First Time Buyer Advice

JOD1989

Hello,

My girlfriend and I are considering buying a house but I wanted some mortgage advice.

At the moment we have enough for a 5% deposit on a £150k house using the help to but mortgage guarantee scheme. Now obviously if we do this we will pay a higher interest rate. (for example 4% fixed for 2 years). If we save enough to 10% we will obviously get a lower fixed interest rate (say 3% fixed for 2 years) but we will have to pay rent for an additional 6 months to a year. So if I calculate how much more the monthly payments are on the help to buy scheme and compare that to rent does that tell me what is the best option.

Maybe I am misunderstanding (and please correct me if I am wrong) but a larger deposit allows you to get a better initial rate but once the initial rate is up the rates are the same anyway.

Thanks in advance for any help.

luis1988

Hey JOD1989,

You're right in thinking a larger deposit will help, generally the better the LTV I.e. 75% as opposed to 95% will lower the interest rates.

However, we are currently waiting to secure our HTB mortgage with Santander on a 2.5 year fix of 1.85%.. So I'm not sure where you got your figures from? Even the 5 year fix was below 3% if I'm correct in thinking..

JOD1989

What was the LTV on your mortgage application (surely not 95% with those interest rates).

The figures I quoted were approx the best I was seeing for a 5% and 10 % deposit on a mortgage comparison website.

I was more concerned with the logic behind my calculation of whether to use the HTB scheme or save a larger deposit while paying rent.

Verix

The two of you are at slightly crossed wires. The OP is looking at the HTB mortgage guarantee scheme and Luis is talking about the help to equity loan scheme.

To answer you initial question: yes your mortgage will convert to the lender's standard variable rate but in reality most people would try and switch to a better rate than that once their initial fixed product is over. This can be done through a product transfer with your existing lender or with a remortgage to a new provider.

luis1988

Ah, Verix is right, I was confused, my bad!