FTB: As big a deposit as possible, or keep some emergency savings?

MushyPeas

Hiya

I'm a FTB and am after some advice about the deposit. I've searched the boards and haven't come across an answer to this question, but if it already exists apologies for posting again.

I'm in the process of buying a house and have agreed a deposit of 15% which is from savings. However, I do have another £2000 left over (and another additional (to normal income) of £3000 coming in within the next couple of months). The question is should I stretch to the biggest deposit possible to begin with, or should I save something back for emergencies? If I put the extra £2000 down this would mean a deposit of 17%. Not much difference, so is it worth it?

Thanks for any advice

HGLTsuperstar

But have you budgeted for solicitors, mortgage arrangement fees, removal costs, stamp duty.....

MushyPeas

Hiya

I've already paid the mortgage arrangement fees and have budgeted for the other costs, about another £3000 put by for those. Sorry, should have said at start

aliasojo

Personally I would have as large a deposit as poss. No point in paying anymore interest than you have to.

I'm about to empty our bank to send a lump sum to our mortgage. I figure if anything springs up that I haven't accounted for then I can aways fall back on a cc for a short time.

HelpWhereIcan

One thing you may be able to do (if your mortgage deal allows) is to overpay the extra (as a lump sum overpayment after completion obviously). Some deals allow you to 'borrow back' any overpayments which could give you the best of both worlds. Having the money accesible in an emergency (generally 5 working days) and, at the same time, saving the amount of interest you pay as the overpayment reduces the balance on which you are being charged interest until you borrow back the overpayment. Check if this possible with your adviser before you decide.

I would doubt that the extra deposit could, in itself, get you an lower rate as the bands generally tend to be 75%, 80%, 85%, 90% and 95%. However, you may find that needing to borrow even £2000 less may bring in lenders and deals that may not be currently available due to the income multiple that you may need to get the loan, but the chances of you being so much better off that it is worth paying a new set of valation fees etc are slim.

Get some advice from a whole of market broker who will be able to assess your circumstances and objectives in full.

Hope this helps

MushyPeas

aliasojo wrote:

Personally I would have as large a deposit as poss. No point in paying anymore interest than you have to.

I'm about to empty our bank to send a lump sum to our mortgage. I figure if anything springs up that I haven't accounted for then I can aways fall back on a cc for a short time.

**********

One thing you may be able to do (if your mortgage deal allows) is to overpay the extra (as a lump sum overpayment after completion obviously). Some deals allow you to 'borrow back' any overpayments which could give you the best of both worlds.

Hiya

Thanks for the advice from both of you. I've just had the survey done on the house and some work needs doing, which I think means I can lower the offer a bit? I'll talk to my mortgage advisor to see how much affect the extra money will have on my monthly payments. If only £20-£30 difference a month I might save it as an 'emergency' pot, just in case. From becoming a person who was in debt, to now has a large (well to me anyway) savings pot, having nothing saved suddenly seems really scary!!

stanmoresaver

MushyPeas wrote:

Hiya

Thanks for the advice from both of you. I've just had the survey done on the house and some work needs doing, which I think means I can lower the offer a bit? I'll talk to my mortgage advisor to see how much affect the extra money will have on my monthly payments. If only £20-£30 difference a month I might save it as an 'emergency' pot, just in case. From becoming a person who was in debt, to now has a large (well to me anyway) savings pot, having nothing saved suddenly seems really scary!!

For what it is worth- i agree with this course of action and the post above from my collegue HWIC- it is very sensible to have an emergency fund- You could always pay it back if your mortgage allows ( normally 10% penalty free ) but when it is paid off, it is normally much harder to get it back.

Get used to the mortgage repayments and home ownership costs before making a capital repayment.

SS

totalguitar

stanmoresaver wrote:

For what it is worth- i agree with this course of action and the post above from my collegue HWIC- it is very sensible to have an emergency fund- You could always pay it back if your mortgage allows ( normally 10% penalty free ) but when it is paid off, it is normally much harder to get it back.

Get used to the mortgage repayments and home ownership costs before making a capital repayment.

SS

I agree, i'm about to move and i need an £85k mortgage but i'm borrowing £95k. When the move is complete, the house decorated and finished as we want it then i will pay whats left off the mortgage, keeping a good few hundered back as an emergency pot. Also going to pay the full years council tax to save paying it monthly. Might go against the grain a bit but i hate paying it monthly.

stanmoresaver

totalguitar wrote:

Also going to pay the full years council tax to save paying it monthly. Might go against the grain a bit but i hate paying it monthly.

Off tread but- Are you charged interest if you pay monthly?

MushyPeas

Hiya

Thanks to all from the advice. It's a bit scary being a FTB so I really appreciate everyone's feedback and support. Sometimes it is just useful to ask questions that are worrying me!

I think I will definately save the 'emergency' fund. I'll feel more comfortable that way.

Cheers again to all: totalguitar, stanmoresaver, HelpWhereICan, aliasojo

MP

Heth_2

Hi,
we are first time buyers and we put down as big a deposit as possible, keeping enough aside for all the fees, stamp duty, moving van etc...For us it was more important though because we just got over the 25% threshold, which meant slightly smaller interest rate on the mortgage and also made the application process easier. Once we move we'll have about 500 pounds in our savings pot (and a couple of hundred spare for some paint) but even with the mortgage we'll be able to save about 200 quid a month to build this up.
I think it is wise to keep a bit of contigency money, but how much you need depends on your circumstances.