Deposit and Repayment Period for Mortgage

IkerHannah

Hello,

I am 30 years old and I have being living in a house share since I graduated from university. The rent is only £325 per calendar month, bills inclusive, which means I have been able to save a lot of money: around £800 per month.

I live in Newcastle, where houses are relatively affordable, and I am looking for a two-bedroom house for around £150,000. I have £40,000 saved.

- Is a 20 percent deposit worth it or am I better with a 10 (or 5) percent deposit?
- Since I am 30 and intend to retire at 65, should I make the repayment term 35 years?

My income is £35,000 and I work as a civil engineer.

Thanks for your help!

buggy_boy

A 20% deposit would be a lot better as you will have more mortgages available to you and so a reduced rate.... If as it sounds like it you can afford it then I would say go for a standard 25yr mortgage, you have to think, will this be your forever home?

If you meet someone and start popping out kids etc then you may want to buy a bigger house later on. You have a good income, the earlier you can pay off the mortgage the less you will have to pay in interest over the life of the mortgage.

Tom99

I would keep a small amount of cash back but otherwise use as large a deposit as possible, 25yr term and, if affordable, overpay each year as well. That will set you up in a good position for the future if ever you want to move or say reduce your monthly outgoings because of a family.

newbietech

If you have the 20% deposit or more, it is usually better putting down as much deposit as you can as this, of course, reduces the amount of debt you are paying interest on. Usually, the lender will offer you a fixed rate for 3 or 5years after which you will revert to your standard SVR. Keep an eye out for this as an opportunity to remortgage to a better rate with the same or new lender will be then.

With a salary of £35,000 you should be fine for a property worth £150k but if you want to utilise some of your savings to generate more money then it might be worth looking at a few options( which a good mortgage broker should suggest)

1) Shared ownership- This applies if you are a first-time buyer. In this case, you buy a share of the home. e.g 80% and pay rent on the remaining. You can also buy the remaining shares of the home through what is known as staircasing.With this option you can utlise some of your savings for other means such as investments etc

2) The second option is the offset mortgage: You simply put your savings in a savings account with your mortgage lender and the savings balance is used to reduce the amount of interest charged on the mortgage. Your savings will be 'offset' against the value of your mortgage, and you'll only pay interest on your mortgage balance minus your savings balance. Your savings don't actually repay any of your mortgage, they just sit alongside it and save you interest



Hope this helps