Mortgage with small deposit

Arty-Ziff

Hi all

Here's my situation... I currently earn around £55k per year. I am in a very stable and secure job, and have been for around 3 years. Within the next couple of months I will have finished paying off all my credit card/ loan debts which I accrued through university and whilst I was on a lower income for a few years. This means I will have around £800 extra a month, which I intend to save to pay for a deposit.
I currently have around £5000 in a savings account, and am really keen to buy a house. So my question is... Am I likely to get a mortgage close to 100% at the moment? Does the fact that I can easily afford the repayments count for anything against the fact that I have next to no deposit? Obviously I could spend the next 18 months saving, by which time I would have a fair sized deposit, but I am keen to buy at the moment while prices are relatively low.
I basically want to know whether I would be wasting my time even trying to get a mortgage with such a small deposit.

Thanks in advance

opinions4u

Arty-Ziff wrote: »

I currently have around £5000 in a savings account, and am really keen to buy a house. So my question is... Am I likely to get a mortgage close to 100% at the moment?

No chance. While lenders like Yorkshire Bank and Nottingham Building Society have been reported as accepting 95% mortgages, the rates and fees are likely to be high and they will cherry pick their applicants (e.g. debt free, longer term stable employment etc).

Some lenders will accommodate 90% mortgages, but again the rates are high and don't tend to improve until a 15% deposit is introduced. 25% deposits improve the cost side of things further with most lenders.

Does the fact that I can easily afford the repayments count for anything against the fact that I have next to no deposit?

A lender doesn't just have to take a view on current affordability. They also have to consider changes in circumstances. If they lend you 100% of the value of the property and you default on payment and they end up repossessing, they will often find themselves trying to sell a property that has fallen in value to repay your debt that has risen in value with accrued interest.

Obviously I could spend the next 18 months saving, by which time I would have a fair sized deposit, but I am keen to buy at the moment while prices are relatively low.

There is nothing in the economic outlook that suggests any significant upward movement in house prices. Quite the opposite. And with most lenders keen to move away from wholesale funding the likelihood of increased availability of mortgage finance driving the market up, as it did in the New Labout years, is pretty low.

In other words, save hard and be patient.

DVardysShadow

Arty-Ziff wrote: »

... Within the next couple of months I will have finished paying off all my credit card/ loan debts which I accrued through university and whilst I was on a lower income for a few years. This means I will have around £800 extra a month, which I intend to save to pay for a deposit.
I currently have around £5000 in a savings account, ....

What are you doing with ~£2400 debt when you have £5000 savings???? It is costing you interest on your credit to have savings.

originalmiscellany

Clear all debts including credit cards, so you have a blank sheet as it were.
Then save like mad.
You bring home pre tax 4.5k a month. Look at the money saving boards to see what you can do to make savings, because you should be able to save at least 2.5k a month for your mortgage. Repeat this for 8 months (Sept 2011) and you will have 20k, plus your 5k = a 25k deposit.

As a word of advice, it is amazing how cheaply you can live when you need to - even a few simple "nips and tucks" could save you a fortune and get you on the property ladder near the end of this year.

All the best

Arty-Ziff

The £5000 is a lump some that I received recently as part of a relocation package through work. It is in an ISA earning 3%. The credit card debt is a 0% balance transfer until may, by which time it will be paid off.

Thanks for the advise everyone. I'd better get saving.
Not sure how any first time buyers are expected to be able to buy a home these days...

beecher2

Arty-Ziff wrote: »

Not sure how any first time buyers are expected to be able to buy a home these days...

By saving - it used to be normal behaviour. You should be able to save more than £800/month on your wage - post a Statement of Affairs on the Debt Free Wannabee forums for help with budgeting.

opinions4u

Arty-Ziff wrote: »

Not sure how any first time buyers are expected to be able to buy a home these days...

By compromising their preferred social life, tightening their belts and saving hard. I had to when I first bought. I suspect it was even tougher for my parents.

100% mortgages have always been the exception rather than the rule, even for first time buyers.

Don't forget the button for those who've helped .

Krider

You could try a government scheme, you qualify as you earn less then £60k and have £5k savings.

Schemes basically sort out the deposit.

My wife, before we were married did hers through moat.co.uk different areas have different websites though.

Arty-Ziff

In fairness though, I earn a fairly high amount, and am lucky enough to be able to save enough for a deposit over the next couple of years. How will somebody earning 20k a year ever be able to afford to buy a home?

I don't need advise on how to save money (although thankful for your input.) I am switched on enough to know that if I don't go on 3 holidays a year then I will have an extra 6k a year in my savings account.
What I wondered was whether or not a mortgage company will take into account an applicants job stability and the fact that they would have no problem making the repayments. It appears the answer is no.

iamana1ias

originalmiscellany wrote: »

.
You bring home pre tax 4.5k a month. Look at the money saving boards to see what you can do to make savings, because you should be able to save at least 2.5k a month for your mortgage.

Post-tax this will be around £3k per month take home. I daresay the OP won't be able to save anything like £2.5k of that!

Arty-Ziff

iamana1ias wrote: »

Post-tax this will be around £3k per month take home. I daresay the OP won't be able to save anything like £2.5k of that!

I actually take home around £2700 a month (by the time student loan has come out).