100% Mortgage worth it or not?

Schwarzwald

EssexHebridean said:

RelievedSheff said:

We took out a 100% mortgage (actually 105% with the Northern Rock Together Mortgage) on the first property we bought and it was a huge mistake. 

Very shortly after we completed on the property in 2007 property prices plummeted and we were in negative equity for a very long time. We were stuck on the lenders SVR when mortgage interest rates were very low because we could not remortgage to a better rate.

It was 13 years stuck in a property that we hated (terrible neighbours which is another story).

We eventually managed to gain enough equity to move in 2019 but it was a long time coming. We were fortunate that we could afford the mortgage repayments and didn't have to move in the 13 years we were stuck in that house. It would have been a different story if we had to move.

We're actually on the flipside of this one. Our first mortgage back in 2003 was also a "Together" product - only ours was 110% for various reasons including clearing some debt that MrEH had (And no - I still wouldn't recommend this approach to anyone else - it purely worked for us because we were very cautious about affordability). In spite of being approved to borrow a lot more than we did, we stuck to our guns and stuck with a level of borrowing that we felt we were comfortable with - allowing that this wasn't all that long past the horrific interest rates of the 1990s I think we were both a bit spooked by that possibility. After a few years we started overpaying, and thankfully by the time NR failed and got split into 2 parts, we had done enough on improving our financial history to ensure that our mortgage was one of the very small number that was taken across to the new "Northern Rock" rather than being stuck with NRAM. That of course in turn meant that we didn't end up in that mortgage prisoner state, thankfully. I was told at the time that only about 2% of the entire mortgage portfolio did get taken over to NR - and I still thank my lucky stars we were part of that. 

OP I'd say a zero LTV can work, but only if you really have all your ducks in a row - don't risk over extending yourself at all, do overpay as soon as you can, and make sure that your credit file generally stays squeaky clean - so use a credit card but only for planned spending, and clear in full each month. Don't dip into overdraft. Don't miss payments on anything ever. Personally I'd also be avoiding use of buy now pay later deals as well - as I suspect we're not far away from a scenario where those are seen as a negative on your file. I would also strongly suggest that you get a proper written budget set out for yourself - a current one, and one for how you see your financial picture after you have bought - and see how much slack you think you will have, before you decide whether buying right now is right for you. At the very least, prove to yourself that you can live to that budget, AND that you can begin to build some savings on that budget, before you commit yourself to a mortgage and life as a home owner. 

i agree.
a 100+% mortgage makes sense if you buy far BELOW your budget, ie you could afford to buy a 800k property but you buy a 600k property, and then opt for 100% mortgage.
this is the only case i see where one should consider it.

i think it is totally wrong to use a 100+% mortgage in order to get into a position to AFFORD a property.

One is choise out of luxury the other is out of necessity. the latter has a high risk of going wrong

DaMatrixBaby

MEM62 said:

DaMatrixBaby said:

I have a good job that pays well around £40,000

DaMatrixBaby said:

but it is so difficult to save. 

Circa £2,400 a month coming in after tax and £550 going in rent.  You should be able to save.  What are you doing with the other £1,800 a month?  

Thats a good question! I recently got this job in all fairness past few months. My car broke down so I have car finance to pay for, plus my graduate and postgraduate loan which is around £200 a month, then pension contribution, car insurance then it’s been a few important occasions for me in which I have a spent a fair bit on holidays and loved ones birthdays. I’m now in a place to start effectively saving around £200 a month going forward!

DaMatrixBaby

Albermarle said:

freesha said:

£40k a year, rent AND bills £550, but you find it hard to save? Are you sure a mortgage is for you?!

As above. As a first step I would write down what you are spending each month ( including a monthly estimate for one off costs like holidays), and then see where it can be reduced.
Then from the spare cash created from spending less, have a look at opening one of these and adding the max £4k per tax year to it ( tax year ends April 5th 2024).

Also are there any opportunities for promotion/higher salary where you work, or any opportunities to move ?

Thank you I appreciate the advice! I already have the help to buy ISA that Nationwide offered years ago but haven’t put any money into it yet. I believe the government added 25% on top of anything you add in? I opened it when I was 18 with £1 so that’s still an option but will check this out too. 

Unfortunately not any opportunities to promote at the moment as I was made redundant and recently secured redeployment with the same wage elsewhere in the company