We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Better loan to value or keep savings?
kisobel
Posts: 25 Forumite
Me and my husband are in the process of selling our property and buying a new one, and I am trying to work out how much to put down as a deposit on the new property and how much to keep as savings. Just thought after reading lots of forum threads I would post here for any views!
The sale of our current property will give us around £175k after the current mortgage is paid off. The property we're buying is £635k and we need a minimum of 80% loan to value which would mean a deposit of £127k. Obviously there are (slightly) better mortgage deals if we can get to 75% LTV which would mean a deposit of £158,750. Stamp duty and all the moving costs, estate agent fees, solicitor fees etc I've estimated will be around £32k. We have savings of around £28k. So we could afford a 25% deposit if we used our savings (as well as the remaining equity from the sale) to pay all the costs.
My main reason for wondering whether it would be better to take out a larger mortgage and keep our savings is because we want to extend the house we're buying at some point (build on top of the existing single storey extension to add another bedroom and bathroom). I'm roughly guessing this will cost around £40k although to be honest I have very little idea what would be involved at this stage, possibly it would be more. We don't have to do it immediately but had imagined doing it in 3-4 years time once we'd saved enough. However if we spend all our savings now we would need to borrow to fund the extension.
Obviously the better a mortgage deal we get, the more we can save once we're in the new house, so it might be better to just use the savings now. But the deals don't seem much better, and we won't be able to easily build up savings once we have a much bigger mortgage (we currently pay £800 a month and this will be more like £2200, plus bigger bills). I guess we could always extend the mortgage later to pay for the extension if the bank would let us? We are borrowing around £60k less than the max amount of our decision in principle. The house is in London so I think the risk of it losing value is fairly low.
Any views appreciated, sorry for a slightly rambly post!
The sale of our current property will give us around £175k after the current mortgage is paid off. The property we're buying is £635k and we need a minimum of 80% loan to value which would mean a deposit of £127k. Obviously there are (slightly) better mortgage deals if we can get to 75% LTV which would mean a deposit of £158,750. Stamp duty and all the moving costs, estate agent fees, solicitor fees etc I've estimated will be around £32k. We have savings of around £28k. So we could afford a 25% deposit if we used our savings (as well as the remaining equity from the sale) to pay all the costs.
My main reason for wondering whether it would be better to take out a larger mortgage and keep our savings is because we want to extend the house we're buying at some point (build on top of the existing single storey extension to add another bedroom and bathroom). I'm roughly guessing this will cost around £40k although to be honest I have very little idea what would be involved at this stage, possibly it would be more. We don't have to do it immediately but had imagined doing it in 3-4 years time once we'd saved enough. However if we spend all our savings now we would need to borrow to fund the extension.
Obviously the better a mortgage deal we get, the more we can save once we're in the new house, so it might be better to just use the savings now. But the deals don't seem much better, and we won't be able to easily build up savings once we have a much bigger mortgage (we currently pay £800 a month and this will be more like £2200, plus bigger bills). I guess we could always extend the mortgage later to pay for the extension if the bank would let us? We are borrowing around £60k less than the max amount of our decision in principle. The house is in London so I think the risk of it losing value is fairly low.
Any views appreciated, sorry for a slightly rambly post!
0
Comments
-
Put £40K in Premium Bonds and use it to extend, then when your fixed rate finishes (after you have completed your extension) get the property re-valued and remortgage to the best rate.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 351.7K Banking & Borrowing
- 253.4K Reduce Debt & Boost Income
- 454K Spending & Discounts
- 244.7K Work, Benefits & Business
- 600.1K Mortgages, Homes & Bills
- 177.3K Life & Family
- 258.4K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards