FTB - How much deposit?

jezebel

As a single person I had originally resigned myself to never getting on the property ladder, but having recently moved back in with parents and started saving I think it is within my grasp. I am saving approx £250 per month for a deposit and have been doing so for a few years now, I've heard that if you have a bigger deposit that you are likely to get a better deal on a mortgage, is this true? Also, how much money should I have for a deposit (remembering of course that I need a couple of thousand for stamp duty, legal fees, surveys etc)?

I'm in the south east so average flat price is £110,000 for one-bed or larger studio. On average salary of £16K what kind of deposit would I need?

Mrs_Optimist

First of all WELL DONE for saving the deposit - it is all too easy to go for a 100% mortgage these days but having a deposit should help you get a better LTV mortgage deal. Carry on saving whilst you are looking and seek the advice of an Independant Financial Advisor to determine how much you can afford to pay in mortgage payments every month. Stamp Duty does not kick in until £125k (then it is 1% up to £250k and 3? % thereafter. On £16k you should easily be able to buy a one or two bed flat. The larger the deposit the less you will have to borrow which means you will save literally thousands of pounds over the term of the mortgage.

Once again - WELL DONE it makes a refreshing change that someone hasn't opted for the easy route!

jezebel

Thanks, I count myself lucky to have parents that let me live at home, I know a lot of other FTB don't have this luxury. My parents can't afford to help me buy a house but they've agreed to let me pay less rent as long as I am saving for my own place!

I've read and heard a lot of stories here about 100% or even 125% mortgages that make me feel better about buying a house!

Mrs_Optimist

Ask around and see if anyone can recommend an Independant Financial Advisor who can get together some figures for you. You will then be in a good position to guage how much a deposit you need. Bear in mind Solicitors costs for the purchase and if you can avoid Stamp Duty that is more money to put towards your own home. Read the Mortgage Free Wannabee (MFW) board and it will really encourage you to carry on saving. try not to overstretch yourself with your purchase budget (I know it is very easy to get carried away but making the right decision now will really, really stand you in good stead over the next few years). if you can afford a 2 bedroom place you may be able to rent a room out (it is you choice but it is nice to have the option) to enable you to make overpayments on the mortgage. The fact that you have saved a deposit really impresses me, I don't know of anyone who has bought recently who has has had single penny to put towards buying a house, either for deposit or conveyancing. They are however constanly moaning about how their monthly mortgage payment is crippling them. You are lucky that your parents have helped you out with the rent - mine did the same thing and although Mr O and I had a very miserable existence for about 18 months of sitting in every weekend counting every penny, it has really helped us in the long run, when we compare ourselves to friends who are mortgaged up to the hilt and had no deposit. There is a overpayment calculator on the MFW which will show you how much you will save on interest if you overpay by even £50 per month. You will be amazed by how much interest you will save. It is a great motivator. I think you will do just fine!

cupid_s

It's important to work out the maximum mortgage you could afford to pay, obviously allowing some room for interest rate changes.

This will let you calculate the mortgage you can afford and hence the deposit you'll need.

This is what me and Mr c_s did. We lived with mommy and daddy c_s for 18 months and saved and saved and we managed to get a 30k deposit towards our house which we bought 2 years ago.

whatnots2015

I am also living with parents and saving up for a house deposit. We are very lucky to have such kind parents who want to support us and have the finances to offer us very cheap bed and board. Make sure your mortgage repayments are within your means; don't go for the absolute maximum you can afford per month, in case other costs rise and you can't do much about them, such as a big council tax rise. This is my concern, after saving for a deposit, that although I can shop around for some things, it is hard to reduce costs in some other areas.

Mrs_pbradley936

If you buy a two bed place you can rent the other room and as long as you do not charge more than £84 per week you do not have to pay tax on it. That will go a long way towards paying your mortgage.

noyk

pbradley936 wrote:

If you buy a two bed place you can rent the other room and as long as you do not charge more than £84 per week you do not have to pay tax on it. That will go a long way towards paying your mortgage.

Dont people buy anymore to HAVE THEIR OWN PLACE. Does it always have to be an investment or a massive struggle, where they need lodgers! It may be a vaguely helpful response for some people, but the majority want their independence.

To OP - save deposit, good for you. Wait a while and search google for house price crash and look on the forums. Your doing well, don't let anyone tell you you need to sacrifice anything.

Robert_Sterling

Mrs_Optimist wrote:

On £16k you should easily be able to buy a one or two bed flat.

The OP was referring to flats costing £110+
Not for nothing do you call yourself Mrs Optimist.
I am thinkink of changing my name to Mr Pessimist or maybe Mr Realist.

Mrs_Optimist

Or maybe that should be grumpy sod!!!

I was trying to be encouraging - it makes a refreshing change for a FTB to actually have saved for a deposit and done a bit of financial leg work prior to buying. I did also suggest that he see a IFA to ensure he can afford what he wants and also give him the idea of maybe renting a room (IF he wants). Just my opinion, don't shoot me down for it!

Alan_M_2

Renting a room out of a 1 bed flat doesn't leave a whole lot for yourself does it. And it's unlikely you'll find many 2 bed places in the South East at less than £140,000.

A £110,000 purchase on a £16K salary, I'd want to see a £46K deposit and a 4x mutiple salary mortage.

Alternatively a 5 x multiple would require a £30K deposit.

You need a larger salary, £16K simply isn't enough.

Very well done for saving, but my advice is keep saving and make every effort to increase your income.

Affording a mortgage is one thing, affording all the associated living and moving expenses around this is another, you just don't earn enough right now.