Deposit question

EmmaD13

We're about to see a mortgage broker to discuss mortgage options and we're still not sure how much deposit to put down, we'd like to go as prepared as possible.. We're buying a house at £136,000 we have up to 25% to put down (perhaps even a bit more) but there's work that needs doing on the house and we'd like to have some money available as we're at the time of life where we're thinking of starting a family. Also so that we've got an emergency fund to cover things like if we want make any further improvements on the house, or if I was on long term sick as I only have 28 days full sick pay in any one year etc. Ideally we'd like to look at a term of 30 years - 80% LTV however we'd be willing to go to 75% if this makes financially more sense.

75% would require a deposit of £34000 with a mortgage of £102000
80% would involve a deposit of £27200 with a mortgage of £108800 - giving us effectively an extra £7k in the bank. We earn £30,000 joint salary annually.

Any thoughts or advice on the above would be greatfully appreciated. Obviously our financial advisor is stating the obvious that 75% will get us better rates, and on the otherhand fatherly advise is suggesting to put as little deposit down as possible and give ourselves a big a cushion as possible (although I confess I'd rather have less in savings and less of a mortgage due to the rates at the moment) but we don't have a clue how this would affect figures in the long run.

Many thanks in advance for your help

Emma

Paul_Herring

EmmaD13 wrote: »

Also so that we've got an emergency fund to make any further improvements on the house, I only have 28 days full sick pay in any one year etc.

Could you clarify that particular sentence please? I think I know what it appears to be saying, but I hope that's not the impression you meant to impart.

We're buying a house at £136,000 we have up to 75% to put down (perhaps even a bit more) [...]

75% would require a deposit of £34000 with a mortgage of £102000
80% would involve a deposit of £27200 with a mortgage of £108800 - giving us effectively an extra £7k in the bank. We earn £30,000 joint salary annually.

That first clause implies you could have a deposit £102,000, the second paragraph implies you only have 25% as a deposit.

Over and above that, do you have any other debts between you (carrying over CC balances from month to month, loans, etc.)

Regarding income multiples: http://www.northernrock.co.uk/intermediaries/policyInfo.asp

20% deposit requires 3.63x
25% deposit requires 3.4x

You require either a 'medium' or 'high' credit score for NR (I realise that you may get better elsewhere, but until you know who you're with, you won't know for sure what boundaries they have.)

April '08: http://money.uk.msn.com/mortgages/mortgageguide/article.aspx?cp-documentid=8100968 suggests only 3x

Looks like no matter how much deposit you seem to be able to give, you'll be pushed to get a decent rate anyway.

EmmaD13

Hi Paul,

:embarasse Sorry, was in a bit of a rush and didn't check through my typing properly. I apologise for any confusion caused, it's my first time on here and I didn't realise I could go back and edit it, which I have now done!

To clarify -

so that we've got an emergency fund to make any further improvements on the house, I only have 28 days full sick pay in any one year etc

- we'd like to have a bit of rainy day/emergency cash for if we wanted to do the house up further, also to cover emergencies e.g. if I was off work poorly for a long period of time as I only have 28 days fully paid sick leave

We're buying a house at £136,000 we have up to 75% to put down

75% would require a deposit of £34000 with a mortgage of £102000
80% would involve a deposit of £27200 with a mortgage of £108800 - giving us effectively an extra £7k in the bank. We earn £30,000 joint salary annually.

- we have actually have more than 25% deposit to put down, but would only like to go up to this figure if possible because of the above mentioned reasons

We don't have any loans and I've just cleared my credit card (I only tend to have £200-£300 max on it and this is usually cleared in a couple of months).

Emma

hostman

Clearly, the larger the deposit you put down, the lower your mortgage will be and the better rate you'll receive. But cash in the bank is a bonus, especially in these uncertain times.

I'd go for 20%, which you say would then leave you a nice sum in the bank for a rainy day.

opinions4u

Just judge the rate in the calculation ... a 25% deposit may get you a lower interest rate than a 20% deposit which could free up a few extra quid a month.