Whats the benefit?

peterc2609

Whats the benefit of actually saving up a massive deposit for a house?

I rent at the moment and earn quite a lot... but also spend quite a lot!

I have a 5% deposit...

Obviously, If I saved a 10 or 15% deposit etc I would have to borrow less money and therefore lower monthly payments....

Is that the only benefit?

I.e. could I get the 95% mortgage now, buy my house and save in the next two years, then once the fixed rate is finished, use my savings to get a better rate then??

m00m00

the bigger the deposit you have the better the mortgage deal you will be able to get in terms of rates, this could save you a substantial amount of money.
it also saves you from things like 'higher lending fees' buried in the small print

SquatNow

If you wait a couple of years, what seems like a big deposit now will probably buy you a nice place outright at the repo auctions.

peterc2609

Its just, as from another thread I created.... I am ready to buy a house... seen one I like... and have a 5% deposit...

People have said to me that I could raise a bigger deposit... and I could... but is it worth it??

I would rather buy now and save money for the next few years.... but what would be the benefit of continuing to rent and throw money away whilst saving a bigger deposit/?

SquatNow

um, I hate to state the obvious, but even the biggest, most pig-headed, obnoxious VIs are now admitting house prices will "probably" fall in the next couple of years.

A 6% fall means your deposit is toast and you're in negative equity.

Now is NOT the time to buy, especially if your a FTB.

peterc2609

I'm not in it to make money tho...

I genuinely just want somewhere to live!

jyonda

You may not be in it to make money (it's only made when you sell BTW) but you should not underestimate the risk of negative equity either. Buying property is about timing so you are able to pay off the mortgage quicker if you want or borrow against it's value in hard times. This comfort zone can have a huge impact on your choices and quality of life.

peterc2609

All I'v heard recently is:

"Its a buyers market at the moment"

Is this totally wrong? I'm hearing that from one angle, and this board telling me that the prices are all gonna crash!?!?!

SquatNow

It is a buyers market, prices are going to crash.

It's a buyers market in that people selling properties are open to negotiation because there are very few buyers out there... so plenty to choose from and easy to haggle.

Of course if you buy, you'll lose pots of cash, but it's still easy to buy. 12 months ago buyers were putting in sealed bids and still being guzzumped, now they are guzundering.

I still wouldn't advise you to buy though... and if you were buying you should be buying at aution anyway.

epz_2

peterc2609 wrote: »

I'm not in it to make money tho...

I genuinely just want somewhere to live!

fair point, its legit to just want somewhere to hang your hat but if you get negative equity and a short mortgage deal then you might not be able to remortgage at all. that would mean getting stuck on the banks standard rate which is like 8 -10% at the moment (havent properly checked just going buy other folkes posts).

a larger deposit not only means better deals and a bigger buffer against negative equity but you probably pay back 3 times what you borrow, if you borrow a little less it saves you a lot overall.

its a buyers market for a reason, that said if you see a good deal and can afford it go for it.