First time buyer - saving for deposit but coming up short
Discussion
Folks, I'm saving for a mortgage, planning on buying around April next year.
I've saved around £8,750 since January and living in South Essex, I need to budget for a £200k house for anything decent (2 bed terraced in an area that doesn't require bodyguards).
Optimally I can save around £1500 a month (working as a contractor but take home average £2600 per month) but the last couple of months have been more difficult as I've been off on holiday so no pay AND had to pay for the holiday so I haven't saved anything in since July. I should be back on track come next pay day to stick about £1k in to my savings.
Obviously with a £200k house I need roughly £20k for a decent mortgage rate. That isn't an easy task to get another £11k in 6 months. Don't really see it being possible - I'll probably get circa £16k total.
How should I get the rest? I don't want to have to settle for a cheaper house as going down to the circa £160k bracket really doesn't get anything nice at all and I wanted to get a 2-bed to rent out a room to offset mortgage.
95% mortgages don't really look that great - is there any products I'm overlooking that aren't these 'lend a hand' mortgages? Asking bank of Mum & Dad is possibility but I don't want to. I want to do it on my own.
I've saved around £8,750 since January and living in South Essex, I need to budget for a £200k house for anything decent (2 bed terraced in an area that doesn't require bodyguards).
Optimally I can save around £1500 a month (working as a contractor but take home average £2600 per month) but the last couple of months have been more difficult as I've been off on holiday so no pay AND had to pay for the holiday so I haven't saved anything in since July. I should be back on track come next pay day to stick about £1k in to my savings.
Obviously with a £200k house I need roughly £20k for a decent mortgage rate. That isn't an easy task to get another £11k in 6 months. Don't really see it being possible - I'll probably get circa £16k total.
How should I get the rest? I don't want to have to settle for a cheaper house as going down to the circa £160k bracket really doesn't get anything nice at all and I wanted to get a 2-bed to rent out a room to offset mortgage.
95% mortgages don't really look that great - is there any products I'm overlooking that aren't these 'lend a hand' mortgages? Asking bank of Mum & Dad is possibility but I don't want to. I want to do it on my own.
fitz1985 said:
Is waiting a few extra months for the rest of the deposit a possibility? I know its a pain, unless you have some assets you could release from equity from? Like downsizing a car or something to get some cash back?
I tried not to go down that route as my current house lease runs out on May 1st. Don't want to mess around with another - it was a pain last time.I am driving a Z4M that I have £12k of equity in. I'd say that's a last resort!
Do your folks have any odd jobs and stuff you can do for them? You could earn some of the extra needed that way, a bit like being a teenager again 
.
Seriously know how you mean though regarding getting a 'free hand' from your folks. In my experience if this does happen - it might be the only way about it, lie to your friends! When my little corsa diesel decided to part company with its timing chain and left me in the lurch I was going to replace it with a £1k Vectra to get back on my feet. I called my dad up because there was one local to him to ask if he could have a look, long an short, after being too weak to tell me dad I wanted the Vectra and to do it myself, He ended up buying me a 6 year old focus and I'd pay him back monthly just like a loan. However I absolutely hated the car and that I couldn't sort it out myself. It surprisingly really affected me and stressed me out, 6 months later I swapped the focus for a £800 Vectra and lost a heap of cash. I was however MUCH happier, I'm about 4 months away from paying dad back for the money the focus cost, and will then take them out to dinner to say thank you.
Do you have a friend with a spare room you could lodge up in for a few months to save the hassle of spending some of your deposit on a rent deposit, and minimum term etc?
. Seriously know how you mean though regarding getting a 'free hand' from your folks. In my experience if this does happen - it might be the only way about it, lie to your friends! When my little corsa diesel decided to part company with its timing chain and left me in the lurch I was going to replace it with a £1k Vectra to get back on my feet. I called my dad up because there was one local to him to ask if he could have a look, long an short, after being too weak to tell me dad I wanted the Vectra and to do it myself, He ended up buying me a 6 year old focus and I'd pay him back monthly just like a loan. However I absolutely hated the car and that I couldn't sort it out myself. It surprisingly really affected me and stressed me out, 6 months later I swapped the focus for a £800 Vectra and lost a heap of cash. I was however MUCH happier, I'm about 4 months away from paying dad back for the money the focus cost, and will then take them out to dinner to say thank you.
Do you have a friend with a spare room you could lodge up in for a few months to save the hassle of spending some of your deposit on a rent deposit, and minimum term etc?
I would't be afraid of calling in the parentals. You're obviously not a scounger and are saving very well so it's quite proper IMHO to keep it in the family rather than involve a grasping bank.
My parents bought their house with an interest-free loan from my grandfather... so why not? Hopefully they will be pleased to help and you can always pay it back if you don't want a freebie.
My parents bought their house with an interest-free loan from my grandfather... so why not? Hopefully they will be pleased to help and you can always pay it back if you don't want a freebie.
GroundEffect said:
Optimally I can save around £1500 a month (working as a contractor but take home average £2600 per month) but the last couple of months have been more difficult as I've been off on holiday so no pay AND had to pay for the holiday so I haven't saved anything in since July. I should be back on track come next pay day to stick about £1k in to my savings.
