FTB: Large deposit, some questions

virtualreality_2

Hi everyone, I am a first time buyer who is hoping to buy a house in around 9-12 months time in the region of £130,000. I have saved £105,000 for the deposit, so looking to get a ~20% mortgage of £25,000.

Question 1: Will banks be willing to lend this small (relatively) amount? Do they have a minimum mortgage value (e.g., £50,000).

Question 2: Also, because the term will be smaller (under 10 years), I assume they will be sticking the rate up a couple percent?

Thank you for helping a worried FTB!

vacheron

Usually banks have a minimum value of around 25-30K so you would be right at their limit.

How much do you think your income would allow you to borrow?

Reason for asking is that we had a similar situation where we had a large deposit and only needed a little more on top.

If you don't want to tie up all your savings you could look at getting an offset mortgage for say 90K and putting down a 40K deposit. Then, as soon as the mortage is set up, offset your remaining 65K savings meaning that you are only paying interest on the remaining 25K, plus you have that 65K instantly available for emergencies.

You will also then be able to effectively make unlimited overpayments with no penalty too which sounds like it may be useful considering what you have managed to save.

As it seems that you have saved up the deposit yourself then you may find this approach useful (and well done!). However if someone has been given the deposit or came into it suddenly, this may be a little too much temptation to have permenantly available.

betmunch

1. The most common minimum loan is 25k, but some go below this. 2. You will not get penalised in the interest rate for taking it over a short term.

virtualreality_2

vacheron wrote: »

How much do you think your income would allow you to borrow?

Not that much - only earn around £15,000/year.

vacheron wrote: »

If you don't want to tie up all your savings you could look at getting an offset mortgage for say 90K and putting down a 40K deposit.

Hmm, interesting. I don't know too much about Offset Mortgages, so I'll have to do some research - thanks!

vacheron wrote: »

As it seems that you have saved up the deposit yourself then you may find this approach useful (and well done!). If someone has been given the deposit or came into it suddenly, this may be a little too much temptation to have permenantly available for some though.

Only 26 and saved up the vast majority of it myself (hard slog, meant going without some luxuries!), parents said they shall be giving me a some money towards it which is included in the £105k.

virtualreality_2

betmunch wrote: »

1. The most common minimum loan is 25k, but some go below this. 2. You will get penalised in the interest rate for taking it over a short term.

Thanks, as I suspected. Do you know how "penalised" I would be? E.g., a typical mortgage might be 4%, and I would be charged 6%? Just trying to balance the books so need some starting figures.

betmunch

oh god. Sorry! Thats what I get for going on these site on my phone, I miss words out! You WILL NOT get penalised for taking the mortgage over a short term!!! Sorry!

virtualreality_2

Lovely jubbly! Thanks, betmunch, one less thing to worry about, I suppose!

betmunch

virtualreality wrote: »

Lovely jubbly! Thanks, betmunch, one less thing to worry about, I suppose!

You seem upset that theres not enough to worry about!

southerngirl_2

Well done for saving your deposit! I had no problems at all taking out a mortgage of £16,000 with HSBC last year. I don't know what the rates are like at the moment but I had a variable rate 2.29% above BoE base rate.

betmunch

southerngirl wrote: »

Well done for saving your deposit! I had no problems at all taking out a mortgage of £16,000 with HSBC last year. I don't know what the rates are like at the moment but I had a variable rate 2.29% above BoE base rate.

Do NOT use HSBC for your mortgage, whatever the size! If you dont know why just do a search in the forum. Southerngirl, you would have not had the problems they are experiencing now