First time buyer, big deposit, use it all or not?

Mrsifter

I am a single guy with a perfect credit score, I am looking to purchase an apartment for £150,000. I have £82,500 in ready available savings and £40,000 in a two year ISA paying 5%. My salary allows me to lend a £60,000 mortgage.
What is my best option of purchasing the apartment, should I use my tied up savings as well and reduce the amount I borrow?
My salary isn't great so should I keep a my tied up savings where they are as a rainy day fund?

CloudCuckooLand

Negotiate the price down, just use the readily available funds, and not all of that if you can.

Person_one

Wow, just want to say you've done incredibly well to save that amount on a salary that only lets you borrow 60K, that's about 14K pa right?

This is not advice! But if it were me, I'd keep a buffer of savings, enough to support me and keep myself covered for say 2 years in case of emergency and then put the rest in the property. You'll get a great deal and the quicker you can pay off the mortgage (ten years? fifteen?) the more you'll save long term.

dimbo61

If you can only borrow £60K on your income then you are going to have to use both the £82,500 in savings and another £7500 out of your ISA,s
I would consider an offset mortgage and that way if savings rates drop below the mortgage rate you could put the ISA money into the offset account and you still have a large Emergency fund just in case.
Either overpay the mortgage each month or build up savings in the offset account ( thus saving interest each month and therefore paying off the mortgage quicker)

Mrsifter

Thanks for your replies, I pretty much know now that I can get the apartment for around £142,500 and my ISA rate is fixed at 6.25% for another two years. SoI need to decide soon.

jamesd

Are you sure that you're giving your full income for a mortgage application? £40,000 in an ISA at 5% produces an extra £2,000 a year of income.

Say you were to borrow £66,000 using salary plus the ISA savings income to support it. That would leave you needing to use £76,500 of the £82,500 savings, leaving you £6,000 of them. If your mortgage lender will accept this it is what I suggest you do because you can get higher interest rates on your money than the sort of good fixed rate mortgage deal you could get.

Because of your relatively low income it seems sensible to use a fixed rate mortgage to ensure that your interest payments don't go up when the Bank of England eventually increases Bank Rate (often called base rate). Say the five year fixed rate at 3.99% available from Britannia with a fee of £999. You can pay the £999 out of the £6,000.

At 3.99% the interest on £66,000 would be £2633 a year or £220 a month. If you used a 25 year mortgage term the capital repayment part would be £129 and the actual monthly total repayment would be £348.69 (no rounding in that number, unlike the other two).

I suggest using no more of your savings than you must because you can get higher interest rates on your savings than you would pay for the mortgage. So the more you borrow, the better off you are. If that ever changes, you'll have the savings and can use them to reduce the mortgage.

Thrugelmir

Do you rent at the moment?