay more is the survey - I would have a full structural survey, as the "homebuyer's" is a complete and utter joke.
How long do you think into a job is the right time to apply for a mortgage? I agree 3 months is a bit drastic, but I would at least expect after a year in a job, then I would surely be accepted.

The idea of moving is really dependant on whether there are jobs available in the area as you say, I agree that could pose a problem; I have checked on job adverts and have seen several job positions and companies in the area but nothing that matches the likes of London.

What do you mean by selling at a discount? Selling the house for a reduced price or?
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londonmyst
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(Original post by Random_user45)
I am committed to paying for 20years as I would be living there. But I was hoping to pay it off earlier once I settled, maybe chip off 10-12 years.

I thought that stamp duty doesn't apply to houses below £500,000?
Stamp duty will not apply to first time buyers of primary residential homes purchased below £500k in England & NI.
But does apply to most second homes, buy to let & investment properties and primary residential properties above £250k in Scotland & Wales.
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Ne en mia nomo
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You'll need at least 6 months of stable employment to be considered for mortgage. The maximum you can get is 3-4x of your annual income, depending on provider.There is also a rule about what percentage of your deposit can come from a gift, not sure about the exact number.At the end of the day it all depends on the bank, if they're willing to give you a mortgage or not.
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Muttley79
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(Original post by Random_user45)
Having done a quick google search, I'm not sure if the figures are correct or not, but the things mentioned above should average around less than £5-7k? That isn't a lot, it is feasible because I can definitely have a family member give me that without doubt.

But yeah, they are stricter. I was hoping with the £80,000 that they would see how committed I was. I guess the only risk on their side and potentially my side is job security. I don't have a credit score at all which is also another setback. I just really want a house outside of London in the East Midlands but come to think of it, there aren't many job opportunities there as there is in London so that would also be difficult.
OK but you'd need a mortgage of £120 000 - I doubt you'd get that. Martin Lewis has some great info on his website.
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Muttley79
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The other thing to bear in mind is that it's a good idea to know an area before buying a house. Renting for six months/year enables you to build a credit rating, find out if you like the job and work out which areas are 'nicer' to live in.

I can think of a couple of houses we looked at and then found issues with the area from walking around ... one ws on a rat run and would have been very noisy.
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RogerOxon
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(Original post by Random_user45)
How long do you think into a job is the right time to apply for a mortgage? I agree 3 months is a bit drastic, but I would at least expect after a year in a job, then I would surely be accepted.
A year sounds more reasonable, especially (as Muttley79 said) you don't know the area well. A house is a big commitment, and requires quite a lot of due diligence. Despite what many say, you can lose on houses.

(Original post by Random_user45)
What do you mean by selling at a discount? Selling the house for a reduced price or?
Life happens. You might need to move at a time when house prices are depressed, and you may not be able to let your house for enough to cover the mortgage (less likely with a large deposit though).

Years ago, I worked for a start-up that went belly-up. The job market wasn't good, and the company owed me quite a lot of money, which I never saw. Although I had job offers, I was financially able to decline until I found something ideal. It took six months for me to find my next job - I was considering moving, which has its costs, but didn't have to in the end.
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Random_user45
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(Original post by RogerOxon)
A year sounds more reasonable, especially (as Muttley79 said) you don't know the area well. A house is a big commitment, and requires quite a lot of due diligence. Despite what many say, you can lose on houses.


Life happens. You might need to move at a time when house prices are depressed, and you may not be able to let your house for enough to cover the mortgage (less likely with a large deposit though).

Years ago, I worked for a start-up that went belly-up. The job market wasn't good, and the company owed me quite a lot of money, which I never saw. Although I had job offers, I was financially able to decline until I found something ideal. It took six months for me to find my next job - I was considering moving, which has its costs, but didn't have to in the end.
Ah true, that's exactly what I am trying to avoid but at the stage I am looking to buy a house it does look likely that it could happen to me too. But yeah as you and Muttley79 mentioned i shouldn't rush into things. I just wanted your opinions and it seems wiser to wait until I am more confident and knowledgeable of the area and financial position. So hopefully 1 and a half to 2 years should be the perfect time from what I have gathered.
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jacketpotato
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Why are you "desperate" to buy a house?

That's a very irrational state of mind for a recent graduate. House prices have been very static for the past few years and are likely to turn negative next year when the stamp duty holiday ends and capital gains tax increases. We do not live in the 1990s anymore.

Most graduates are much better off renting:
- Renting is much more flexible. Lots of people want to change job after a year or 2 of employment. If you want to move to a different part of the country for further education or a better job, you can do that if you are renting.

- Renting allows you to make the most of government support for first time buyers. You can get a government bonus of £1,000 per year to add to your house deposit if you save into a Lifetime ISA. You can't do that after you are a homeowner.

- Renting gives you a chance to understand where you want to live and what you are looking for. If you buy straight out of uni you risk making a really expensive mistake.

