5% or 10% mortgage deposit

mattmitchell365

Hi all,

I have been trying to work out whether to for a 5% or 10% deposit for my first mortgage which will probably be around £180,000. My initial thought was to save a 10% deposit to allow me to get better interest rates on a mortgage offer but considering the fact that I am currently spending £6000 a year on rent I am thinking that I would be better saving just a 5% deposit to allow me to get out of renting quicker. I am basing this on the fact that the difference in interest I will pay per year between a 5% or 10% mortgage will be know where near what I'm spending on rent a year.

What are the general thoughts on this? Am I missing something from my calculations or should I be considering something else?

Thanks,
Matt

dimbo61

Can you get a 95% mortgage on the property you want ?

Khrisjun

Hi,

I had this debate previously.. IMO it depends on the mortgage deal you could get, if you think house prices are going to rise and quality of your rental in my opinion.

If you get a house worth 180k on a 5% deposit @ 3.5% morgage rate you would pay £856 a month with 5917 of that being interest in your first year. If you are already paying 6000 on rent then the difference is marginal between interest paid or rent to a landlord. A possible benefit is no maintenance if you stay in a rental property. A possible negative is if house prices rise you need to pay more when you buy.

If you go with a 10% deposit @2.5% then the monthly payments will be 727 a month with 4000 being interest which means you have saved 2000 in interest in your first year.

If interest rates go up in the next year then it complicates it even more.

Personally, I would buy sooner with a 5% deposit if its going to take >12 months to save up the other 5%.
If you can do it in 6 months i would wait and put down 10% deposit.

JOD1989

I have a similar conundrum to you. Have a 5% deposit at the moment for a 150k house and would take me somewhere between 6-12 months to save an additional 5%.

I'm debating whether to use the HTB equity loan to get a good interest rate on a 5% deposit and then saving as much as possible over the 5 years to pay back the equity loan.