Buy now with 5% deposit or wait?

Bella_doll

My husband and I have been renting together for the last two and a half years, during which we have saved to pay for our wedding, about £7000, and are now saving for a house deposit. We currently have just under £13,000.
We had always said we would try to get a 10% deposit saved before buying but I've started to wonder otherwise. We have our savings in Nationwide's Save to Buy scheme and they do offer 95% mortgages. Looking at what we would need to borrow, the repayments on 90% and 95% differ by £170.
If we wait for another year them that is a years worth of rent payments effectively down the drain, 12 lots of £675.
This is a very long winded way of asking your valued opinions on whether we should sit tight and save, or go with 5% deposit. We know we can easily afford the 95% repayments as some months we have saved £900, the least we've saved is probably £400.
Just to mention that we are looking at houses around the £165,000 mark.

Bella_doll

Anyone?! A bit more info, we earn around 60k between us and are in our early 30s.

Ciderarmy1987

people like to talk about rent being "wasted money" but remember that interest on your debt is also wasted money. I think a good thing to do is to compare rent payments with interest payments. If interest is lower than rent then it is "cheaper" to buy

But remember that you do have to fact in the fact that you are now going to be liable for all repairs etc on your new property so make sure you fact this into any budget that you do.

If you haven't already I would make a spreadsheet detailing all of your expected income and outgoings and see how much you will have left over each month.

Bella_doll

Thank you for your reply.
I've been documenting our outgoings on spreadsheets for years! Both the 90% and 95% mortgage repayments are more expensive than our current rent, but the house we live in is smaller than what we are looking to buy. Even with the larger payment we could still have a few hundred left each month.

Ciderarmy1987

Mortgage repayments or interest payments.

also £170 extra a month seems like ALOT more! what is the difference if rate?

stevieboy248

Bella
The only disadvantage to getting a 95% mortgage is that you will pay higher interest rates and therefore higher monthly repayments. But if you see the property you like then go for it. More than likely you will be on a fixed rate of about 6% ish for a few years but then it should go down to the lenders variable standard rate which should be quite a bit less in your case.

OddballJamie

Another angle is a 5% deposit will leave you closer to failing into negative equality.

Bella_doll

Interest rates on 5% seem to be 4.6% compared to 4.2% with ten percent.
Seem to be a lot of pros and cons to weigh up.

Ciderarmy1987

Bella_doll wrote: »

Interest rates on 5% seem to be 4.6% compared to 4.2% with ten percent.
Seem to be a lot of pros and cons to weigh up.

What types of mortgages are these?

Also what type of property are you buying? If you are looking at flat some lenders can be difficult.

One last things, on a 95% mortgage you have to have an almost perfect credit record and pretty secure jobs etc

OddballJamie

£170 difference seems quite high between £157,000 at 4.6% and £149,000 at 4.2%. Are you certain that's right?

As you are only £3,000 or so off the £165,000, I would be trying to get the 90% LTV deal. The other option is take the 95% on fixed for a couple of years and over pay to bring you down to 90% when to come to get a better deal.

Ciderarmy1987

OddballJamie wrote: »

£170 difference seems quite high between £157,000 at 4.6% and £149,000 at 4.2%. Are you certain that's right?

As you are only £3,000 or so off the £165,000, I would be trying to get the 90% LTV deal. The other option is take the 95% on fixed for a couple of years and over pay to bring you down to 90% when to come to get a better deal.

Remember that they will need 3-3.5k to cover fees and stamp duty as well though. So in reality they need almost 20K