5% vs 10% deposit

steensy

ok so firstly what im trying to decide is, is it better to save for a 5% deposit or a 10% based on the fact that we currently rent and would the rental costs for saving the additional 5% outweigh the discount on a 10% motgage.

a few basics then, so we(wife and i) will at the end of this month be debt free for the first time in 8 years and will be starting our savings for a deposit for a house of our own. based on some online calculators and a brief chat from the bank we recon we can get a mortgage of 180,000 for a house and would be looking either 30 or 25 year term (most likely 30). starting in feburary (paid at end of month) we can save £1140 per month. we are currently renting at £500 per month. therefore a 5% deposit would be 9,000 and a 10% would be 18,000.

out of the savings we have insurances and car tax ect to come out during the year which i estimate to be ..... 1,200 in august, 210 november and 50 in december.

what i want to know is will the difference of roughly 9month of sving to get a 10% mortgage (total of about 18) cost us more in the long term or should we aim for 5% and apply for a mortgage then thus saving on 9ish months of rental.

i should also note that should we go for a 10% then with the added timeframe we would look at renting elsewhere which would cost about 575 per month as this house isnt suitable anymore. that being said if we were only here for a shorted time we would consider staying put and paying the cheeper rent.

in terms of mortgage lenders we live in northern ireland so it would have to be able to lend here and a two year fixed term is what we would be considering.

thanks for your help in advance. anything else needed to know just ask

foxy-stoat

If you can get a 95% mortgage secured and can afford it and find the house that best meets your needs then buy it. Overpay as much as you can as at 95% LTV your not far off renting - but hopefully your buying an appreciating asset.

kilby_007

foxy-stoat wrote: »

If you can get a 95% mortgage secured and can afford it and find the house that best meets your needs then buy it. Overpay as much as you can as at 95% LTV your not far off renting - but hopefully your buying an appreciating asset.

This is money saving genius!
















































I'm being sarcastic.

foxy-stoat

kilby_007 wrote: »

This is money saving genius!

What a good piece of advice for the OP










































































I'm being sarcastic.

copperclock

Having you factored in stamp duty, moving costs, mortgage fees and legal costs?

Also, small point, I would separate insurance and car tax from 'savings'. These are bills that happen annually and should probably be in a separate pot so that you don't end up confusing yourself in the middle of house-buying.

steensy

copperclock wrote: »

Having you factored in stamp duty, moving costs, mortgage fees and legal costs?

Also, small point, I would separate insurance and car tax from 'savings'. These are bills that happen annually and should probably be in a separate pot so that you don't end up confusing yourself in the middle of house-buying.

in terms of your first question, i figured that if i hit the target for the deposit and then start looking at houses that the next few months of looking and then going through the process of signing over paperwork ect would allow me to get an extra few thousand.

as for the insurances, i put together a wee spreadsheet and when they will be taken out and for how much and i reacon i can have 9grand for october if nothing changes but ive been trying to sell my car and downgrade so that will release some cash (about 3000) so i wasnt really worried about seperating out the pots although i see why it would be helpfull.

bruich76

At the end of the day most people only realise the equity in their houses when they retire (to sell and buy a smaller house) or, when they die (someone else gets the benefit). Despite what people will tell you above and I appreciate that you don't want to overpay on a mortgage but what makes you rich is cash in hand, in the bank and your savings.

Pixie5740

Have you spoken with a mortgage broker to see if a 95% LTV mortgage is a realistic option for you?

adindas

steensy wrote: »

ok so firstly what im trying to decide is, is it better to save for a 5% deposit or a 10% based on the fact that we currently rent and would the rental costs for saving the additional 5% outweigh the discount on a 10% motgage.

a few basics then, so we(wife and i) will at the end of this month be debt free for the first time in 8 years and will be starting our savings for a deposit for a house of our own. based on some online calculators and a brief chat from the bank we recon we can get a mortgage of 180,000 for a house and would be looking either 30 or 25 year term (most likely 30). starting in feburary (paid at end of month) we can save £1140 per month. we are currently renting at £500 per month. therefore a 5% deposit would be 9,000 and a 10% would be 18,000.

out of the savings we have insurances and car tax ect to come out during the year which i estimate to be ..... 1,200 in august, 210 november and 50 in december.

what i want to know is will the difference of roughly 9month of sving to get a 10% mortgage (total of about 18) cost us more in the long term or should we aim for 5% and apply for a mortgage then thus saving on 9ish months of rental.

i should also note that should we go for a 10% then with the added timeframe we would look at renting elsewhere which would cost about 575 per month as this house isnt suitable anymore. that being said if we were only here for a shorted time we would consider staying put and paying the cheeper rent.

in terms of mortgage lenders we live in northern ireland so it would have to be able to lend here and a two year fixed term is what we would be considering.

thanks for your help in advance. anything else needed to know just ask

Considering that you are currently renting a family house, and in general the difference of mortgage interest rate of 95% and 90% LTV is not that great the decision to take is obvious.

Also as another people say, you could always overpay your mortgage (seems up to 10 % as a standard) when you have extra cash. So when you overpay just 5% you are already on 90% LTV where you could take advantage of it on your next move, e.g remortgaging.

But keep in mind, depending on one personal circumstance it is sometimes not easy to get a mortgage with 5% deposit.

steensy

forgive me for being naive here but is it not just a case of applying for a mortgage with a supplier doing a 95%LTV. we havent had an indepth discussion with the bank yet but after a brief one they said 180k should be what we have to play with.

also the intention was to take a mortgage of abou 30 years that way it keeps monthly payments low enough that if for some unfortunate reason we had to live on one wage we could. That would also allow us the oppertunity to build up large amounts of savings and pay it off when we go to renegotiate the mortgage assuming the finincial situation we are in satys as positive as it is now.

rtho782

We went with a 95% mortgage back in May. We're paying £1488 on a 17 year term, a 4.09% 2 year fixed.

It's a massive millstone but the idea is to throw everything we can at it for these 2 years and then remortgage. We worked out that the monthly interest was less than the rent we were paying, so figured this was the best strategy.

Thanks to increases in house prices, and the amount we're paying off each month, we're probably already below 90% LTV. I kind of wish we'd gone on a tracker as then we could remortgage now and get a new valuation to reduce our APR already.