15% vs 20%

readytofly

Hello moneysavingexperts! My husband and I currently rent a 1 bed property in north London. We're saving for a deposit and we are hoping to buy in 2014/2015. I have worked out we will have enough for a 15%dep on a property valued at 210,000 plus fees to buy next summer. If we continued to save at the same rate until 2015 we would have a 20% deposit.
I am currently the main earner, my hubby is working his way up to a more substantial wage. We will be thinking about babies at around the same time we plan to buy. I just wanted some expert opinions on whether we should stick it out for an extra year in rental property for a larger deposit/Lower mortgage payments or just bite the bullet and buy next year? A quick mortgage calculator on nationwide says we could borrow upto £266,660- although I'd be worried about borrowing quite as much as that! That would also lower out deposit value to 10%. Any hints or tips please?

StuC75

A true Crystal Ball moment. What could happen in those extra 12 months with prices could be anyones guess - if it goes up then its sensible to get in.. if they go down, then waiting extra year could get you even more for money.

More relevent though is what amount to commit to if planning Children and your the main earner\ similar amounts.. Plans can change when children come along so best if not maxing out what can lend to - maybe gauge what could be afforded on One earnings if the other was to be a SAHM\D.. 'just in case' that scenario becomes a possibility..

Cisco001

I am no expert.
Although you have a larger deposit, the house price could go up at the same time.
And put it another way, do you want to pay the bank for your own mortgage or pay your landlord rent such that they can pay their mortgage?

dtsazza

Have a look at how your rent payments would compare to the interest on a mortgage. I suspect you would be worse off renting for an additional year and then taking a mortgage at a better rate (due to 80% LTV), than you would be taking a mortgage in summer at 85% LTV.

Bear in mind that if you take out a mortgage with a higher initial rate, you can remortgage to an 80% LTV rate once you've saved up the deposit. And in fact you'd probably be saving up the extra 5% faster if your interest payments are lower than renting.

Plus if you're able to save £10,000 a year, it doesn't sound like there's any question over your ability to meet repayments. Given that interest rates are at an all-time low now, and can only really go up, I'd say that your best option is likely to be to make hay while the sun shines. If you're decided on buying your own place at some point in the near future, sooner is very likely to be better.

readytofly

Thank you for all your response they have been helpful. I had no idea that the remortgaging the LTV was an option so thanks for that tip I will research that a little more.