Mortgage Guarantee or not?

drex · 5 January 2015 at 4:44PM

Hey,

I should soon be in the position to buy my first property. The flat I am after is on the market for around 140K, but I believe I will be able to get an offer of 135K accepted.

I have roughly 16K saved up, so this would easily get me a 90% mortgage, but would only leave me with 2.5K for legal fees / arrangement costs etc, plus obviously furnishings.

Given that this may make it difficult to get everything up and running at first, I was looking into the Mortgage Guarantee option (it's not a new-build). 5% deposit would be £6750, leaving me more than enough for all the other costs, but then the mortgage repayments would be higher etc.

Since (I guess) it is harder to obtain a mortgage guarantee loan because of the amount of lenders offering them, would it just be better to take the first option rather than leaving myself with higher repayments, or is it worth putting a bigger deposit down (perhaps 10K) and still taking advantage of the mortgage guarantee?

First, I'm not sure if that's allowed with the mortgage guarantee, and secondly, I've heard it's best to keep to 5% increments in terms of deposits.

Any advice welcome,

thanks in advance.

amnblog · 5 January 2015 at 4:55PM

Put down 10% if you can as you have more chance of lending and will get a lower pay rate.

drex · 5 January 2015 at 5:01PM

Thanks amnblog - I may just wait a couple of months, see if I can build up another 1/2K and go from there.

stator · 5 January 2015 at 5:25PM

£2.5k isn't much at all for fees + moving costs. You may find yourself with nothing left at all. Get mortgage quotes for both 90% and 95% and see what the real difference is.