Nationwide 'Save to buy' 5%

mforcer

So i popped into Nationwide last week to deposit some cash into my savings account, the cashier asked what i was saving for? a Mortgage.

She advised me to open a 'Save to buy' account, and after the minimum term (6 months) and subject to meeting the full criteria, i would be eligible for a 5% mortgage.. which is exactly what i want!

I'm only looking to buy a 60/70,000 home so the deposit i need is quite low at 5%, infact i have this amount now, but the minimum term is 6th months.

I've got the application form and plan on going in tomorrow to get it sorted.. i'm just wondering if there is anything i should know about? is there a catch? a risk? can i lose my money in anyway?

She made the whole thing sound amazing, but thats what they are supposed to do.

My plan is to deposit half of my savings and then slowly increase it over the next 6 month until i have the deposit in this account, plus extra for fee's etc if it gets that far... the lease is up on my rental flat in 6 months so it couldn't be more perfect.. I just dont want to register for something i may regret.

She said i wont be able to withdraw cash unless i close the account, which is fine... as far as i know that is the only condition?

I do have some other questions that i will be asking when i go in, but feel free to answer those for me as well

1. If i close the account, do i lose any money?

2. Does every penny in the account go towards the deposit? eg. if i have 10k in the account, and the deposit is 5k do i get the 5k back to spend on fee's or home improvements? I'd assume they would take the whole lot for the deposit? in which case i'd need a separate amount of money in another account to go towards those things?

3. If i am declined for the 5% mortgage what happens next? Do i lose any money and what happens to the account?

Thanks in advance

beecher2

There's lots here to help you decide
http://www.nationwide.co.uk/savings/limited_access/savetobuy/introduction.htm
There's an ISA too
http://www.nationwide.co.uk/savings/cash_isa/savetobuyisa/introduction.htm

I'd personally think you'd be better saving up a 10% deposit and using an ISA to save, especially as you already have a 5% deposit.

DVardysShadow

mforcer wrote: »

... My plan is to deposit half of my savings and then slowly increase it over the next 6 month until i have the deposit in this account, plus extra for fee's etc if it gets that far... the lease is up on my rental flat in 6 months so it couldn't be more perfect.. I just dont want to register for something i may regret.
....

I do have some other questions that i will be asking when i go in, but feel free to answer those for me as well

1. If i close the account, do i lose any money?

2. Does every penny in the account go towards the deposit? eg. if i have 10k in the account, and the deposit is 5k do i get the 5k back to spend on fee's or home improvements? I'd assume they would take the whole lot for the deposit? in which case i'd need a separate amount of money in another account to go towards those things?

3. If i am declined for the 5% mortgage what happens next? Do i lose any money and what happens to the account?

If your rental is up in 6 months, then you need to start buying in about 2 months. The timing looks far from perfect to me. I suggest you plan to let your rental go periodic and start looking about 2 months before you have the required savings in place.

Actually, I suggest for technical reasons you only think of buying once you have 10% deposit. You will probably get a cheaper mortgage and you will not be so vulnerable to negative equity.

As for the questions on the account, there are no one size fits all answers for accounts in general, it depends on the specifics of your proposed account. Look at the terms and conditions and satisfy yourself as to the answers.

mforcer

This is where i got confused because she also said i could open an ISA, or even open both and split the savings between the 2.

You say i'd be better off saving up 10%, why is this? apart from the obvious reason of putting more on to a deposit and having less to pay off.

I've estimated in the next 6 month i can save another £2000, although it's probably more, this is a minimum, and providing i dont need to make any emergency withdrawls.

This would put me inline for a nice 5% deposit, all the fee's that come with a mortgage, i dont even know what they are but i'm assuming it's well over £1000... and then a bit left over to put towards the house, to meet this target for a 10% deposit i'd be looking at another year which is something i dont want to do... an extra 6 months is more time that something will come up that the money may need to be spent on, in other words it's a commitment i want to get into sooner rather than later.

beecher2

What will you do if something comes up which needs to be paid for, and you don't have any savings?

There's no guarantee you'll get the 95% mortgage - I'd hazard a guess that you'll need to be the most straightforward case possible, ie no blemishes on your credit, etc. With a 90% mortgage you need perfect credit, so they will bevery strict with the 95% ones. You'll pay a higher rate too, I'd imagine - have they told you what the present deals are?

Get copies of your credit files, make sure you've no blemishes and maybe go and see a mortgage adviser to see what your chances are.

mforcer

I've already found a property, it's £65,000 and has been on the market for quite some time, if i didn't have to wait 6 months for the 'save to buy' i'd go for it now so i'm hoping it is still being on the market in 6 months.

beecher2

https://forums.moneysavingexpert.com/discussion/3419761

You say here you probably have a rubbish credit rating and that your partner was rejected for credit, neither of which sounds good.

mforcer

beecher2 wrote: »

What will you do if something comes up which needs to be paid for, and you don't have any savings?

There's no guarantee you'll get the 95% mortgage - I'd hazard a guess that you'll need to be the most straightforward case possible, ie no blemishes on your credit, etc. With a 90% mortgage you need perfect credit, so they will bevery strict with the 95% ones. You'll pay a higher rate too, I'd imagine - have they told you what the present deals are?

Get copies of your credit files, make sure you've no blemishes and maybe go and see a mortgage adviser to see what your chances are.

I just meant for example, my car dies and i've got money in the bank i know i would use some of it to buy another car, setting me back even longer, where as if i didn't have the money in the bank i would just do without for a bit.

i do have a nice income so it's not a major worry... was just an example of why i want to be committed to a mortgage sooner rather than later.

DVardysShadow

mforcer wrote: »

... You say i'd be better off saving up 10%, why is this? apart from the obvious reason of putting more on to a deposit and having less to pay off.

This was answered in the sentence after the one where I suggested 10%.

mforcer

beecher2 wrote: »

https://forums.moneysavingexpert.com/discussion/3419761

You say here you probably have a rubbish credit rating and that your partner was rejected for credit, neither of which sounds good.

this issue is resolved and i have no problems getting credit.

i have no debt apart from a finance payment which is paid monthly on time and always has been.

my partner on the other hand is a concern, she gets rejected for everything such as mobile phones, she has never been in debt in her life, she does have a finance as well which is only £10/month and has never missed a payment, this has been running for 4 years and is due to come to an end in a couple of month, she was advised to get a credit card, she spends £20/month on this and pays it in full every month in an attempt to boost her rating.

It's strange because i have been in debt, and have no issues what so ever.. i went through a period where i was in serious debt with a 2k over draft and a 2k loan, this is all paid off and i turned my finances around in a couple of years.. i'm now well into the green and have very healthy accounts with lots of money coming in every month, i'm in a secure job and also run my own business... so we technically have 3 incomes.

opinions4u

95% mortgages are few and far between.

As such, they are invariably expensive and there's a limited choice of products.

Those with 10%, 15% or even 25% deposits get a much bigger choice of lenders and interest rates.

Your rush to buy now could prove very expensive. Patience and more saving is likely to save you £thousands in the long run.