Big Deposit - What rate can I expect?

InMyDreams

BennyC wrote: »

I can afford interest only payments on my salary at 4% without the aid of any other investments or income from renting out a room.

So what happens when interest rates go up? Which they will as there is no other way for them to go. Why are you looking at interest only mortgages? This is essentially renting but with all the added risks (and expenses) of owning. The worst of both worlds. I would be looking at what a *repayment* mortgage at 7% (at least) would cost to see whether you can really afford a mortgage (and even then be thinking about how you can adjust your lifestyle in case rates go even higher). With such a large deposit it's unlikely you will be saddled with negative equity, but it would be a shame to see a huge portion of that inheritance just disappear if you find you have to sell.

BennyC wrote: »

If I can only borrow £86,000

Which is still more than 4 times your brand new salary which you only have for 2 to 3 years. What then?

BennyC wrote: »

I could use £110,000 of my inhertiance as a deposit and then save up another £4,000 to bridge the gap totaling £200,000 but this would leave me without any spare cash at all, until money from the sale of my dads house comes in (which could be days or years) which I don't think is sensible.

I agree. Wait until the money comes in and then reassess your circumstances. You are only 21. Things can change so fast. If you are so desperate to move out then rent somewhere cheap, protect your inheritance, build up your credit rating and get a bit of experience of how much living away from parents can cost. I wouldn't consider gambling away such a large inheritance just because "living at home is stressing me out". Life is set to become a whole lot more stressful...

SilverSix

Thanks for the reply, has put things into perspective a bit.

Strangely Nationwide were willing to lend me £94,500 however after having read your post it seems the thing to do would be:

Wait for my fathers house to sell use a £150,000 deposit with a loan of about £50,000. This would give me interest only payments of £166 @ 4% and £291 @ 7% which would be affordable either way.

Whilst interest only payments are low I would put money aside and pay off small parts of the mortgage at a time eventually bringing my interest payment down.

This , to me, looks like a safer bet and would be affordable soley via my income. Any extra income from a rented room or any Personal Training work or second job could be put towards paying off the mortgage.

I plan on using the next 2-3 months pay as a 'trial run', putting aside what I would need to survive if I went ahead, to see if it is affordable.