5 Ways to reduce your mortgage payments ?, for a NEW property/new mortgage

somethingcorporate

Cheaper mortgage repayments via IO are pointless if you have no way to pay back the capital borrowed you may as well be renting and let someone else worry about the costs of keeping the property well maintained.

If you cannot understand how IO works I guess you are the one lacking common sense. LOL.

gemmaking

Everyine is learning,

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lovinituk

Has the OPs child taken control of the forum account?!

JimmyTheWig

kingstreet wrote: »

2) a lower deposit means a bigger mortgage, a higher rate and higher payments

But you could use that money to pay some of the payments in the short term.

E.g.
Property price: £100,000
Savings: £20,000
Mortgage: £80,000
Interest rate: 4.0%
Monthly repayments: £422

Alternatively...
Property price: £100,000
Savings: £20,000
Mortgage: £90,000
Interest rate: 4.0%
Monthly repayments: £475
Withdrawn from savings each month: £179
Monthly money required for mortgage: £296
Savings will last: 5 years

[I'm assuming the same interest rate despite the difference in LTV, but even with an increase the plan could be made to work if necessary.]

Hopefully after those 5 years the OP will have had pay increases, etc, and be able to afford the mortgage repayments without using savings.

But note that this is NOT a money saving plan. Would be much better to wait until you can afford the repayments.

kingstreet

JimmyTheWig wrote: »

But you could use that money to pay some of the payments in the short term.

E.g.
Property price: £100,000
Savings: £20,000
Mortgage: £80,000
Interest rate: 4.0%
Monthly repayments: £422

Alternatively...
Property price: £100,000
Savings: £20,000
Mortgage: £90,000
Interest rate: 4.0%
Monthly repayments: £475
Withdrawn from savings each month: £179
Monthly money required for mortgage: £296
Savings will last: 5 years

[I'm assuming the same interest rate despite the difference in LTV, but even with an increase the plan could be made to work if necessary.]

Hopefully after those 5 years the OP will have had pay increases, etc, and be able to afford the mortgage repayments without using savings.

But note that this is NOT a money saving plan. Would be much better to wait until you can afford the repayments.

Same rate for an 80% mortgage as for 90%?

JimmyTheWig

OP, another option that you overlooked is a mortgage that lasts more than 25 years.
Again, it's generally a bad plan but certainly better (and more likely, I believe) than interest only.


I think these measures are only generally worth doing when house prices are shooting up.
I bought my first flat in January 2000, based on a valuation in September 1999.
I didn't have any deposit to speak of and I paid through the nose because of this.
By April 2000 (just three months after moving in) the rise in house price meant that I had "made back" the money I "wasted" by not having enough deposit.
While I wasn't expecting the increase to be that sharp, I was pretty much convinced that prices were, at least for the short term, going up and so it was worth paying through the nose to get on to the ladder.
Today is not the same as back then. Prices are pretty much going nowhere (some months they are up, other months they are down, some places are up, other places are down) so I see no reason to cripple yourself with a debt to buy an asset that won't necessarily be appreciating.

JimmyTheWig

kingstreet wrote: »

Same rate for an 80% mortgage as for 90%?

Ok, make it 4.4% for the 90% mortgage.
Repayments of £495.
Means cash required each month is £316.
Still significantly more affordable than £422 for the 80%.

Also note, OP, that a mortgage company wouldn't allow you to do this in terms of their affordability calculations. You'd have to be able to show that you could afford the repayments (on paper, at least) from income rather than capital.

So, in effect, you'd be using your savings for those first 5 years as unnecessary spending money.

droiderm

I don't understand the concept of people saying don't buy a house unless you have a "big enough deposit" which I can only assume you can have better rates, and possibly not fall into negative equity.

If it was an investment, I could understand that.

But, if it's somewhere for you live then I don't see the issue of buying a home with as little as deposit as you can get away with.

FTBs will want a home one day , why wait if you don't have to?

You could always take it to the extreme from a frugal perspective - save up until you don't need a mortgage.

gemmaking

droiderm wrote: »

But, if it's somewhere for you live then I don't see the issue of buying a home with as little as deposit as you can get away with.

FTBs will want a home one day , why wait if you don't have to?

the higher the deposit %
= the lower the interest rate
= the Lower the monthly payments

or doesn't it make that much of a difference these days ?

droiderm wrote: »

But, if it's somewhere for you live then I don't see the issue of buying a home with as little as deposit as you can get away with.

because monthly payments will be higher.

Thrugelmir

droiderm wrote: »

But, if it's somewhere for you live then I don't see the issue of buying a home with as little as deposit as you can get away with.

Life is full of ups and downs. Relationships, health, job security, burden of dependents etc

The sounder the foundations the more likely that difficulties can be overcome.