use all savings for mortgage?

Fraggy_Muffin

hi, i'm 25 and have been patiently saving and still live at home. I'm proud to say i've managed to save 23k on my own, i finish uni this year and i'm looking to move out and buy my own place.

the question is should i use all my money for deposit? (minus furnishing and set up). obviously it will be horrible for me to lose all my capital, the interest i'm getting ect

i'm looking for advice, what would you recommend?

Newme2014

Personally I'd say keep some back for emergencies. I was kind of lucky that my buying process took so long that I managed to move back to my parents for a few months and save up my emergency fund but originally I did throw everything apart from moving/legal costs at the mortgage and until I'd built up that safety net I felt quite vulnerable

Fraggy_Muffin

see i wouldn't mind paying an extra £50 a month if i had a bit more financial freedom. I don't really want to be in the situation where i've saved for so long and move out and be broke. Is it a wiser decision paying more for less payments though i don't know

Newme2014

You're better off having a lower monthly payment then overpaying if you have a bit extra so that would mean putting as much into the deposit as you can BUT if you don't keep a buffer and then something happens when you move in (forgotten expenditure, car breaks down, etc) you'll find yourself in a mess. It's a fine line. Have you looked at property prices, mortgages available, legal costs, etc to get an idea of costs?

Fraggy_Muffin

anybody else have some input?

Fraggy_Muffin

@newme2014 I've had a very brief look at houses and mortgages. I plan on buying a 1 bed in the local market there are some really nice ones for 50-60k. a quick mortgage calculator says the amount i want to borrow would cost me 200PCM (that was leaving 8k in my bank)

pinkteapot

Write a list of all the initial costs - the fees for buying a property (stamp duty, solicitor, mortgage application fee, removals, etc) as well as the items you need to buy (white goods, furniture, etc). That's your 'moving' budget.

On top of that, I would definitely keep *something* back. What if you move in and the boiler breaks down the next day and needs replacing? That's an extreme scenario, but house maintenance does cost money and you can't guarantee you won't have to do some work in the first few months. If you can, I would keep say £2k back as an emergency fund.

If possible, it's often recommended that you have at least three months of living costs in savings (preferably six) - total of mortgage, bills and food - in case of job loss, ill health, etc. A lot of people don't manage this in their first home but if you can it's some peace of mind.

Savings minus initial costs and emergency fund = deposit.

Agree with the poster above re minimising your monthly repayment and then overpaying if you have spare cash. You're obviously disciplined enough to save so you'll be disciplined enough to overpay when you can. See this thread from today:
https://forums.moneysavingexpert.com/discussion/5211503

Finally, you're finishing uni this year - do you have a job lined up yet? Some mortgage lenders aren't keen on new jobs and will want you to be past your probationary period before you can apply, but a broker will help you find suitable lenders if you are in a new job.

kingstreet

Wait and see what your income is, what you might find purchase-price wise and what your loan to value might be?

There's no point planning anything now as you might end up accidentally picking a deposit which gives you an 86% mortgage at a higher rate than you would have got if you'd got to 85% or just under.

You're going to have legal costs, mortgage costs, possibly stamp duty to pay so wait until you have all the facts in front of you and decide from there.

Rollinghills

I'd start off by thinking about what house you could afford at what LTV. A lower LTV gets you a better rate. But once you are at say 90% LTV the rate won't improve until you go down to 85% or 80% LTV depending on lender. So if you can't go down to 85% it makes sense to stay at 90% (and not 86-89%). Obviously this is just an example.

You may not want to give up your savings but I suppose you also want a nice property - there is a trade-off there and only you can decide what works for you.

You should also have some money for emergencies as well as legal / moving costs.

Fraggy_Muffin

i have no job lined up. I have been working throughout my degree 25 hrs pw for the first 2 years and 16 for this final year. I left 3 weeks ago though because i just felt so stressed and needed to take some load off.

Rollinghills

You will not get a mortgage unless you have a job / regular income. But you have done very well to have saved so much, most people graduate with lots of debt. So you are well placed for the future.