5% Mortgage or push for 10%

neonplanet40

Hi folks, just looking some opinions.

My and my wife are looking to get our first home soon.

However we are currently deciding whether to go a 5% Mortgage now or wait and gather a 10% Mortgage?

I know the interest rates are higher for 5% but we currently pay 650 a month on rent. Would paying the higher interest rates be better than paying rent which is, in many ways, dead money?

All feedback welcome. The houses we are looking at are costing around £220k.

Thank you

dc197

Get out your spreadsheet and crunch the numbers.

Variables include:

How long would you need to wait to get to 10%?
How much of a saving in monthly repayments would that give?
How many months rent would be spent waiting?
How might house prices change in that time?
How might rates change?

Personally I would want to buy sooner because that means fewer months passing 650 to LL instead of to house equity.

smile88egc

You'd be crazy to buy with a 5% deposit now. Prices are dropping, there's a big risk you'd find yourself in negative equity.

I wouldn't buy with this kind of a deposit unless you'd be happy to stay in that house for 7-10 years.

Pixie5740

If you consider rent to be dead money then so is mortgage interest. Unless you are in an area where property prices are rising much faster than you can save, wait until you have a 10% deposit. Have you even spoken with a mortgage broker to see if a lender will grant you a 95% LTV mortgage?

magicpork

a 95% LTV mortgage today sounds a very risky idea... obviously this depends on your own circumstances

AdrianC

There's a presumption that, by "5% mortgage" you mean 5% deposit/95% mortgage. Can you confirm this, please?

Rent is not "dead money". Rent is paying for a roof over your head, maintained by somebody else at their expense.

foxy-stoat

AdrianC wrote: »

There's a presumption that, by "5% mortgage" you mean 5% deposit/95% mortgage. Can you confirm this, please?

Rent is not "dead money". Rent is paying for a roof over your head, maintained by somebody else at their expense.

I had the same argument with some older folk sometime ago - its about 40-50% dead money.

If prices are on the up in your area then buy now with your 5% and overpay every month the money you where able to save towards your 10% depositl, if prices are stable then save and wait for another year, but keep an eye on the market.

At 95% LTV then your are more or less renting anyway and you will not be spending much on the propertry apart from a few tins of paint. The interest/capital repayment graph looks very scary for the first 10 years!

mrsbee17

We've decided to go for a 5% deposit as house prices are on the rise constantly, I want to buy somewhere where I'd be looking to stay long-term and we are paying out £800 in rent which I feel could be better placed in a mortgage. Personal preference - I'd love to save for 10% deposit but it's another 2 years at least for us.

wjr4

mrsbee17 wrote: »

We've decided to go for a 5% deposit as house prices are on the rise constantly, I want to buy somewhere where I'd be looking to stay long-term and we are paying out £800 in rent which I feel could be better placed in a mortgage. Personal preference - I'd love to save for 10% deposit but it's another 2 years at least for us.

We are also going to have to do this! Saving 10% is a bit unrealistic with prices £260k+ for a 2 bedroom house! At least if we plan to stay there for 5-10 years, hopefully we will have some equity!

AdrianC

rjw4 wrote: »

Saving 10% is a bit unrealistic with prices £260k+ for a 2 bedroom house!

Saving another £13k is "unrealistic"?

dc197

rjw4 wrote: »

We are also going to have to do this! Saving 10% is a bit unrealistic with prices £260k+ for a 2 bedroom house! At least if we plan to stay there for 5-10 years, hopefully we will have some equity!

Saving £26K is not unrealistic.
For my first house, bought solo in my 20s, I had saved £53K.