Advantages of a large deposit?

nash0819

Hi, first-time poster here. I hope to be a first-time buyer soon and am about to go hunting for brokers to arrange my mortgage. I want to buy a property for approx £235K and have just inder £70K in savings.

My monthly income is £2600. If interest rates rise, I could probably afford to put 50% of that towards a mortgage but would aim for 40% to start with. I have no family/child support financial committments to burden me.

I expect I will need a 25 year mortgage as I am a rather late first-time buyer - almost 40 - and I have no plans to retire early. I am leaning towards a 5-year fixed rate mortgage, if any are still out there. My gut feeling is that there is too much financial instability around and I know that mortgage rates are historically still very low.

My main concern however is how much of my savings I should use as a deposit. If I go 4 times salary, I would need to put £50K of my savings in and I worry that maybe that's too large a deposit. I would want a medium (or lower) risk on any investments made on the remainder of my savings.

Given my circumstances, should I aim for a larger mortgage and invest the rest of my savings elsewhere? Or should I use a large deposit to get a better mortgage deal and, if so, what benefits can I get from it?

MortgageMamma

IMO you should always keep some savings, at least 6 months salary readily accessible.

As for the mortgage, when you find a broker you wish to use he or she will be able to advise you of the options. you could ask for some comparison research to be done, i.e. to see if there is much difference rate/product wise for a 90% mortgage as opposed to say an 85% one

herbiesjp

By putting down a higher deposit, mean you are borrowing less and therfore income multiples are lower. This will bring into play more lenders when a broker does the research for you.

However you do no want to, very wisely, put all your eggs in the one basket and hold back a nice chunk of your savings.

I think you are in a very fortunate position, in having a good income, and also a good deposit.
As suggested, I think discussing this with your adviser would be good, so you could look at the various options, and see what difference it makes on the lenders available, the rates they are offering, and the monthly affordability to you

As for no or low risk options for the balance, you would be looking at deposit accounts offering a good rate of return
Whereabouts in London are you looking at?

JoeK_3

nash0819, is your monthly income of £2600 gross or net?

JoeK

nash0819

JoeK wrote: »

nash0819, is your monthly income of £2600 gross or net?

JoeK

Thanks for the advice so far people. My income is net, thankfully! I'm looking to buy in N12/N20/NW7.

herbiesjp

I know N12 and N20 really well - I live in finchley
If you have any questions on the areas tehn fire away

What is the gross income figure as lenders work on gross income?

nash0819

My gross salary is just under £46K.

I've been looking for a 2-bed around Woodside Park or maybe a bit further SW towards Finchley Central or E towards Friern Barnet. I have just started looking at NW7 since it seems to be slightly cheaper there but still nice.

I would like a 2-bed flat, with a small garden if possible but that's not a deal breaker. I just lost out on a nice ex-council 3-bed in NW7 because I wouldn't go over £240K. There were already 2 offers on the asking price and one over the asking price, I was told. It was the first place I saw in Mill Hill East and I didn't want to stretch myself on price on an area I hadn't researched the prices for properly.

herbiesjp

All nice areas - it looks like you are looking at your transport links i.e. along the Northern Line, so that may mean the prices you are looking at being a little bit higher due to the location

Loads of amenities etc in each area, so that should not be a problem. I think it will be a case of trying to find "the one" that is offering the best to you in terms of what you are looking for, like the small garden

Have you registered with many agents?

nash0819

Being near a tube is good but not the be-all and end-all. I don't work in the middle of town and I travel to work via bus (or cycle) so being near good bus connections is important. A tube is very handy however. I had not been planning to look there but I was quite taken by the little area around Mill Hill East. Lots of greenery, a useful little selection of shops around the roundabout (and two pubs!), a Waitrose, a gym and the local people were actually friendly when I asked for directions!

I have registered with about 10 different agents, only a couple of which have got back to me. Bairstow Eves are quite good at sending out new details by e-mail but I get very few phone calls. I did a mass visit of estate agents over two days I had off work, a month ago or so. I may actually repeat that and go in and remind them that I exist; also I now know much better what I want.

If I don't get a call when the property goes on the market then, by the time it goes up on Rightmove, it's almost sold. It definitely appears to be a seller's market right now.

nash0819

I can recommend to anyone trying to organise a mortgage in an effective manner that they NOT do so via London & Country since they are a bunch of clowns. My experience with them has been awful and may well lose me the property I want.

I placed an offer on a property last Friday, at the same time as contacting L&C via phone, their only contact method. The mortgage advisor was very keen that I get a credit report from Experian (or similiar) after I told him I had missed one credit card payment in the last 24 months. I expressed upon the advisor that I had excellent credit otherwise and wanted a quick arrangement; nevertheless I agreed to try and organise the credit report over the weekend.

Lunchtime Monday, I went back to the L&C broker and said I wanted to get a quote regardless of credit reports. He agreed to do so after a lot of prompting. I stressed that I was eager to organise a mortgage "in principle" as soon as possible so that my offer would be accepted by the seller of the property. I finally got a recommendation and quote via e-mail on Tuesday night after several delayed exchanges of information.

At this point, I decided to visit another broker, picked on a personal recommendation from a work colleague. They provided several good quotes but none that was quite as good as the one provided by L&C. After a long exchange of information, the broker finally had all the info he needed at lunchtime Wednesday. Later that afternoon, I chased him and was told that I would be contacted when my application had been processed. During the above, I had stressed several times that I wanted a mortgage agreed "in principle" quickly if at all possible.

That evening (Wednesday), I gave the estate agents the number of my broker and vice versa and sat back for half a day thinking they would sort each other out.

I rang the L&C broker on Thursday afternoon and got an ansaphone message to say he was out of the office and not back until Monday. I immediately got in touch with one of his colleagues who promised to advance my case. About an hour later he came back to say that the mortgage I had been recommended to take required a paper application and could not be processed online and therefore I would have to fill out such a form and send it to L&C who would then send it to the mortgage lender.

At this point, I, perhaps somewhat belatedly, realised I was dealing with a bunch of clowns in London & Country. I should mention that, within the above timescale, there were several three or four business hour gaps where the broker made no attempt to contact me and, when finally contacted, complained of being too busy to respond. After almost one whole business week of asking L&C to organise a mortgage in principle, I have got precisely nowhere! This trail of incompetence frankly astounds me.

So now I am "agreeing in principle" my 2nd choice mortgage through the work-colleague-recommended broker, hopefully tomorrow morning and hopefully my seller will not have dropped my offer in the interim (personally I would not blame him if he did so).

herbiesjp

What was your first choice deal? Why can't your broker get that deal - is it an exclusive with L&C?

Is the broker whole of market?