Mortgage deposit while renting.

Sweet_Potato

Hi there.

We are looking towards our future and wish to buy our first home in the next few years, currently paying off our dept with every penny we can chuck at it and hope to be dept free within 6 months and then save for a deposit for a mortgage.

Just like some advice on the best way or most cost affective way moving forward.

We are currently renting at £400 per month. Do we save up for a 5% deposit and then look at getting a mortgage. This would seem the best as we can use the £400 towards a mortgage rather than a land lord or do we keep on renting and save for a considerable higher deposit in the 30% - 40% range and hopefully get a better deal? Just seems more expensive saving for a high deposit over a few years while paying £400 a month into someone else's pocket.

We both work full time and have a combined income of 45k that will be going up in the next few years. This is not including extra moneys from my self employed business ventures.

Any advice appreciated.

zarf2007

Sweet_Potato wrote: »

Hi there.

We are looking towards our future and wish to buy our first home in the next few years, currently paying off our dept with every penny we can chuck at it and hope to be dept free within 6 months and then save for a deposit for a mortgage.

Just like some advice on the best way or most cost affective way moving forward.

We are currently renting at £400 per month. Do we save up for a 5% deposit and then look at getting a mortgage. This would seem the best as we can use the £400 towards a mortgage rather than a land lord or do we keep on renting and save for a considerable higher deposit in the 30% - 40% range and hopefully get a better deal? Just seems more expensive saving for a high deposit over a few years while paying £400 a month into someone else's pocket.

We both work full time and have a combined income of 45k that will be going up in the next few years. This is not including extra moneys from my self employed business ventures.

Any advice appreciated.

10-15% deposit will give you access to better mortgage rates than 5%. Also don't forget stamp duty & fees.

Sweet_Potato

Thanks for the reply zarf2007. So even saving for another 12 months to get a higher deposit while having to pay £4800 in rent for that period will save me more in the long run by getting a possible better deal on a higher deposit?

pjcox2005

There isn't going to be a certain answer on this as it will depend on your circumstances.

For example, if you brought a house for 150k at a 4% mortgage rate, then you'll be paying £500 in interest a month. So renting at £400, would allow you to save/pay capital faster.

However, this may mean you're not in a house you prefer, and would miss out during the period if that house went up in value.

Likewise you may want to consider the rates, interest on 95% mortgages I'd imagine would be a couple of percentage higher than 75% mortgages. So 2% on a £200k mortgage would be an extra £300 or so of interest a month.

I think you just have to try and do the maths as best as possible and then work out what you are comfortable with e.g. if you buy with 5% deposit, are you comfortable having no savings straight after buying a property?

Sweet_Potato

Thanks for the feedback. We will probably look at a 100k to 130k house. We will also save for all the associated fees in addition to the deposit and will also ensure some savings to cover all bills etc for 3 months at least before taking the plunge.

Thanks.