5% deposit now or 10% after a year

no_one · 19 February 2020 at 4:52PM

Hi,
We have got just enough saving to put up a 5% deposit but the interest rates are too high.
so not sure which option should be pick from these three or if there is a better 4th option.

Buy a house with a 95% loan (very high-interest rate and all savings in deposit)
Buy with Help to buy ( Restricts to newly built properties only and won't be able to pay back in 5 years so will have to take another loan)
Wait for a year and buy with 90% loan (House rates may go up especially in the North and will end up paying 10k in rent)

Cheers

notrouble · 19 February 2020 at 4:56PM

Can you afford the repayments at the higher rate?

How secure is your income? Do you expect it to rise in 12 months? 5 years?

Do you like/want to live in a New Build or not?

Do you want/need to buy immediately or are you happy to wait?

How much additional savings could you put aside in the next 12 months if you wait?

Thrugelmir · 19 February 2020 at 5:16PM

What do you regard as a high rate of mortgage interest?

no_one · 19 February 2020 at 5:23PM

notrouble said:

Can you afford the repayments at the higher rate? I can but would prefer to pay less so to save more
How secure is your income? Do you expect it to rise in 12 months? 5 years? Have a perm job, yes should go up every year
Do you like/want to live in a New Build or not? Yes would love to live in new build but old house gives an option to live in city center and less commute to work
Do you want/need to buy immediately or are you happy to wait? Happy to wait, its just that I am paying 10k in rent every year
How much additional savings could you put aside in the next 12 months if you wait? will easily get to 10% deposit

no_one · 19 February 2020 at 5:24PM

Thrugelmir said:

What do you regard as a high rate of mortgage interest?

well, I think it was different for 1.5% and the EMI was £400 more per month

notrouble · 19 February 2020 at 6:05PM

no_one said:

notrouble said:

Can you afford the repayments at the higher rate? I can but would prefer to pay less so to save more
How secure is your income? Do you expect it to rise in 12 months? 5 years? Have a perm job, yes should go up every year
Do you like/want to live in a New Build or not? Yes would love to live in new build but old house gives an option to live in city center and less commute to work
Do you want/need to buy immediately or are you happy to wait? Happy to wait, its just that I am paying 10k in rent every year
How much additional savings could you put aside in the next 12 months if you wait? will easily get to 10% deposit

If you can afford the higher rate, want to save the £10K rent, and prefer to move now, then move now!

If you would "love to live in a New Build", more than in an old house with less commute, then use Help To Buy.

If you are happy to wait, and can easily save for a 10% deposit despite paying £10K rent, and don't want to pay the extra interest on a 5% deposit loan, then wait a year.

...........

In other words, there's no 'right' answer. It's a personal decision!

Moneyminded · 19 February 2020 at 8:35PM

You don't seem happy with the interest rate you are currently looking at with a 5% deposit. Have you spoken with a whole of market mortgage broker or just spoken to a specific lender? Could you shop around for a better deal?
Have you found a property you want to buy? Is there a lot of choice in your budget locally? How quickly do you expect to move? How much might you save in this time? If it might take a while to find somewhere/ buy then could you move to a cheaper rental property in the meantime to save even more?

no_one · 20 February 2020 at 9:16AM

Moneyminded said:

You don't seem happy with the interest rate you are currently looking at with a 5% deposit. Have you spoken with a whole of market mortgage broker or just spoken to a specific lender? Could you shop around for a better deal?
Have you found a property you want to buy? Is there a lot of choice in your budget locally? How quickly do you expect to move? How much might you save in this time? If it might take a while to find somewhere/ buy then could you move to a cheaper rental property in the meantime to save even more?

Yes, I have spoken to a broker and compared the rates and monthly EMI, IIRC its difference of £300-£400 per month.
Is there a website where we can get the deal from multiple lenders just like the one brokers use?
No, haven't found the property yet, since it's a new build only option we can go for there are few options in the area of interest and we have started requesting the viewings.
Moving to cheaper rental is an option but need to do the maths to work out the difference in parking etc.

steampowered · 20 February 2020 at 10:24AM

Have a look at https://www.moneysavingexpert.com/mortgages/best-buys

If you have made the decision to buy and intend to live in this house for some time, personally I would take out the 95% mortgage on say a 2 year fixed term. At least then you'll start building up your equity. You can remortgage onto a cheaper rate when your fixed term expires.

Personally I would not go with help to buy, unless you particularly want a new build property, as it comes with other complications and costs (such as solicitors' fees etc. when you come to buying out the government's share of the property) which are better off going towards the mortgage. Also you often pay a premium for new build properties.

5% deposit now or 10% after a year

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