.
Does being a contractor affect what mortgages are available to you?.
If I'd have asked my old man for a £4k loan to go toward a house deposit while I had £12k equity in a car I dread to think what would have happened but I'm sure my blood would have been spilled.
Sell the car, release some equity and buy your house. I would have said don't go on holiday and work all the hours god sends you but it's a bit late for that.......
Sell the car, release some equity and buy your house. I would have said don't go on holiday and work all the hours god sends you but it's a bit late for that.......
Yeah, there are other things you may be overlooking.
1. You need about £3,000 more than the deposit to cover fees, surveys, charges and initial costs like a washing machine from ebay.
2. You will not get the same mortgage offers as a contractor due to your employment not being fixed. You are likely to need a much larger deposit and will be offered worse rates. Is for this reason that I chucked in contracting and had to take a permanent job on half the money.
3. Lose the car. £500 tax, 18 or 19" tyres and 30mpg at most are not items you need when you get a house.
Interest rates WILL be going up in the next three years so if you get 4.5% AER today you might be looking at 6.5 or 7.5% when you re-mortgage in 3-4 years time. The best thing to do is make overpayments and get the total down quick. Throw all your money into the mortgage for the next few years if you are sure your job is secure.
1. You need about £3,000 more than the deposit to cover fees, surveys, charges and initial costs like a washing machine from ebay.
2. You will not get the same mortgage offers as a contractor due to your employment not being fixed. You are likely to need a much larger deposit and will be offered worse rates. Is for this reason that I chucked in contracting and had to take a permanent job on half the money.
3. Lose the car. £500 tax, 18 or 19" tyres and 30mpg at most are not items you need when you get a house.
Interest rates WILL be going up in the next three years so if you get 4.5% AER today you might be looking at 6.5 or 7.5% when you re-mortgage in 3-4 years time. The best thing to do is make overpayments and get the total down quick. Throw all your money into the mortgage for the next few years if you are sure your job is secure.
GroundEffect said:
No, I fully own the car. They really are only £12k these days 
I think that the fact you own it is mute, really. Compared to what you need, you could easily release £7k and still have a good car with as much chance as throwing bills as the Z4M.I think they question you perhaps have to ask is
- Am I willing to alter my lifestyle to obtain a property?
At the end of the day there is no point being miserable for the next 5 years to obtain it unless you really want to. You may have to accept waiting longer, maybe renting for another 6-12 months and then being in a more comfortable position for any fees, unexpected works etc.
GroundEffect said:
On the contractor status - I should be sorting that within the next month. It was part of the plan - it's why I didn't save for a house earlier.
What do you mean that you're sorting out your contractor status?Edited by GroundEffect on Saturday 21st September 17:46
As a contractor, you should keep a fair bit of cash aside in case you find yourself without income for a while, two years worth of mortgage payments is probably a reasonable figure.
fandango_c said:
What do you mean that you're sorting out your contractor status?
As a contractor, you should keep a fair bit of cash aside in case you find yourself without income for a while, two years worth of mortgage payments is probably a reasonable figure.
I've been interviewing for a permanent position. And it's looking good. Will find out next week. Either way, I don't plan on remaining a contractor when the mortgage would start. As a contractor, you should keep a fair bit of cash aside in case you find yourself without income for a while, two years worth of mortgage payments is probably a reasonable figure.
GroundEffect said:
fandango_c said:
What do you mean that you're sorting out your contractor status?
As a contractor, you should keep a fair bit of cash aside in case you find yourself without income for a while, two years worth of mortgage payments is probably a reasonable figure.
I've been interviewing for a permanent position. And it's looking good. Will find out next week. Either way, I don't plan on remaining a contractor when the mortgage would start. As a contractor, you should keep a fair bit of cash aside in case you find yourself without income for a while, two years worth of mortgage payments is probably a reasonable figure.
GroundEffect said:
95% mortgages don't really look that great - is there any products I'm overlooking that aren't these 'lend a hand' mortgages?
Not sure why you aren't interested in the lend a hand offers? The current scheme quoted below "Help to buy" is only for new builds but from Jan 2014 there is a similar scheme being put in place for existing properties. It seems the ideal solution for someone like you with a low deposit but good earning rate/potential."With a deposit of 5%, the Help to Buy Equity Loan scheme allows you to borrow an additional 20% of the purchase price of the property from the government; the loan is interest-free for the first 5 years"
blank said:
Might be obvious but...
You need to consider the drop in income when going permie. Don't forget pension contributions!
10% deposit, borrowing 4-5x salary and only being in the job a few months is not going to get a good rate!
In my line of work, the contractors take home pretty much exactly the same as the permies. The only advantage of BEING a contractor is it being easier to get in to the place to begin with. I might drop a thousand or two but really not much.You need to consider the drop in income when going permie. Don't forget pension contributions!
10% deposit, borrowing 4-5x salary and only being in the job a few months is not going to get a good rate!
Gassing Station | Finance | Top of Page | What's New | My Stuff