FTB advice

OtterBear123 · 13 June 2017 at 10:11PM

Hi all,

Looking for a bit of advice from people more experienced…

Keen to buy my first house soon and move out of my mother’s house. I'm 25 years old on a £30,000 salary with no debts (other than student loan). At the moment I have £9,000 savings trying to get to a deposit for a house of around £120,000 - £140,000. (Appreciate there are fees other than a deposit).

I'm hoping to move out in a few months and aim to have savings of around £10,000-£11,000 by this time. This of course falls short of the magic FTB 10% deposit figure + fees. I've considered a few things:

5% deposit
Seen a few ok deals recently but worried about the worse rate compared to 10% and above. Does anyone have any experience or thoughts on these? Been reading up on concerns around negative equity and the added interest that will be paid.

CC
My Credit Card company have offered me a money transfer of £6,000 on a 0% offer for 18 months. I could use my savings in a few months plus part of the credit card transfer to get to that 10% deposit + fees. Affordability wouldn't be a problem and I'd pay off the card within the offer period, but I know it’s quite frowned upon from the point of view of borrowing money to borrow money.

10% deposit
I could wait and save further. Don't really want to do this as it feels my life is on standstill at the moment.

Rent
Would be able to move out and test the waters, but wouldn’t be getting on the ladder. Quite want to get stuck into DIY and this will be trickier with this.

What are your thoughts on these? Appreciate any feedback that can be given!
Thanks all!
:beer:

Crashy_Time · 13 June 2017 at 10:15PM

Don`t enter a debt Ponzi scheme at one of the most tricky political moments in UK history, with interest rates at their lowest level ever. You are obviously stretching your finances and could go from being debt free and saving/investing every month to negative equity literally overnight.

glosoli · 13 June 2017 at 10:29PM

The interest rates that are applicable to 95% mortgages are higher, but if you need to move within the next few months then at least the option is there.

Borrowing money from a credit card for your deposit is a non-starter, so there is no point on entertaining this idea further.

The preferred option would be to wait until you have at least a 10% deposit, as you may be able to get a rate between 2-3% compared to >3.5% for over 95% mortgages, but I guess this depends on you and whether you can hold out this long before moving. If you think about it though, a year into a fixed rate at 95% you may look back in hindsight and wish you waited just that little bit longer.

In regards to renting first, whilst obviously this has it's pros and cons, you are almost there in terms of deposit, i'd rather just buy rather than put money into someone else's pocket but that's just me.

parking_question_chap · 13 June 2017 at 10:33PM

Save for another few months, no reason you cant put aside £1k per month. Interest rates are going nowhere.

OtterBear123 · 13 June 2017 at 10:53PM

Thanks all for the responses so far. My bank did say the cc option could work as long as I meet the affordability, which I would. But this is probably my least preferred option anyway.

It's frustrating because I can afford everything on a monthly basis and it is just the deposit/fees which are proving tricky.

Perhaps I do just need to be a bit more patient

glosoli · 13 June 2017 at 11:49PM

OtterBear123 wrote: »

My bank did say the cc option could work as long as I meet the affordability, which I would. But this is probably my least preferred option anyway.

Just out of curiosity, was it a regulated mortgage advisor that said this, or someone else?

OtterBear123 · 14 June 2017 at 12:15AM

@glosoli

Good point. Perhaps not very good (or factual) advice from them? It was someone else I believe, it was an operative in the mortgage team at my bank,

SuboJvR · 14 June 2017 at 12:23AM

If you actually did the credit card thing, when you came to prove evidence of funds for deposit it would be realised and the lender and your solicitor would both raise an eyebrow at that, as you have taken on extra debt to buy the house alongside the long term mortgage commitment.

If you want to take advantage of the better rates, save save save. And don't forget stamp duty, solicitor fees, other fees etc!

SuboJvR · 14 June 2017 at 12:26AM

The other option I suppose is the Help to Buy scheme government equity loan which seems to still benefit from better mortgage rates, but then you of course have the extra loan to think about later.

We have gone down that road as it's the only way we can viably get on the ladder in the next few years, which is something we are aware of now in early 30s.

OtterBear123 · 14 June 2017 at 12:32AM

Just to mention, I'd be being totally up front and honest with all parties. I was thinking the money transfer would mainly pay for those fees and only a small part of the actual deposit.

Can appreciate taking on extra debt to be able to purchase a house probably is the least favourable idea

OtterBear123 · 14 June 2017 at 12:36AM

@SuboJvR

Thanks for the replies, I'm new to this and can't seem to quote or reply directly (it is late also).

I have looked into the HTB and would consider. Just difficult to find a new build in the areas I'm looking for

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