Loan to pay for a mortgage deposit

daniels070

Hi everyone,

I am pretty new to this and I need some advice which I hope you can help me with!

I am a 23 year old in full time work earning £27k p/a, I am currently renting which is costing me upwards of £900 a month and therefore not enough money left at the end to save for a mortgage deposit.

My current tenancy runs out in May 2015 and I'd really like to get onto the property ladder as soon as possible. I have found some new builds in London for around £250,000. With the Govs. equity loan I would only need to put up a 5% deposit, I have £2,000 saved already and would need a loan of £10,000.

Would you think this is a wise move? I just don't know how I will get myself onto the property ladder without wasting money on rent for years and only being able to save minimal amounts.

Any advice you can give would be really useful - if I am being unrealistic then please say

Thanks a bunch in advance for your help!

Jane

amnblog

On the government scheme you need 5% of your own funds cash - a gift from family is OK, but lending wont do it.

kingstreet

£27k income will get you a mortgage of £135k maximum. You would need £190k for your proposition.

Once you factor in the loan payments and the notional cost of the equity loan (3%) plus any ground rent & service charges, what you can borrow will fall dramatically.

Then, you will struggle with the HCA affordability calculator for the equity loan, which only goes upto 4.5x income, uses a mortgage rate of 4.8% and only allows a debt to household income ratio of 45%.

It ain't going to be affordable I'm afraid, even if you could get a lender to believe the loan wasn't for your deposit.

Newme2014

Could you rent somewhere cheaper to give you more to put into savings?

Also, on 27k a year with basically no deposit you should be looking at much cheaper properties!

Gentoo365

Unfortunately there is no magic solution except to save for a deposit. This is a problem that affects many young people and the reason why the average age of a first time buyer is increasing.

Most people that do manage it while in their 20's either have help from their parents, or are buying with a partner.

Sorry if that is not helpful, but at least it puts things in context. Note that not many 23 year olds can afford their own property.

amnblog

Worth noting that a 25 year mortgage on a £250,000 equity loan purchase is going to cost as much as your rent anyway.


By the time you factor in the equity loan and other lending and ownership costs you will be worst off each month, even if you could afford it.

daniels070

I knew I was being too ambitious! Where is a lottery win when you need one?!

Thank you for your replies

Thrugelmir

Keep saving for the long term. You never know when the funds may come in handy.