Mortgage Advice 10% or 20%

Elliot_J

Hi,
I'm looking to buy a house for c£300k. I have enough savings to comfortably put down 10% but could stretch to 20% and have a little safety pot. I often hear friends saying to put down the minimum % required for a mortgage and max out to 30 years so you have lower payments and then over pay at the end of each year? What are you thoughts on this?
I was hoping some wise folk would give me some guidance on how they would approach the situation and the pros and cons of taking out a bigger or lower mortgage.

I also have a general query on how mortgages actually work. If i take out a mortgage for 30 years with with provider X and the first two years are 2% before it moves to 3.5% there after. Can i change provider after 2 years (appreciate there may be fee for exit) and then get a better rate for another two years and continue to repeat? If i did this is it classified as remortgaging and am exposed to any change in my property valuation? Or is it a simple process of one provider passing on the remaining debt to my new provider?

Thanks for the help in advance and apologies for what may be a novice question.

 

onetimeatponycamp

I think you need to look at the rates available, as the rates are different for 90% LTV to 80%. It might be that by putting down the 20% you'll save a lot more in interest, and have a lot more lenders available to you.

ChloeManoey

Nothing to stop you doing 15% as a happy medium. I am putting down a 31.5% deposit, to be exact! 

In answer to your other questions, yes you can change lender after the 2 year fix and repeat repeat repeat as you say. Yes I think that is classed as "remortgaging" but not totally sure on the definition!

amnblog

In the UK mortgage products have terms of 2 to 5 years in most cases.
At the end of the mortgage term you can take another rate with your existing lender which is a simple paperwork exercise - this is known as a product transfer or rate switch.
Replacing your mortgage with one from another Lender is a remortgage and involves credit searches, proof of income and revaluation.
The options on both approaches are affected by property value.

Elliot_J

amnblog said:

In the UK mortgage products have terms of 2 to 5 years in most cases.
At the end of the mortgage term you can take another rate with your existing lender which is a simple paperwork exercise - this is known as a product transfer or rate switch.
Replacing your mortgage with one from another Lender is a remortgage and involves credit searches, proof of income and revaluation.
The options on both approaches are affected by property value.

Thanks amnblog,
QQ on the above. If take our a 270k mortgage on a 300k property and after two years my loan has reduced from 270k to 260k but my property value has gone up by 10k am i right in assuming my debt to the new provider is 260k and doesn't increase in line with my property value growing. How about if the property value crashed, how would this impact my debt to a new provider following an evaluation?

Thanks

Harvic

YElliot_J said:

Thanks amnblog,
QQ on the above. If take our a 270k mortgage on a 300k property and after two years my loan has reduced from 270k to 260k but my property value has gone up by 10k am i right in assuming my debt to the new provider is 260k and doesn't increase in line with my property value growing. How about if the property value crashed, how would this impact my debt to a new provider following an evaluation?

That's correct. The debt is just money that you've borrowed, so it's the loan that you owe, the fact you bought a house rather than a holiday is doesn't really matter on the balance sheet. A mortgage however is secured to your house, so the risk of that loan varies with the value of the house- if you have 50% loan to value (LTV) the bank are always going to be able to kick you out and recover their money by selling up! At 95% LTV that risk is much greater that they could lose something, hence normally the interest rate is higher.
The issue you raise with fall in value can tip you into 'negative equity,' this means that your LTV is >100%. On a fixed mortgage, this doesn't technically mean anything, however if you look to move or remortgage you may not be able to secure a mortgage. Possible outcome from this is that you get stuck on the SVR (normally 3.5-5%) until you can get a new product- so ironically you pay a lot more even though you could be in a worse position and less able to afford it.

MovingForwards

To follow on from the above post.

What you do in a negative equity situation is look to see what fixed rates your existing lender has and take another fix, no affordability checks, no checking the value of your home and usually done online with a few clicks.

bethjames5681

If you can afford the 20% it will be money well spent as you're much more likely to find a favourable rate (many banks are taking their 90% LTV off the market) plus your mortgage amount is less.

The other piece in your armoury when coming to remortgage or switch rates would be to reduce your mortgage term if your circumstances have changed.

Remember, each time you remortgage you will likely pay a fee of c£1k 

Use the mortgage calculators to compare rates over periods of time before settling on a decision.