Is it worth stretching to hit lower LTV benchmark?

Sibbers123

I am £5,000 away from hitting the 75% LTV benchmark (putting down £100,000 for £420,000). Would you stretch to £105,000 deposit which would give me a 75% LTV rather than just over 76%?

Looking at the interest rates (Barclays), the interest rate will be 2.25% if I put down £100k but 1.84% if I put down £105k, but the extra £5k will stretch my finances - I currently have £106,000 and can save £3,000 a month and would probably exchange/complete in 8-10 weeks (no chain).

thoughts?

ACG

Is there any reason why you have limited yourself to Barclays? 
.4% difference seems like quite a lot. Are you sure you are comparing like for like (ie fees/cashback/incentives)?

Sibbers123

Looking at it, the 5 yr fixed ‘great escape’ is 1.84% with no fees (75% loan to value) and the 80% LTV has fees of £999.... (can’t use the the ‘great escape’ mortgage at 80% LTV as mortgage exceeds £250k).

I haven’t limited myself to Barclays, I have DIP with Clydesdale as well and have a broker. I am slightly limited with lenders (5 to 6) as I will be applying for 5x annual salary (mortgage for professionals - chartered accountant). 

The difference in rates for Clydesdale is less between 75% and 80% LTV.

would you not recommend Barclays?

ACG

I hate Barclays with a passion, I would rather turn business away than submit a case to them. But that wasnt the reason for the question, it was more to understand if you were limited or if you were comparing the market as the 0.4% seemed like a big jump. 

What you have said make the 80% product sound even worse. Not only is it .4% higher but it is also a grand more in fees. 

I think you need to compare all of the lenders products - look at the best 75% product and the best 80% product (taking into account any fees, not just the rate) and then you can make a fair comparison and decide whether it is worth getting to 75% or not. Barlcays (or any lender) may only want 75% or under mortgages so price competitively for that business but then badly for anything over 75%. 

Sibbers123

Thank you! The only issue is the additional £5,000 will leave me with very little cash left. I’ll have enough to pay mortgage fees, solicitor fees but not much else! So I will have to compare the 5 year saving to see if it is worth it.

tim_london

Just looked at Halifax, difference is 1.91% vs 1.94% - so in this case the answer is probably no.  

Keep the spare cash.  With some much disposable income other factors like overpayment facility are more important that just the pure lending rates.

getmore4less

Can you extend the term to get the initial payments down to rebuild some savings faster £315k 1.84%
if you can save £3kpm now wont take long to rebuild £5k even on a 20y term
20 £1,570
25 £1,310
30 £1,140
40 £930

That 1.84% rate with no fees  on £315k   ( using 25y term £1311pm)
A £999 fee product needs to be 1.768% or better

Seeing rates as low as 1.6% they would cover costs up to £3,344
But if your 5* criteria don't match that's no good.

Looking at Clydesdale your 5 year options seem to be.
75% 1.80% £999, 1.82% £0  (no fee better ~£800)
80% 1.83% £999, 2.15% £0 (fee better  ~ £4k)

Still better to be going with the 75% LTV no fee option but the great escape should be no cost at all will there be other fees  with Clydesdale?

As a Barclays customer they have been good over the 20+ years we have used them.

Edit: Forgot to take into account the £400 cashback on the great escape