5% or 10%

f6100153x

Hey,

me and my girlfriend are in the process of buying our first property. We fell in love with one recently but lost out to another buyer. We waited a while and one luckily 2 doors down came for sale, which is great. However this one hasn't been updated since the 70's so needs re wiring, new kitchen, bathroom ect. The price reflects this as we've got it for £35k cheaper.

We have enough saved up for a 10% deposit but we're now wondering if we should go for a 5% so that we have a chunk of money to get in and do everything that needs doing. We've looked at Natwest calculator (just as an example as that's who we bank with) and the Apr is 4.2% for 5% and 4.1% for 5%. Even doing the 5% deposit we will still be less per month than we're paying to rent in the area.

Also my other thoughts are if we do up the property, hopefully to a better standard than the one 2 doors down so that ours will be valued at similar price, will that reflect the LTV amount? Do you have go get it re-valued by the mortgage lenders?

Thanks in advance everyone

kingstreet

Ignore the APR. That will be skewed by the SVR being 4% for the bulk of the term.

The HTB - MG product will be about 4.5%.

If the property requires improvement, you may find a retention is held until remedial work is done. This may make your purchase difficult if you can't find the extra money to bridge the retention and get the work done after completion.

f6100153x

I'm new to this mortgage stuff and I've never heard of a retention, what sort of thing would course this? I thought the price reflects the value of the property now, with all the work that needs doing and that is what we'll be borrowing.

We do have a bit extra saved up that will hopefully cover the re-wiring, the rest of the jobs are just cosmetic. It's got a new boiler, double glazing, central heating ect

amnblog

Your first issue is whether the property can be mortgaged at all in its current state.


If it can be mortgaged there may be work that the lender wants done before the will release the fund mortgage funds you have requested - they keep the rest back as a retention.


For example:


The property is work £200,000 but needs re-wiring.


Lender say we will lend you £180,000 but will only release £170,000 now, retaining £10,000 to be release once the wiring in replaced.


You then need a 15% deposit to complete the purchase rather than a 10% deposit.


You should engage a mortgage broker to walk you through this situation.

f6100153x

I think the property will be in a state where it can be mortgaged, it's had a new roof couple of years ago and structurally all fine and it is liveable, it's had someone in it up until a month ago. My electrician friend said the wiring is old but not too bad, but when we're ripping everything out we might as well replace so that we don't have to do it in the future and to put sockets where we will need them.

I am going to arrange to see a mortgage advisor, thanks for the help

f6100153x

Still, if there isn't any retention required would you recommend a 5% or 10% deposit. We would have an extra £12k to spend on doing the property up if we did a 5% and it's only £120 a month difference?

stator

What sort of position would you be in with regards to savings on a 90% vs 95% mortgage? If you bought the house and lost your job, how many months could you go before you get another job, living off your savings?

f6100153x

It's a joint application and we could still quite easily afford if either of us lost our jobs, there isn't much chance of that though and my job is quite easy to find another if I do leave, I get phone calls most days from recruitment agencies. We've been offered over twice as much as we're borrowing so it's not like we're maxing out our limits