Should we squeeze to 15% deposit?

Afternoonteepee

Offer has been accepted on our first house purchase :j

We can afford 10% deposit easily which leaves some money left over for renovation work we are set on doing within 2 years (knocking through a wall, redoing kitchen).

We could squeeze to putting down a 15% deposit, by borrowing some money from family which has been offered to us. There is a chance we could do the renovation work too if we borrow the max amount from family, but if it goes over-budget we could be stuck! :eek:

We have no debt (other than student loans).

What would you do?

Red-Squirrel_2

Mortgage lenders won't let you use borrowed money for a deposit, even from family.

How much difference is there in the rates for a 90% and an 85% mortgage anyway? I wouldn't have thought it was huge, not worth leaving yourselves short if you have an emergency/unexpected cost.

Afternoonteepee

We have already been given money by family, sent to my husbands bank account several months ago. It is technically borrowed because the family members have asked us to look after it and want it back, but are very happy for us to spend it and replace it because they don't have a set time frame of wanting it returned.

The additional money we can borrow would be to cover the renovation work.

The rates we are looking at (first direct mortgage) are 3.48% vs 3.29%, plus the mortgage fees are £500 less for 15%. Over a 5 yr fixed term this is a total difference in the region of £1750 (for interest and fees saved).

Red-Squirrel_2

The lender will want a signed statement that your relatives don't want their money back. A lot of people probably lie on these, but I wouldn't be comfortable doing so, certainly not for such a small saving.

Prothet_of_Doom

Afternoonteepee wrote: »

Over a 5 yr fixed term this is a total difference in the region of £1750 (for interest and fees saved).

What is that a month ? £29.17

I think I'd rather have a spare £5K in case of SHTF moments, like the boiler packing up mid winter, or the cooker packing up on the same day the fridge and washing machine decide to start leaking.

Afternoonteepee

Prothet_of_Doom wrote: »

What is that a month ? £29.17

I think I'd rather have a spare £5K in case of SHTF moments, like the boiler packing up mid winter, or the cooker packing up on the same day the fridge and washing machine decide to start leaking.

The £1750 is a calculation of the difference in interest costs assuming the same amount borrowed. In real life terms, the monthly repayment is £998 for 85%LTV or £1079 for 90%LTV. If we didn't overpay at all, the calculations across a full 25 year term mean that we would save around £12000.

The SHTF moment is a concern for us. We always planned to put down 10% deposit and overpay after renovation if we have spare funds. However, we've received advice to push ourselves, including from the family members who are lending us money!

d70cw6

amazingly the lender wont know about the family gift if you don't tell them

libf

Red-Squirrel wrote: »

The lender will want a signed statement that your relatives don't want their money back. A lot of people probably lie on these, but I wouldn't be comfortable doing so, certainly not for such a small saving.

Might depend on the lender, but it's generally that there is no 'expectation' of it being paid back, which is different to not being able to pay it back.

Afternoonteepee

Thanks for all the replies so far. Regarding a signed letter to the lender, I know that family members would be very willing to do this. Ultimately, our major concern is not what is theoretically possible (and because if it isn't there is no dilemma!)... but what SHOULD we do, assuming the options are possible?

libf

Afternoonteepee wrote: »

Thanks for all the replies so far. Regarding a signed letter to the lender, I know that family members would be very willing to do this. Ultimately, our major concern is not what is theoretically possible (and because if it isn't there is no dilemma!)... but what SHOULD we do, assuming the options are possible?

Does the 15% improve the rate that you get on the mortgage? Or improve your likelyhood of being accepted for the mortgage? If not, then I would keep the cash accessible.

Afternoonteepee

libf wrote: »

Does the 15% improve the rate that you get on the mortgage? Or improve your likelyhood of being accepted for the mortgage? If not, then I would keep the cash accessible.

It improves the rate by 0.19% and reduces mortgage fee but it shouldn't change the chance of being accepted. We both have good credit histories and borrowing significantly less than we could.