- Moving house costs several thousands of pounds each time - stamp duty; conveyancing fees; mortgage lender fees; estate agent fees when you sell. If you end up want to move again in 2-3 years, moving costs will probably have cost you more than rent.
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Random_user45
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(Original post by jacketpotato)
Why are you "desperate" to buy a house?

That's a very irrational state of mind for a recent graduate. House prices have been very static for the past few years and are likely to turn negative next year when the stamp duty holiday ends and capital gains tax increases. We do not live in the 1990s anymore.

Most graduates are much better off renting:
- Renting is much more flexible. Lots of people want to change job after a year or 2 of employment. If you want to move to a different part of the country for further education or a better job, you can do that if you are renting.

- Renting allows you to make the most of government support for first time buyers. You can get a government bonus of £1,000 per year to add to your house deposit if you save into a Lifetime ISA. You can't do that after you are a homeowner.

- Renting gives you a chance to understand where you want to live and what you are looking for. If you buy straight out of uni you risk making a really expensive mistake.

- Moving house costs several thousands of pounds each time - stamp duty; conveyancing fees; mortgage lender fees; estate agent fees when you sell. If you end up want to move again in 2-3 years, moving costs will probably have cost you more than rent.
But if I was set on living there for a minimum of 7-10 years, would renting be a bad idea? I heard renting is bad, unless your options are very limited. You tend to get issues with landlords (Not every instance), you are also putting money in the pocket of the landlord too. Mortgaging is surely a better option because of the low interest rates currently? I understand what you mean by having the freedom of movement with no ties attached. I acknowledge that it would be good in the short-term, as you said, it gives a chance to think things clearly and could result in a costly mistake. I agree. I haven't considered this side yet, I guess renting would be better in that situation.
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Quady
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(Original post by Random_user45)
I am committed to paying for 20years as I would be living there.
Main thing for me was committing to allocation for a decade or more. Personally I moved 150 miles for my job after the grad scheme I was on. Doing so increased my salary by 80%.

Also over the first couple of years after graduating house prices fell then drifted sideways for a further couple.

I'm pretty pleased I didn't buy until five years after graduating, financially I was no worse off renting and it gave me more flexibility.
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jacketpotato
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(Original post by Random_user45)
But if I was set on living there for a minimum of 7-10 years, would renting be a bad idea? I heard renting is bad, unless your options are very limited. You tend to get issues with landlords (Not every instance), you are also putting money in the pocket of the landlord too. Mortgaging is surely a better option because of the low interest rates currently? I understand what you mean by having the freedom of movement with no ties attached. I acknowledge that it would be good in the short-term, as you said, it gives a chance to think things clearly and could result in a costly mistake. I agree. I haven't considered this side yet, I guess renting would be better in that situation.
If you were fairly sure you were going to live in that property for 7-10 years, buying is a good idea.

But who be sure of that as a graduate entering your first full time job in your first adult property? You might find you want to move to a different job in another city after a year or two. Or perhaps you want to move to a different area. Or perhaps you have a bigger salary and fancy living in a larger house. Or perhaps you want to move in with your partner. You can easily do that if you are renting. It's very difficult to do that if you have bought.

Anyone who says "renting is bad" is an idiot. If you buy a house there is lots of wasted money. You are putting money in the hands of mortgage lenders (mortgage interest and fees), surveyors (you'll need a survey to get your mortgage), conveyancers (you'll need to pay solicitors/conveyancers - typically around £1300 plus) and throwing away your first time buyer benefits (saving into Lifetime ISA is worth £1,000 a year in free cash from the government). Add to that estate agent fees when you sell (the average agent fee is 1.5% + VAT, so about £3.6k on a £200k property).

There are thousands of pounds of wasted costs associated with buying a property! It's not worth it unless you are pretty sure you are going to be there for a few years at least.
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Surnia
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(Original post by Random_user45)
How long do you think into a job is the right time to apply for a mortgage? I agree 3 months is a bit drastic, but I would at least expect after a year in a job, then I would surely be accepted.

The idea of moving is really dependant on whether there are jobs available in the area as you say, I agree that could pose a problem; I have checked on job adverts and have seen several job positions and companies in the area but nothing that matches the likes of London.
You will find it more difficult to get a mortgage if you are in a probationary period when you start the job.

You also have to factor in your other monthly costs, eg food, household products, utility bills, tv licence, wi-fi, travel for work, plus your personal expenses of socialising, travel, clothing, holidays, birthdays and Christmas.

Your family are offering to help financially; will that need repaying?
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Jack22031994
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Depends on what you want and id you can afford it. At the end of the day if you start a mortgage younger, likelihood is that youll pay it off earlier too. I dont wanna still be paying a mortgage into my 60s ideally for example
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Reso1utionS
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It depends on your financial possibilities, and of course, the bank will count your job as a decisive factor. You already have £80,000, and this is enough for the deposit, but you have to make sure you'll have enough money for the monthly payments. I would recommend speaking with a Mortgage Broker Cambridge if you want a full overview of the mortgage process and you want to know more details about your specific case. Don't rush to make a decision only because you already have some money on hand. Getting a mortgage is a complicated procedure and you have to consider all the aspects.
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