Have £5000 saved, whats my best option?

steampowered

joocyglutes said:

I'd like to be putting £300 into equity rather than someone elses mortage.

At the start of a mortgage, particularly a high LTV, nearly all of your money goes on paying interest, hardly any on principal. If you are looking to take a 95% mortgage you might be putting £20 a month into equity, and £280 a month on interest.

Also, if you did take a 95% mortgage, you'd find yourself trapped on negative equity if there was a 5% drop in house prices. That would be a complete disaster. 

So you aren't losing out on very much at all by not buying, and buying now with such a thin deposit would be an enormous risk.

You are better off waiting until you have a proper deposit, a proper salary and a long term job. In the meantime, consider saving into a Lifetime ISA to maximise the government bonus.

princeofpounds

[steampowered said:

joocyglutes said:

I'd like to be putting £300 into equity rather than someone elses mortage.

At the start of a mortgage, particularly a high LTV, nearly all of your money goes on paying interest, hardly any on principal. If you are looking to take a 95% mortgage you might be putting £20 a month into equity, and £280 a month on interest.

An alternative way to think about this - instead of renting the property from a landlord, you are basically renting the money from a bank. Whilst buying can often be a more financially sound thing to do, on average (not always!), over the long term, it's not helpful to view rental payments as so-called dead money, whilst viewing mortgage payments as a pure investment. 

TuppenceWorth

Another vote to keep renting. 
Council tax and bills/ insurance would be around 200pcm. Then you have the mortgage interest on top.
I doubt house prices are going to rise in the near future. Just keep saving would be my advice.

FreeBear

TuppenceWorth said: Council tax and bills/ insurance would be around 200pcm. Then you have the mortgage interest on top.

I doubt house prices are going to rise in the near future. Just keep saving would be my advice.

I crunched a few numbers last night...

Band A council tax in Stoke on Trent - £1100p.a. with 25% single person discount, £825. £68.75p.m.

Gas/electricity - At most, £50p.m

Insurance, say £20p.m.

Total, a little under £140 per month. On top of this, add an annual boiler service, building maintenance costs and decorating/refurbishments. £300 is starting to look like quite a good deal.

Having looked at some of the properties in the Stoke area, a cheap rundown terrace in what looks like a slum area can be had for £30K, but no chance of getting a mortgage on it. Slightly up market (is there such a thing in Stoke), £60K might get something that is mortgageable. Realistic budget would be more like £100K to £120K, but a £5K deposit is not going to be anywhere near enough. Lenders are currently wanting to see a 20-40% deposit before even considering a mortgage application.