Currently Renting but need to save for a Deposit

F_T_Buyer

deb_buffy wrote:

Hi

Me and my partner are currently renting a flat for £500 a month but are looking to buy our own place. We have been given a mortgage promise of £98,000, which is great, but they have told us we need to save a min of 2% deposit. We have just 6 months left on our rental agreement. I was just wondering if any one had any ideas on how we can manage to get the 2% in just 6 months. We have total monthly outgoings of £1470 and have incomings of £1600. Our outgoings are already at the smallest I can make them as far as I can see. Any ideas would be grateful.
Outgoings are as follows:
Rent: 500
CT:100
Credit card: 100
Payment to parents:70
Money for work for petrol me and partner: 200
Food: 200
Bills:150
car insurance: 150

Thanks

Deb_buffy

Hold on, the interest on that mortgage would be around £430 a month (@ 5.27% mortgage rate June national average) and in November rates will be much higher. Add on the repayment, I would assume 25years, which would be £326 a month.

Are you sure you can afford this? If your struggling to save now, paying only £500 a month, how will you cope with higher mortgage rates, and actually paying off that debt?

PoorDave

F_T_Buyer wrote:

Hold on, the interest on that mortgage would be around £430 a month (@ 5.27% mortgage rate June national average) and in November rates will be much higher. Add on the repayment, I would assume 25years, which would be £326 a month.

Are you sure you can afford this? If your struggling to save now, paying only £500 a month, how will you cope with higher mortgage rates, and actually paying off that debt?

Agreed. Nobody said whether this was one of those nice interest only mortgages yet, did they?

£150 pcm for car insurance seems kinda high, is that 2 young people each with cars?

Have you shopped around to get the cheapest price on your utility bills etc?

To get 2%/£2k in 6 months you need 333pcm spare, and you only have about 130, basically. Are your outgoings realistic, or are they a high/low assessment? Could make all the difference.

Has your "mortgage promise" come from talking to a whole of market broker to find you the best deal? If not, you should consider that too.

deb_buffy

The car insurance is for one of the cars, we do the payments over 4 months of the year as the interest is cheaper then is we spread it over the year at cheaper payments, its just unfortunate that this money is needed over the next 4 months.
Uitilites are not something which i cannot change as they are set by the land lady. So we have to pay the set amounts.
The mortgage promise is the best deal which we can get after looking at quite a few deals. it would be a repayment mortgage as i dont like the sound of the interest only ones.

PoorDave

deb_buffy wrote:

The car insurance is for one of the cars, we do the payments over 4 months of the year as the interest is cheaper then is we spread it over the year at cheaper payments, its just unfortunate that this money is needed over the next 4 months.
Uitilites are not something which i cannot change as they are set by the land lady. So we have to pay the set amounts.
The mortgage promise is the best deal which we can get after looking at quite a few deals. it would be a repayment mortgage as i dont like the sound of the interest only ones.

How much will the mortgage on a repayment cost per month?

Is the credit card payment £100 per month on a big balance, or £100 spent, £100 paid off all in the same month? If it's the former, is it on a good rate? (0%?). If the latter do you need to spend the money.

If your parents can be flexible that might help.

If the repayment mortgage is more than £130 more than your rent, then you have a problem, as after buying the house/flat, incomings =£1600, outgoings = £1600 = no spare cash i.e. can you really afford to do this?

barnaby-bear

PoorDave wrote:

How much will the mortgage on a repayment cost per month?

Is the credit card payment £100 per month on a big balance, or £100 spent, £100 paid off all in the same month? If it's the former, is it on a good rate? (0%?). If the latter do you need to spend the money.

If your parents can be flexible that might help.

If the repayment mortgage is more than £130 more than your rent, then you have a problem, as after buying the house/flat, incomings =£1600, outgoings = £1600 = no spare cash i.e. can you really afford to do this?

I assumed 5.3% repayment and made it £597
the IO is £432

Buildings insurance and maintainence could be pushing it if interest rate rises, but I think the killer could be whether it's a flat with a service charge/sinking fund and being careful if no sinking funding - when the re-roofing/redecorating is as a 1-3k unexpected bill could be not good.

I think on day to day income do-able (35% of income) if they had a fallback savings, what when your boiler goes bang, car needs repairs, toilet leaks, fridge breaks. Factoring in a 1% interest rise can be sobering
the repayment on 98k goes from 597 to 657 - loan amount 98k small so not to scary but worth considering

Bargain_Rzl

deb_buffy wrote:

DFW board? sorry am new to the site.

Debt-Free Wannabe. It's towards the top of the main list of MSE forums.

This is not because you're in debt (though perhaps you are in debt to your parents hence the £70pcm payment?) but because the guys on there are REALLY good at analysing people's finances and identifying areas that can be trimmed down.

HTH

whambamboo

Angela_D wrote:

They are saving money by buying at £98,000 seems like a good deal to me.

sounds like they are signing up to 25 years of being barely able to make ends meet to me.

Jay1b

whambamboo wrote:

sounds like they are signing up to 25 years of being barely able to make ends meet to me.

Their salary will rise as their job position rises. Their salary will rise with inflation, their mortgage wont. So this isnt true in the slightiest. Unless they're stupid with money they will be far better off in a couple of years.

Check out https://www.freecycle.org for free furniture, if you dont mind 'making do'.

F_T_Buyer

Jay1b wrote:

Their salary will rise as their job position rises. Their salary will rise with inflation, their mortgage wont. So this isnt true in the slightiest. Unless they're stupid with money they will be far better off in a couple of years.

Errr? What???

Maybe you should work out if the average pay rise has paid for the additional increases in the cost of living (gas, elec, petrol, council tax) and this is with wage inflation in a booming economy. When this growth slows, and unemployment rises, what do you think will be happening to average wages....

We're not in the 80s you know!

barnaby-bear

Jay1b wrote:

Their salary will rise as their job position rises. Their salary will rise with inflation, their mortgage wont. So this isnt true in the slightiest. Unless they're stupid with money they will be far better off in a couple of years.

Check out https://www.freecycle.org for free furniture, if you dont mind 'making do'.

Individually maybe but it's an average - you have to have the reserves to ride the little fluctuations - a big bill for car repairs, a big repair on the flat/house, a redundancy....

Plus as a couple the biological clock, childcare losing one income or part of a big issue. Their income could essentially fall by 35-50% while expenses rise.

I'm not saying it's a bad idea I just think they should have at least a few thousand in savings as a buffer before - which with DFW techniques etc would be a 6month/ one year delay.