Skipton BS, credit check scores? Please help

callmechar

To get a half decent rate we would need 20% deposit, which is approx £30 - £35k. This would take us YEARS to save for. In meantime paying £825 a month in rent, £10k a year. A higher interest rate now is not such a bad thing, another 3 years renting is £30k dead money. I do get your point, thank you for your advice though

Henry_P_Chester

callmechar wrote: »

Thank you. For us the benefits as you mention far outweigh maintenance costs. We will save for repairs etc but generally speaking what is there to do? We will get cover for the boiler etc and we will put money aside for repairs £100 a month, and also save other money for holidays etc and save money for anything else (hopefully some overpayments to get us a better deal when 2 yr fixed rate ends)

I'm not saying don't buy, I'm saying don't buy with such a poor value product. If you can save up 15% or even 10% the rates are much better and you're repayments will be lower.

Also it will only take a small drop in house prices over the next two years, which is not unlikely, and you wont be able to remortgage and you will be stuck on a very unfavourable SVR.

callmechar

Thanks...I think a drop around here where we live will be unlikely (south east). We are saving every penny at the moment, but not sure we will have 10% - we have more than 5 but not yet 10%. We will hopefully overpay and get down to a 90% in first 2 years, in which case after 2 year fixed rate ends we can get a better deal then. Surely thats better than waiting another 2 years?

DVardysShadow

callmechar wrote: »

We will hopefully overpay and get down to a 90% in first 2 years, in which case after 2 year fixed rate ends we can get a better deal then. Surely thats better than waiting another 2 years?

Your supposition is far from a certain fact.

I am a committed home owner. But we made a decision to rent in 2007 and bought again in 2009. Our rent was paid for by the interest on the proceeds of the house sale over the 2 years. We sold high and bought low. We are between £30000 and £50000 better off, depending on how you work it out.

Your plan to buy and overpay so you can remortgage at 90% could become totally unstuck if house prices drop over the 2 years. Whereas if you stayed paying some landlord's mortgage and saving at the same rate as you would in your own house, you might reach the 90% sooner than you think if house prices drop. Renting would be the route to a better mortgage deal which could be unavailable if you buy.

callmechar

Renting means we can't save as much as we want. Prices are fairly stable where we are.

Renting is so unstable. If we have to move again if landlord does not renew then this will affect our credit rating.

callmechar

If we continue renting then its even later in life until its paid off

WillF_2

Henry_P_Chester wrote: »

You are missing my point. I'm saying the OP would be wasting more money by buying with a 95% mortgage. As I said by saving a larger deposit now will save the OP a small fortune in the long term.

And now we've gone full circle.

My original point was to contest your statement that:

"I think youll find that the extortionate interest rate on a 95% mortage is much more wasted money than your rent is."

This statement was made on a series of assumptions.

We now know that the OP's rent is currently £825 and we now know that the OP is looking to borrow £160k at 6% would would be at a cost of ~£800pm in interest over the initial fixed rate period.

The real difference in cost is therefore negligible, even if you factor in your argument around maintenance costs.

Now let's look at your argument where you assume the OP will be better off saving for a bigger deposit and get a better LTV.

We can assume that the OP is looking at a property worth £168k and currently has an £8400 deposit (5%).

The OP currently has a surplus of £500pm, so if this is saved every month, it will take another 17 months for the OP to achieve a 10% deposit.

During this period OP has "lost" £14k in rent payments

If the OP takes the 6% 2 year fix from Skipton today, the total cost over 2 years is £28,441.32.

If the OP waits 17 months until they have 90% LTV, the best rate on moneysupermarket.com returns a total cost of £19,924.12 over the 2 year period - but we also have to factor in the additional £14k that the OP spent on rent during the 17 month wait, bringing the total to £33,924.12. A total of ~£5k more "lost" on interest/rent.

It starts to get difficult to calculate after that because we don't have a crystal ball. we don't know which way house prices will go, and we don't know what interest rates will be available.

Either way, if the OP is prudent and gets a good price on the house and makes some good overpayments, it is likely that the difference in total cost of taking the mortgage now or renting and waiting is negligible, and not extortionate or a "small fortune" like you originally claimed.

Due to other factors, I'm not necessarily saying that the OP should buy now, I was simply disputing your statement

GMS

'Rent is dead money' is a term often used. The statement is true and false with arguments debated in this thread.

'Save a bigger deposit' is very often used on this forum. Easier said than done when somebody is currently paying rent at an equivalent or higher price than a mortgage would be.

If the OP is happy to borrow the amount required at the rate offered then why should they be told not to? The risk is predominantly with the lender at 95% so the rate will reflect this. After a few years they may be in a position to reduce the rate. Of course rates are historically low at present so even if the LTV reduced there could be a situation where the rates for a 85/90% mortgage would be similar to the rate of the 95% of today.

Ultimately if the property is affordable and all risks undestood then why not go for it?

The 'extortionate' rates look remarkably low compared to rates of the past.

Thrugelmir

GMS wrote: »

The risk is predominantly with the lender at 95% so the rate will reflect this.

The real risk is with the borrower, as the lender just absorb the loss. Whereas the borrower is left literally with nothing.

GMS

Thrugelmir wrote: »

The real risk is with the borrower, as the lender just absorb the loss. Whereas the borrower is left literally with nothing.

Mortgage equal to rent payment means the borrower will need to pay rent or the mortgage. Chances are they will pay the mortgage rather than rent as they have made a calculated decision to purchase a property.

Lender has little room for margin at 95% and any repo will almost certainly result in a sale at less than mortgage and costs.

If the worst were to happen the mortgagor would indeed end up with nothing but the lender could end up with a loss, for which the mortgagor could be pursued but no guarantee for the lender of repayment.