Nationwide Save to Buy savings account and FTB advice please

seriousDFW

I'm thinking about buying my first property within the next couple of years (I'm 28). Once debt-free OH and I are only just starting to save for a deposit. We are going to start saving in about July for a deposit and will have about £1200 pm to pay into the deposit fund.

I've been reading about the Natwest Save to Buy savings account which gives the opportunity to apply for a 95% mortgage if you have saved with them for at least 6 months.

Info here: http://www.nationwide.co.uk/savings/limited_access/savetobuy/introduction.htm

This seems a really good scheme to me and so I'm thinking of setting one up, and paying £50 in until debt-free then putting in all of our spare cash.

The way I see it, if we want a 95% mortgage because we will have the option, or we could just keep saving until we've got a bigger deposit. Does anyone have any opinions or experience of this account - any potential pitfalls before I start pouring any spare cash into it? I know I could get a better rate (only marginally better) in a normal savings account with a 12-month bonus somewhere, but is the option of the 95% mortgage worth the lower interest rate?

Also, while I am aware 95% mortgages make it more likely to fall into negative equity, we may be in a position in the next 12-18 months where we have to move out of our current rented place and it would be in some ways better to move straight to the house we buy rather than another rented place inbetween.

Another question for naive FTB: how much money will we need to have saved for additional costs (solicitors' fees etc) in addition to the deposit? I realise this could vary but a ball-park figure would be useful.

Also useful would be some idea of how much money one needs in an emergency fund for a house. We have always rented so any breakdowns have been someone else's financial responsibility! I want to make sure that when we move we have enough saved up to cover emergencies, and know how much each month I would need to allocate to cover such events.

While all mortgage calculators we put our salaries into say we could borrow up to about £250k we don't want anywhere near this as repayments would be high and we'd have to save way more for even 5 or 10% deposit. So we're looking at properties around the £150k mark, meaning we could have savied 5% by this time next year, and 10% by 18 months' time.

Any opinions would be great - this is the first thing I've seen that will be helpful to FTB as opposed to the shared equity/ownership schemes for new-build properties).

kingstreet

The pitfall is you save with Nationwide, then they turn you down when you apply. There is too little money available for the amount of high loan to value business out there.

Saving a bigger deposit (10%+) will significantly improve your chances of a successful application by increasing the number of lenders available to you. This will also impact on the quality of the rate you can get, reducing your mortgage costs. Avoid 95% if you possibly can.

johnboyinsole

Hi seriousDFW,

I was in a similar position until recently. I opened the buy to save savings account and stuck all my savings in it so that I would be eligible for the maximum £1000 cash back (if you save £10k or more when applying for the mortgage). The upside is that after 6 months you can apply for the mortgage and if you put in the full £10k, then it's a very quick way of making £1000! However just be careful not to withdraw or miss a monthly payment because then you wouldn't be eligible for the cash.
When I was about to apply, I found I had enough to meet an 85% LTV. The only problem is, the save to buy scheme will only allow you to apply for any mortgage product that is 85.01% LTV or more, meaning the interest rate isn't great. After I worked out the difference, it was actually cheaper to go with one of their normal mortgages at a lower interest rate, even if you do include the £1000 cashback. In fact, the £1000 bonus is all gone after I have made 14 repayments. As already mentioned (and Nationwide explicitly told me this too), you're not guaranteed to get the mortgage even if you save in their scheme.
However, if it's more important to have enough money left over after buying a house so you can renovate for example, then this scheme may be for you. But essentially its a earn the money now and pay for it later.

kazd

The other thing to bear in mind is if you are currently in debt, have you affected your credit file. If you have that will also make it difficult for you to get a mortgage with a decent rate.

I agree with other posters, save a larger deposit if you can, it does not look like prices are going to rise anytime soon.

seriousDFW

Thanks for the responses guys. That has really helped - the more I think about it, the more I don't want to have to pay extortionate interest rates for having a high LTV, so saving for a bit longer is probably what I'll do. Just worried house prices are going to shoot up, and if so obviously the 95% mortgage sooner looks more attractive.

While I'm in debt I haven't got any adverse info on credit files - never missed payments and have always been able to get mainstream credit (just transferred remaining debt to first direct and Nationwide 0% credit cards). Is this what you meant kazd? As soon as debt-free I will be saving madly for deposit but don't want to sign up for something that is a bad deal just to get on property ladder.